I have been carrying around a copy of this article in my briefcase for a few weeks. I am not sure I have anything particularly smart to say about it, but I think it is an interesting story of a firm building a global manufacturing network. The firm in question is Bombardier, the Canadian conglomerate that has its origins in making snowmobiles but is now better known for regional jets and trains. Trains are the focus here and Bombardier’s attempts to build a presence in India (Bombardier’s rough passage to India, May 7, Globe and Mail). Bombardier has been making train components in India for over 30 years, but has recently moved to build complete rail cars. As this corporate puff piece shows, they are pretty proud of their facility in Savli, 800 miles from New Delhi.
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So what is the opportunity here? Well, India has a lot of people and has grand plans to remake its railway system:
Despite the country’s huge population growth and rapid urbanization, new lines and extensions have been developed at a snail’s pace. Since 1950, the network has expanded by little more than 10,000 km, or less than 170 km a year. Now the country wants to transform its massive, antiquated, overcrowded system. State-owned Indian Railways already boasts the second-largest rail network on the planet, comprising more than 64,000 km worth of track that transports about 19 million passengers a day on 7,000 trains. According to the Railway Ministry’s ambitious blueprint, that’s about to change. More than 25,000 km of new lines are slated to be completed by 2020. There are also plans for a dedicated freight corridor between major centres. And for the first time, Indian Railways is considering buying entire trains from private companies, rather than purchasing components and building its own vehicles.
To grab this opportunity, Bombardier has invested a lot:
The company has spent more than $45-million building a new train factory that has created 750 desperately needed jobs. … Under the direction of Mr. St-Onge, a Montrealer who first worked for Bombardier in 1975, the factory was completed on time and on budget. It took just 18 months from the ground breaking until the first metro cars rolled off the assembly line – a Bombardier record.
What justified that investment was winning a contract to supply 424 train cars to the Delhi Metro in 2007. On top of that, the plant has the capacity to do a lot more — with the potential to supply other developing Asian nations.
Of course, there have been challenges.
It wasn’t easy – finding local suppliers to make components to Bombardier’s standards and employees with the right skill sets was extraordinarily difficult. Also, the land under the factory had to be raised by 1.6 metres to prevent flooding damage during the rainy season. The final factors spelling sleepless nights for executives were India’s widespread corruption and suffocating bureaucracy. “It was a nightmare. It was really, really a nightmare,” Mr. St-Onge concedes.
In a place where baksheesh is regarded by many foreign companies as just another business expense, Bombardier says it has refused to pay bribes or kickbacks to speed its progress. But there have been plenty of opportunities to do so. “That makes it very difficult for us. I know that if I would just give 100 rupees, it would get done within seconds. But I cannot. So it will take a week instead of seconds. This is where it gets really mind-boggling,” Mr. St-Onge says.
As an example of the bureaucracy the firm has faced, the article notes that Bombardier’s rail cars leave its facilities on trucks. Why? because they have not been able to negotiate permission to use 300 meters of local track.
There have also been personnel challenges. Bombardier has focused on hiring young recruits with little or no factory experience. This allows them to train them they way they want. However, once they are trained, they are much more attractive to other manufacturers. Thus there are issues on hanging on to good employees.