By T Murrali:
Global warming, which leads to climate change and its unprecedented consequences, is directly linked to vehicular emissions. Eclectic environmental regulations demand effective changes in powertrains to manage the thermal characteristics and exhausts of vehicles. More efficient IC engines, hybrid, fully electric and fuel cell vehicles, in different stages of development and on-road application, are the industry response to this global imperative. Korea-headquartered Hanon Systems has set its sights on becoming a leader in innovative thermal and energy management and in developing sustainable solutions. Its Indian subsidiary Hanon Automotive Systems India (HASI) is also pursuing the same aspirations. The first joint venture that the present Hanon Systems established in India, now named Halla Climate Systems India Private Limited (HCSIPL), is celebrating its 25th anniversary this year. Hanon Systems set up three more plants for its regional spread in India. It has also established two Engineering Centres to develop new thermal management systems and products. The company has chalked out plans to support its customers in India and abroad to make the planet more liveable with its innovative systems and products.
Hanon Systems, then known as Halla Visteon Climate Control Corp, was formed in 1986 as a joint venture between Ford Motor Company and Mando Machinery Corporation, Korea. In 1989 the company established its first research and development centre in Korea, and in the same year, launched its first overseas operation in Ontario, Canada.
By 1998, the company was delivering its state-of-the-art automotive climate systems across the globe. In March 1999, anticipating the spin-off of its component divisions, Ford transferred its majority equity stake in the company to Visteon Corporation and Visteon became the majority owner.
In June 2015, Visteon sold its majority stake in Halla Visteon Climate Control Corp to Hahn & Co, Korea’s largest private equity firm and Hankook Tire. In July 2015 the company changed its name to Hanon Systems.
In 1993 Visteon along with Maruti established a joint venture, which today is known as Hanon Climate Systems India Private Limited. By 2000 this company become a recognised name in the automotive climate systems market, becoming the largest manufacturer of radiators and charge air coolers for light passenger vehicles in India.
Globally, 2017 was good for Hanon Systems barring headwinds in some markets and from a few customers. Overall, it has been preparing in multiple layers to be a technology and cost-leadership company.
Last year the group did record new business. Almost 45 percent of this came from thermal systems for electric, hybrid and fuel cell technology vehicles vindicating Hanon’s preparedness for the future disruptions set to happen in the mobility industry. The company is also ready to adapt its new technologies to the needs of the other markets, including India.
In general, different parts of vehicle systems grow either at a higher or lower level than the growth rate of the vehicle industry itself. This is primarily because of the specific requirements of the vehicles. It is also based on the markets and their climatic conditions in which the vehicles are deployed. “The thermal systems are always on the higher side since the need for more refined thermal management of the different systems of vehicles. These specifics drive the demand for thermal system products. In the emerging new mobility, especially electric vehicles, a big portion of them will be on battery cooling system. Besides, these vehicles will have electric compressors to drive the HVAC systems,” Murali Vaidyanathan, Managing Director, Hanon Automotive Systems India, told AutoParts Asia.
Located in Bhiwadi, HCSIPL is celebrating its 25th year of operations in India this year. The 69:31 joint venture company makes Cooling Modules, Fan & Shrouds, Radiators, Charge Air Coolers, Heater Cores, EGR Coolers and Condensers and supplies to few OEMs including Maruti Suzuki.
Five years after this plant began production, Hanon Systems set up a plant in Chennai to make HVAC Modules, Evaporators/Heater Cores, Cooling Modules, Fan & Shrouds, Radiators, Charge Air Cooler, Condensers, A/C Lines and Compressors. It commissioned the Pune plant in 2011 to make HVAC Modules and Cooling Modules. In 2014 a factory was set up in Sanand, Gujarat, to make HVAC Modules, Condensers, AC Lines, Radiator and Intercoolers.
“Looking back, we are happy the way each plant has been performing. The Chennai plant, which is the largest among them, makes every product-line apart from thermal and emission systems. We have leveraged both the local and global customers. We have set up a base and reputation for technology pipeline and the quality that we offer. Based on that we are trying to see if we can make products for exports. Since India is predominantly a fixed compressor market we tried to consolidate it in our Chennai plant. There had been good growth and we expect to have increased investments and growth rate in future. We have been manufacturing about half a million compressor units since a couple of years and by the end of this year we will double the capacity. We are trying to expand further. Now a third of the compressors manufactured in this plant is exported,” he said. (Compressors are of two technologies, fixed or variable, depending on the profile of swash plate that drives the piston; both the types are used for car air-conditioning systems.)
Uniqueness Of India
The ability to handle various products, customers and exports simultaneously is unique to India. The Bhiwadi plant in10,000 sqm manufactures radiators, condensers, engine cooling modules, exhaust gas recirculation coolers and charger air coolers. It is the market leader in radiators and charge air coolers in India and its main customer is Maruti Suzuki. In 2013 the Bhiwadi plant received the Shingo Medallion for operational excellence and became the first plant within the Hanon Systems family to receive this. The Shingo Prize is awarded annually by the Jon M Huntsman School of Business at Utah State University, to companies around the globe that ‘achieve world-class operational excellence status.’
The Shingo model has helped the company improve its quality levels, operational efficiency, energy savings in plant operations and improve its cost competitiveness. The model has also helped the employees change their attitude towards their work and organisation. All these culminated in making it a more cost competitive and efficient organisation. These concepts are deployed at all its plants in India.
The Plant Director of Bhiwadi facility, Kunal Ahuja, said, “Our plant is known for quick learning and aligning with customer focus areas. Excellence has been in the roots and it got enhanced focus during the last seven years. We are working for excellence in all areas of safety, quality, technology, productivity, and logistics. We have taken lead in the last two years to work in line with Suzuki’s comprehensive excellence model and upgraded our critical Tier-2 suppliers to the Green level.”
Hanon Systems’ Pune plant was established in 2011. Spread across 4,600 sqm, the plant supplies HVAC, engine cooling modules and AC Lines to customers in the western region, mainly Mahindra. With automatic machines and testers, the plant is a perfect example of lean manufacturing and six sigma culture. The plant recently completed 2500 safe days without any incident. “Hanon Pune has established itself as a quality supplier by maintaining single digit PPM and extremely low warranty returns over the years. The plant takes pride in its culture of 5S and continuous improvement which are well exhibited by its people. A camaraderie of openness, team work and emphatic thinking marks the uniqueness of the Plant,” Sudeep Chakraborty, Director, Pune Plant Operations, said.
Established in 1998, the Chennai facility spread across 28,000 sqm, manufactures entire range of Hanon products, including HVAC, condensers, radiators, evaporators, heater cores, AC Lines and charge air coolers. It supplies to all major OEMs including Hyundai, Ford, Mahindra, Renault Nissan and Kubota. It is the global hub for manufacturing fixed compressors and therefore, exports many parts to several locations across the globe.
L Prabhu, Director, Plant Manager of the Chennai plant, said the plant makes about 16,300 heat exchangers a day. Optimising space has been a mission for this plant; the facility gained about 25 percent space in 2016, and 32 percent last year. “In 2016 we created a record by brazing 3.8 million cores, against the machines’ capacity of 2.9 million cores. This was possible by adding one more row each in condenser and evaporator brazing. We have also optimised the belt speed and reduced the weight of fixtures to optimise the speed of operations,” he said.
The plant in Sanand, Ahmedabad, is the latest and is headed by Vibhas Raina who had worked in the Bhiwadi plant for about 13 years. About a quarter of the shop floor of the Sanand plant is lighted by Sun light and needs electric lighting only after 5.30 p.m. Besides, LED lights help conserve energy. All the major equipment and utilities have variable frequency drives (VFD) to optimise power consumption. The company plans to utilise the excess heat from furnace, which is a power-intensive equipment, for hot water washing, eliminating heaters.
The equipment acquired to commission the plant meets global standards. The company has to choose the machines from a global catalogue. In some machinery it has merged two operations into one, needing only one person to operate the machine instead of two, besides, reducing the footprint. There is a particular complicated assembly line developed by Hanon Systems in Korea; no one else in the world does it. “We are the first plant to develop it locally and were able to cut down the cost also. The flow we have put in helps reduce the movement of material and manpower,” Raina said.
The entire building is connected to five rain water harvesting wells. Besides, it is a zero-discharge company; everything is utilised within the plant. Despite being a green-field project, it began with manufacturing five products simultaneously: radiators and coolers for Mahindra – these were shifted from Chennai to Gujarat – HVAC, condensers and a/c lines for Ford India. It was a big challenge as every product has a different configuration. This year it is launching a ‘Zero Defect’ programme.
Raina said, “We segregate defects into two: punchable, which affects customers, and non-punchable which will affect only us and not the customer. All punchable defects have to be fully rectified so that the customer is completely insulated. Customer need is our priority. We have a matrix that tells us what percentage of known defects is covered through poka yoke. Earlier we used a gauging process but it’s not fool-proof as defects could sometimes pass the operator. We do many things and hopefully could move on to the next level.”
“We have a standard industry process called PFMEA (process failure mode effective analysis) which is the base quality control document for any process, identified from our learnings across the globe. Our teams debate on what could go wrong and how it can be rectified to prepare the document. It enables a check on the severity of the problem for us or the end-customer; how frequently has it occurred in the past. From this we give the RPN (risk priority number) to the defect where the rating is guided by the TS standard. Anything above 100 needs to be immediately tackled as this means the process is at risk.”
The company has challenges being in Gujarat where the industrial base is small, and suppliers limited. Most of the materials come from far-off Chennai and the North or are imported.
“We have recently started supplying a new product – engine cooling module, to Maruti Suzuki; so far it was only radiators,” he said. On the safety initiatives he said, the company tracks them in three ways. One is accident-free days; FTOV (First time occupational visit), where someone gets a minor injury that doesn’t require him leaving the workplace, is the second, and the third is the near-miss. “When we started the construction of this plant we had almost 400 labourers working at the site. So accident-free had to start from here, not when the plant is ready. The safety initiative was the primary focus when selecting contractors for construction of the plant. Safety instructions were given every day to all personnel; we monitored them continuously. Suppliers were also made to understand these safety issues. Last December we celebrated 1,500 days without loss since construction began. The plant has been up-and-running for the last three-and-a-half-years with zero-accidents so far. We have on an average three to four near-misses reported in a month which we track carefully to make sure they are not repeated. We should never be complacent; every morning safety is the first topic to be reviewed and discussed exhaustively, as also in our monthly management meetings.”
Though another focus of this plant is to contain energy consumption, it is a challenge since it deployed energy efficient equipment, garnered from the learnings from other plants, in the construction phase itself. However, it has been reduced to some extent by using aluminium pipe-lines with zero-leak joints. In any manufacturing organisation of this size, 15 to 25 percent air leak happens. “When we last checked, the leakage was seven percent, which is a definite reduction. We have a furnace that runs for about 10 hours, the rest of the time it is idle. We bring down temperature during the idling time, to reduce power requirement. This is being done daily, including weekends,” he said. When the plant was commissioned it received a request from Ford India to get Q-1 certification in seven months. The basic criteria for any company to apply for Q-1 is to get certified for TS-16949 and ISO-14001. Later, it has to qualify Ford’s criteria and meet the required parameters. “We were in no way prepared for it as we were at a very nascent stage with new people working here. Ford insisted that they have a target to get Green field suppliers; we were just seven months into production when they asked us. It was a very tough call, but we decided we would go for it; we did it in seven months. In 14 months since starting production we were Q-1 certified; we were the second in Sanand region to get it as also one of the fastest,” Raina said.
Vaidyanathan said the future expansion of HASI will be more for exports. “We are also looking at heat exchangers to be manufactured in this plant at competitive prices, and export to other locations. It is a story of growth with domestic customers while leveraging exports.”
Globally and in India Hanon Systems is one of the leading full-line automotive thermal solution suppliers. Almost all the products that are manufactured by Hanon Systems globally is manufactured in India also. The only exception is the thermal system products for the new energy vehicles since there is no market here. The company makes HVAC system, charged air-coolers, EGR coolers etc. It may manufacture a few more. All the products manufactured here are not supplied locally, as there is no demand.
The company has commenced manufacturing transmission oil coolers (in both oil-cooled and water-cooled versions). A fraction of that is supplied to customers in India, the rest is exported. Overall exports account for about 20 percent of the product portfolio of HASI. As the production of new generation vehicles like the automatics picks up, its export varieties will find takers in India. “We have enough opportunity to enhance the content per vehicle,” Vaidyanathan said.
The current BS-IV emission norms will hold good only for two more years. With India leapfrogging to BS-VI from 2020 the demand for thermal management systems will increase. For electric vehicles, the requirement of such systems will be still more owing to their special demands. Though there are simplifications in EVs, the content will grow for specific systems. In this space thermal systems will be huge, he said.
On the preparation to face the new mobility, where it is construed that the number of systems will be less than in conventional vehicles, he said, Hanon Systems looks at the global trends and its Indian operation observes the domestic trend. “We are preparing ourselves to these emerging trends that occur globally. As a Tier-1 solution provider we have to be prepared for the diverse technologies. Some years ago, we had to choose from two different emerging refrigeration technologies. Finally, we had to invest in both as there were specific requirements. Similarly, if there are diverse sets of technologies, we have to invest in all of them. We have already invested in thermal systems for fuel cell vehicles and were PACE award finalists for that. We are investing for the new energy vehicles. Last year 45 percent of our business was from new energy vehicles. As a full-line system solution provider there is a lot of thought on which technologies we have to invest in. We do monitor what is going on globally and locally,” he said.
About the prospects of Hanon Systems globally and in India in the new energy vehicles era, Vaidyanathan said, overall the new breed of vehicles will be content-rich from the thermal systems point of view. Battery cooling module is the big portion of the thermal management system in new energy vehicles. On the opportunities from KIA Motors India, he said the company has been having a relationship with the OEM globally for several decades. HASI will support the OEM which is currently commissioning its plant in Anantapur, Andhra Pradesh, about 190km north of Bangalore. “We have to see the optimum footprint for customer, as it calls for a support system,” he said. Hanon has manufacturing operations in 40 locations and 18 engineering sites globally. HASI has two full-fledged Engineering Centres, one in Bhiwadi, accredited by the Government of India, and the other in Chennai. Both have facilities for testing also. The Chennai Centre is being upgraded with new investments. These centres monitor new product development at various stages. While some products are completely developed in India, others are co-developed with the four technical and innovation centres of Hanon Systems.
“Our endeavour is to make them capable and self-reliant in the next few years. We have a global product development strategy that drives the location for any product development. There is a lot that is happening in India, especially innovations for this market. These find applications overseas too. There are some products developed in India meant only for India, while there are others that are for India and some other markets. Increasingly we will match our customers’ engineering footprint to1:1 or even beyond. As more and more global OEMs carry out engineering activities here, we will ensure we also do as much engineering in India, if not more.”
All the four plants of HASI are intense in lean manufacturing techniques. The company maintains single digit PPM across plants and across products for all the customers. “One of the things to make ourselves cost efficient is to ensure that localisation level is challenged all the time. It needs extraordinary effort to ensure that the entire supply chain (vendors) is in line with this goal. The company has supplier development group driven globally and a similar activity in India to support the vendors to improve on quality and delivery. The company has about 100-plus suppliers across all plants and a few of them have been supplying to Hanon Systems globally. “It is heartening that the number has been growing consistently,” Vaidyanathan concluded.