[Dr.Naren]

Just giving one example (Hypothetical).

A certain vendor supplies high pressure common rail fuel pump. Maruti would have tested the cars extensively with this part. Now if there is any defect in the said part, Maruti would take the liability and recall the cars. Now Maruti has come up with strict norms to ensure same standards or quality from the vendor. Making the vendors responsible for recall would make them improve their quality checks. I don't know if zero defect is possible but it would definitely help to maintain quality standards.

[romeomidhun]

Originally Posted by Thilak29

But in whole circle, i wonder what are Maruti's liabilities ? Just assembling parts tight?

Just assembling parts? In that sense, all manufacturers are doing the same thing. Just because Maruti ensuring 0-defect parts doesn't mean they are just 'assemblers'. What about critical components like engine and gear box? They are manufactured by Maruti only.

[i74js]

Let me give an example as I come from Power Sector. The Thermal Power stations across the globe are managed by third parties who are responsible for day to day operations, planned annual shut down and repairs.

There are cases wherein because of negligence of operator, and I am stressing the word Negligence here, the plant requires a shut down for a day.

The total amount of electricity produced in a day from a 1000 MW (a very standard size plant with 2 units of 500 MW) runs into millions of dollars. The owner of plant cannot claim / recover such amounts from the O & M contractor. The contractor simply cannot afford it and it is not a market practice either.

Similarly, the cost of 1,00,000 cars recall by MSIL (again this is not hypothetical as they produce more than this number in a month) may result in bankruptcy of a supplier. I doubt if this is legally possible as the vendor supports living of its employees / labour.

The only thing that is possible is that the contract between supplier and MSIL may come to an end and a normative penalty is enforced through arbitration.

[Sip]

There is nothing wrong in raising the bar as far as excellence is concerned. Sure there could be challenges for vendors but overall I think its a good move by Maruti. After all mankind has always pursued betterment. Let me emphasise that Maruti has timed it well with its product in high demand, production capacity amply demonstrated by July 16 sale figures and surely this is a calculated step, I mean when vendor can share profit he must share loss too!

[autohead]

These days lot of technology that goes into a car is developed by Vendors who are sometimes bigger than than automobile company itself, which only adopts the technology. Takata case is an example http://fortune.com/2016/06/10/the-ta...-blown-crisis/, In case of Takata recall Involved multiple Auto companies which no way could have ensured quality check at their end. Bosch, ZF are few more companies which constantly develop technologies independent of any automobile manufacturer. When we are talking about human lives Zero defect should be the only goal, who takes the blame is secondary and whether who can or should absorb the loss is immaterial, we should really appreciate such an initiative by a leader in the Industry.

[Freon911]

This is a good sign of the Indian automotive industry changing for better times. MSIL should be appreciated for the focus to improve quality of the vehicle. By enforcing this, the automotive ancillary units will be forced to invest in good machinery, better skilled resources which will benefit the industry as a whole. I think by volume of sales for MSIL, it would be big loss for the vendors not to upgrade and risk loosing their status as supplier to MSIL. To drive this home, MSIL should further improve their inhouse QC process and stay true to their word. Cheers.

[Pam81]

This is a good move. But any OEM can't just like that shrug-off their responsibilities as well. From the industry experience, we deal with this in 2 scenarios:

1. Application of standard product from Vendors:
Tier III and upwards are making parts with certain level of technical understanding, cost-competitiveness and location advantages over many other variety of factors. If MSIL or any OEM for that matter, buys something that the component / sub-assembly vendor produces with their own spec, then it must be shared responsibility to ensure application feasibility & competence in meeting all functional, quality and safety requirements. In this scenario, in fact, it is more responsibility for OEM on sound engineering / testing to ensure an off-the-shelf part would function reliably. Like others mentioned in previous posts, in some cases, component or sub-assembly vendor may be more heavier than OEM itself in technical might. On the other hand, well established suppliers are more stringent than OEMs. In many a cases, OEM themselves do not have the know-how of intricate details on the design philosophy, design factor of safety and application understanding. Having said that, suppliers are more worried about their standard design if that's a fit for OEM requirements.

2. Custom development specific to OEM design requirements:
Here, the OEM leads the way for technical description of what a component function is and what are the physical strength and reliability requirements. If a supplier signs-up in executing their own design to meet OEM requirements, it is binding that in case of failure, supplier is responsible. Even in this case, many a times there are uncomfortable situations on agreeing why there was a failure, was it due to poorly manufactured part, was it due to poor assembly & handling or was abused which was not known or not tested for. Beyond certain point on technical discussions, whether OEM takes responsibility or pushes it to suppliers depends on the volume & credible business relationships as well.

It is good to expect that suppliers will up the ante for zero defect but is should be of greater emphasize to learn the imperfections & it's effect on the part function & reliability. You may have a perfectly manufactured part, meeting your inspections, cost and function. Devil is in the detail that you must also know the application loads properly to ensure that it would work perfectly for intended service life. It is not uncommon with OEMs in adapting an already available component rather than investing in new component development.

Problems are galore in automotive industry because, the search for lower cost is always "ON". Some suppliers are so good in cost, they don't bother about not following established quality management systems such as ISO. In most cases, these are Tier III or contract manufacturers in last leg of the value chain of components industry. But still many OEMs buy from them. They minimize their risk by procuring only less critical items.

IMHO, MSIL is taking a good first step but this is only a low hanging fruit. To achieve their objective of reduction in recalls, sound application R&D is more important than mere perfect execution of their supply chain. Otherwise, suppliers will be pushed to bear the burden which in some cases makes the supplier bankrupt and gets out of the business for someone's fault.

[Venkatesh.C]

If we consider manufacturing in a difference space, say medical equipment, zero defects become non negotiable. Of course, it comes at a price. As for MSIL, i believe there is nothing wrong in aiming high. Pushing boundaries is the only way for innovation and progress.

[dr. sen]

Originally Posted by navpreet318

When the initial costing of a product is done it is not a tender system that someone quotes a particular price and the OEM takes a decision. The first thing that is done is develop prototypes and send them to the OEM for testing.
Once it is approved then a detailed cost analysis is done. Each and every component of the cost is analysed. If one or more sub vendors are involved then they too are included and their raw material costing and value addition is calculated

Dear Sir, Thanks for explaining the methodology, to arrive at a costing. Now a stupid question to ask, is this practice adopted in all cases, or only in cases, where the part or component in question, is and can be, manufactured by most auto-component vendor / supplier / manufacturer. Is this system of cost calculation and operating profit margin, applicable to specialized organization, like Bosch, ZF, Dupont, Denso (master in auto hvac), Catalytic Converters, Tyres cos. Battery Cos. etc.

Reason for asking is -
1. Specialized Auto component Suppliers / O.E.M. have exponential growths, which cannot be or very very difficult to achieve (in my humble opinion) in case it is based on fixed operating profits, as dictated by the car manufacturer. Please correct me, if wrong.
2. In case of paint, and specially in case of tyres and battery, i have experienced, specially in case of JK TYRES, 70% tyres dont complete their life, without developing defects, whether its wires coming out or side / top bulges coming showing up. Similarly in case of Battery, whether it is Exide or Amaron, they hardly last more than 2 to 2.5 years. whereas when i purchase it outside the country as in middle east , or AU OR US, they last at least 3-4 years. Even in Nepal, the toyota / nissan cars have shown very very large lifespan, some even 7-9 years. (my own case, for my nissan 1978).

Now the questions:-

Is it because organization involved in these supplies themselves are huge, some even bigger than the car manufacturer, many times over, that the car manufacturer does not have the courage to come down heavily on them.

Secondly, is it also because, the car manufacturer believes, and is rightly so, that if a tyre / battery or fuel pump fails, people dont blame or criticize the car manufacturer, but the Tyre / battery / Fuel pump (Bosch in this case). Its their reputation on line ( tyre / battery / fuel pump manufacturers), and not the car manufacturers.

Or is it, that the people in general, across the continents, dont consider a Battery / Tyre / Fuel Pump Failure a part failure, so as to blame the car manufacturer, as the operating and driving conditions are so extreme, that they know that any claim will be futile, except in fuel pump / catalytic converter where there is virtual monopoly.

As far as my memory goes, except for a couple of crucial life threatening items, (as mentioned in various posts) like airbag, brakes, fuel pumps, catalytic converters, door locking / unlocking; car manufacturers, across the globe have done commendable jobs in quality control. The undisputed Leader and King has, pulled up everybody; willingly or unwillingly or by, just being in the herd (part of car manufacturing, small or big, niche player or mass producer). The king has raised the stake so high that the 'zero defect' and 'just in time' has been forced to become the part of the normal manufacturing process.

Please read the report in TOI, in business section, "Car Companies, Eye Value over Volume" , where The King has a sales turnover of 1449 Cr. / month, by just making 8171 Quality Innovas.

Hyundai does 952 Cr/ month by selling just over 7700 Cretas.
and our Suzuki does 1103 Cr / month on sales of 15560 Swift Dzires.
510 Cr / month on sales of 15,750 Alto's.

The experts can say whether the margin of profit is same or not on each model. I cannot comment and say on, ones way of business model. a person might open a chain of restaurants across the city and generate say 'x' amount of profit, another person might open a single 5 star deluxe hotel, and generate the same 'x' amount of profit. Quality can be same, (the taste and dining experience / environment might be different, as in case of our cars of low cost and high cost, i have knowingly avoided the word 'Value', for known reasons and known logic.)

Coming to above mentioned topic, I would request our Esteemed Seniors and Experts to comment on the subject,

For an example, The car dynamics, on various conditions, like high speed turning, bad roads, sudden braking on straight or twisted or curved line, wet driving, rubble surface, undulating surface driving, etc etc, is the subject and domain of the manufacturer, right. But the car manufacturer alone knows how it wants the new car to fare and behave, in the particular driving condition, right. but few car manufacturers have the in-house (i seriously doubt, it, experts please comment again), wherewithal to deal on the entire subject matter, right. Now, comes the question, in that case the car manufacturer has to either send an expert on 'deputation' to the specialized component manufacturer, or totally depend upon the knowledge and manufacturing expertise of that specialized component. In this case how does the company do zero defect component.

That is one the 'SOLE' reason, the King, hardly does 'top of the line' or 'hi-tech', exciting cars for the enthusiasts, except for the 'supras', once in decades. The Kings of 'Speed'( ferraris, Mclaren, Lotus, etc) 'Adventures', 'Luxuries', 'Hi-tech & Futuristic' do not get to make 'zero defect' parts even now. they will never be able to make their cars 'zero defect'; its a pity. ( aguar is a typical case, where it has tried to do zero defect at the cost of driving pleasure. The thrill of driving a raw Jaguar, or a raw Porsche, is no more there. (as per the old timers). Its no more what it was (I might be wrong , here too)

experts please comment, if i am wrong.

Thanx in advance.

[navpreet318]

Originally Posted by dr. sen

Dear..............

Dear Dr. Sen, I claim to be no expert in this field and neither a senior by age or experience. But I have been part of the chain and been at the helm of operations for a tier one supplier to a number of Vehicle manufacturers in India and abroad such as Ford, JLR, Tata, M&M, Ashok Leyland etc. etc.

In your above post you have mixed a number of items and queries together. From profits a company makes from a high selling market leading non-challenged products to failures of generic components which to business growth of supplier companies due to profit margins to mentioning a report in TOI(Lets not get into TOI) to driving please of "raw" machines.
I'll try my best as to acknowledge your queries though there is mostly a common-sensical answer to all of these queries.

Lets go to profits of Vehicle Manufacturers- Profit margins will not be the same for different products.
Firstly a particular percentage of products at different price points will be different.
This the factor of market competition comes into play.
Then the factor of the business strategy comes into play where the profits are reduced and cut to make sure a good product kills the competition.
Then comes the factor of actually be challenged in the market or not. I have never seen a festive discount or offer on the Innova. In fact dealers had more customers then the stock for the previous generation Innova when this new generation Crysta was launched. No discounts given. No offers offered.
If one introduces these factors then the different profits mentioned in your post will start making sense and one can actually see a correlation in them also.
Lets move on.

Component life of items such as Battery, Tyres etc.
Tires are a component which get affected by the environment and driving style the most. There have been people on tbhp itself you have had normal OEM tires last 60-90k. Some even more. Best example is taxi drivers who own their cars. They get super mileage from their tires and batteries.
My swift is approximately 3 years old and is at 30K kms. Stock MRF ZVTV tires seem that they will last another 30K. Car is looked after well. On the other had my civic is equally cared for and is at 60k kms and has seen two sets of stock Bridgestones. My BMW GS is at 8000 kms on its second set of tires and my now sold Kawasaki ZX12R was at 6K kms on its 4th set of Michelins. Road consitions, Driving conditions. How a vehicle relies on mechanical grip Vs frictional grip.
Now about the battery. My civic is from the year 2008 on its stock Battery. I don't even remember the make since its never given a hiccup. The stock battery on our now sold safari lasted 5 years.
Thing to be observed is that the vehicles with longest life of such components are daily drivers and looked after well.

Now lets come to business growth of large component companies.
A thing to be noted about these large component companies is that they offer generic components to the Vehicle manufacturers. They will have tires in fixed sizes. Batteries in fixed voltages/amperage and size and fuel pumps and injection system which are calibrated as fixed numbers and nothing out of the ordinary. Now we are talking of specialized vehicles like a buggati veyron which will invariably need a specialized everything.
One can also observe a certain fixed pricing for these items as they are supplying to a number of Manufacturers. Of course this price too will be justified. But herein lies an element which was not taken care in my post which you have quoted. Development and Testing costs. While for most normal items the R&D is done by the vehicle manufacturer themselves, the more specialized items life fuel injection systems are developed and tested by these component manufacturers themselves as it is their domain of specialization. Now as common business sense goes, if you have an item that you made yourself and everyone wants it because it is that good, you can charge a premium over it and justify costs as development costs.
Of course development costs and the premiumness will be negated over time and because of that we now see this technology has trickled down to the lowest costing vehicles as well.

Another fact not covered in my post was how this profit moves. Yes profit moves with time. When contracts are executed there is always a clause of price revision over certain time and price revision due to increase of raw material costs and general economic conditions and forex rates if some sub components are imported.
Now how does profit move. Lets take an example. Cost of transportation is a component of the final component cost. Lets say a crate carries 3 components and we can send 4 sets of 3 crates stacked over each other in a truck. So 36 components in a truck. A manager at the company is give the task to reduce the transportation cost. He talks to his team for this and they set out to work on this.
A new crate is designed which is slightly more in length but can house 5 components instead of 3. But now there is an issue with the truck's bay size. It barely clears it.
The transporter is summoned. The team cracks the transporter and finally what has happened is that he has agreed to provide longer trucks for this component at the same cost on the condition that we give him more business for transporting other components. Deal is done and struck.
But what has happened is that now due to the longer bay, 5 sets of 3 modified crates can be placed on the truck. Now it makes 75 components. Effectively making the transportation cost half of what it was earlier.
Now this will come into notice of the manufacturer and he will negotiate the transportation costs again but the supplier will keep a certain amount of profit. All happy. Vehicle manufacturer's supply chain manager's year target of reducing costs achieved. Supplier's logistics manager's transportation costs reduction achieved. Supplier profit margin increase achieved. Transporter's increased business with supplier achieved. Now implement this at every level and we will be able to see increase in profits of all tiers and reduction of costs.

Hence profit moves and the manufacturers have huge profits.
Another way to look at larger suppliers, Maruti may make 40-50K cars per month but a fuel injection manufacturer will supply to 5 different Vehicle companies and make over 1.5L components. Economics of numbers will ensure that sub components and raw material suppliers will be able to reduce costs.

Now let us come to zero defect policy of regular japanese car manufacturers vs high performance machines like the italians.
Most of the companies working on zero defect make cars with a high factor of safety. The components don't fail at even double the original target stress as the original stress itself is not too high. Basically highly engineered components used for regular lower stress jobs.
Now in case of the ferraris and porsches the stress is the number one factor. Each and every component is manufactured for the highest possible performance. Sometimes to the very limit of the material used for the component.
Lets take an example of a component which needs surface hardness treatment through heat. If it Suzuki needs "X" hardness and the component manufacturer makes X hardness, the factor of safety will mean that in daily use the component will hardly face stress required for X/2 to 3X/4 hardness.
Now in case of a high performance Ferrari X will mean X daily. Now if even a single component in all those components working under high stress fails due to reasons like a microscopic fracture deep inside the component or a heat treatment which didn't happen properly and one millimeter of that component surface didn't get the proper hardening. Therein will be the failure.
And on personal front I never liked the engineering finesse of the italians. When Casting Flash is not removed properly on a ducati standing at the Auto Expo then it shows their attitude towards the engineering they feel so proud about.

Talking about high performance and zero defect and over-engineering, the Skyline followed by the GTR are quite some examples. to be able to comfortably handle double the power output on stock internals of quite a feat.

Hope I have been able to give some direction to the queries. And yes this is a non-expert point of view.
I hope some "real" experts can answer your queries properly.

Oh and yes, the feel of driving raw performance cars. Sadly I don't have that experience nor do I foresee getting such experience due to my driving preferences. Hence won't be able to comment on that. If you add Royal enfield to that list of rather raw feel. Haha. I loved it!