You have made an acquisition in the aerospace segment — CIM Tools. What kind of opportunity do you see in this space? How do you see it growing from this point on?
In this Covid situation, the teams have done a great job to complete the particular acquisition. We can really grow this company because they have an order book of almost $200 million plus. I think we will do very well in the coming time but it also allows us to set up bases in different countries together with them. Motherson is in 42 countries. This could be a huge multiplier that we have. Also vertically, Motherson Group is going to contribute as well as learn from them. It is a win-win kind of situation for us. There will be a lot of exports because the customers are abroad. So definitely, exports will be one focus area.
Could you help us with the numbers? What kind of returns do you think this acquisition will give considering that the cumulative book business potential of $200 million dollars is being discussed?
Motherson has a very clear thinking. We have to get a 40% return on capital employed. This is a profit making company and our idea would be to improve on that and, of course, add to the top line.
You have acquired a Chinese company making automotive mirrors. It is not a big one. but from the opportunity perspective, how big is it?
Actually our subsidiary is acquiring an existing profit making joint venture in China and that could be probably our 29th facility in China. But it is very important because up till now, we were more into the passenger vehicles. This one is all about commercial vehicles. We have a huge presence in China. The takeover of PKC fits brilliantly with that. We have a huge market that we can then generate in China itself. The numbers may be small and big or something, but that is not the point. Motherson never worries about that.
Opportunity-wise, in two-three years, it will be all over in China. Also we are learning about commercial vehicles and we can take that learning globally. It is a wonderful area to get into because Motherson is very strong with commercial vehicles globally.
The semiconductor or chip shortage is causing a global supply disruption. Most of the leading automakers around the world are talking about it being normalised in the second half. Is that really the case?
So sorry to disappoint you, we are in a silent period at the moment because the quarter is just finished. Please appreciate that but we have always maintained that we have to be on our toes because of the customers.
Definitely the chip shortage and all these particular things have been combated at with the customers in a very strong way. I have full confidence in them and the situation is only getting better because there were some natural disasters and nobody had a control on that. Things are getting better but the demand is huge.
One factor a lot of people are talking about is that the underlying demand for OEMs has not been hit. It is still very durable. Could you take us through the demand scenario that you are seeing across different segments and regions?
It is very difficult to compare between domestic and global business because the kind of cars that are produced outside and the cars over here are different in value terms. But every car that we can make there has a buyer for it. That means that my customers are in a very good situation. They have the orders but they are having some supply constraints. So, we should not really worry too much about a quarter here or there.
But generally there is an upswing. There are people who are trying to solve this problem but that is all I can share at the moment. The car makers can tell you what is happening.