West comes to east

Calcutta, March 28: Global auto majors are increasingly in favour of moving non-manufacturing operations to low-cost locations, like India and Mexico, in order to reduce costs, according to a survey.

According to the survey conducted recently by management consultancy firm AT Kearney, India is going to draw business worth Rs 5,000 crore over the next few years from the automotive sector alone, given the current trend.

Even though there has been a furore among the Americans against business process outsourcing, the auto companies are looking at the manufacturing potential in the developing countries.

According to the survey conducted over 40 senior automotive executives, nine out of 10 executives in the US are in favour of moving non-manufacturing processes to low-cost locations.

Sources said most of the executives felt that India is one of the best locations for passing on the non-manufacturing business processes as language and costs are not a barrier.

Importantly, India scored 24 per cent, much above China which got only 15 per cent, as a preferred destination to shift the US automakers’ non-manufacturing businesses.

The study is understood to have revealed that by shifting the non-manufacturing processes to countries like India, US auto majors will be able to reduce the cost of production by at least 50 per cent.

Recently, General Motors Corp (GM) had announced its decision to shift white-collar jobs worth $48 million to low-cost destinations like India and Canada.

The move is part of a cost-cutting programme, which aims to slash GM’s manufacturing costs by 25 per cent by the end of 2005, according to an internal report of the company.

GM, however, is not alone. Sources said global auto majors like Ford, DaimlerChrysler and Toyota are also planning to shift most of their white-collar jobs to India as a part of the cost cutting exercise.