Swedish firm finds its bearings

China's slowing growth fails to dent SKF's enthusiasm

Even two decades later, Rakesh Makhija, president of SKF Group AB's Asia operations, still recalls his very first experience of China.

He remembers it was around 11 pm that he looked up from his book, glanced at the snaking waters below him, took in the squared-off landscape and realized the aircraft he was in was about to land at Shanghai's Hongqiao airport.

Upon arrival, he recalled the neon-lit night in Hong Kong, from where he departed. Memories of it still lingered as he made his way to a dimly lit room the size of a basketball court that constituted the terminal.

The luggage was dumped on to a creaking conveyor belt mottled with stains.

"Those must be really poor bearings," Makhija thought.

He grabbed his bag and hopped on a hotel shuttle bus, seeing it as a sanctuary amid thousands of bicycles scattered around the exit.

The year was 1991.

It's become a clich to say China underwent tremendous changes in the subsequent years. But Makhija said he is more than a witness to the country's achievements. His company joined the influx of Western businesses and began "riding the largest ever industrialization boom".

SKF Group AB, a Swedish bearing-to-lubrication conglomerate, celebrated its centennial in China in early September. As in many business narratives, SKF's early presence in China followed the route of appointing an agent, setting up a sales company and, after decades of inactivity, resuming business and introducing manufacturing facilities following the launch of the reform and opening-up policy.

It makes products for a range of sectors including automobiles, aerospace, wind energy, construction and industrial transmission.

But its China ambitions were not turned on full-force until SKF China Investment Co began operations, Makhija said.

"Back in the early 1990s, there were a lot of discussions about massive industrial development in China, notably in areas such as oil, gas, automobiles, refinery and steel plants," he said.

At that time he had yet to join SKF, but he could not help noticing the unlocked market potential.

Makhija was trained as a chemical engineer in his hometown in India and spent his early career days in Europe. He brought with him technical expertise garnered from a global chemical giant, where he worked in the oil and gas business, both onshore and offshore.

Makhija said the combination of engineering and business management makes him perfectly positioned for his current post. "It gives you a strong base to build on," he said.

The only thing he failed to bring along is the speed at which work is done in China and the ubiquitous global vision held by Chinese firms, he admitted.

In 2000, when he served as head of SKF's Indian company, he traveled to meet a very important customer in China. "They had this huge manufacturing shed, so big I could hardly see the end of it. I was told it was 800 meters in length. It turns out they have eight of them."

The scale of the investment certainly stunned him and the ambition of Chinese companies to move up the value chain encouraged SKF to accelerate its deployment in the country.

To demonstrate its commitment, SKF introduced all of its five technology platforms in China, including bearings and units, seals, lubrication systems, mechatronics, and services. They mainly fall into the category of industrial business and the automotive market.

The company runs 18 manufacturing units and several service units. Primarily a business-to-business company, its clients include car producers, railway manufacturers and wind energy businesses. The company manages to reach end users through its own sales force as well as distributors in more than 300 locations.

Asia currently accounts for almost 50 percent of the world bearing market, compared with less than 30 percent just 10 years ago, according to a survey released in May by the Bearing Specialists Association, an international service organization of distributors representing almost 100 companies in the industry.

Among them, China has been growing rapidly over the last few years supported by the expansion of its domestic railway infrastructure and a robust demand in renewable energy. It now accounts for more than a quarter of the world's bearing market.

Enjoying 13 years of consecutive growth, the company's Asia operations have continued aggressive expansion in all their businesses. In that time, China has helped to lift SKF's balance sheet.

While the faltering global economy has temporarily slowed down China's growth pace, it has so far failed to dent SKF's investment here.

"Take the automotive sector for example," Makhija said. "While we see single-digit growth this year, you must remember that 8 percent in a car industry that boasts almost 17 million vehicles is such a big base," he said.

He forecast the industry will enjoy lower double-digit growth for many years to come, despite the current bumps it is experiencing.

The country's automobile sector is certainly dotted with companies that cover the whole supply chain, but what makes SKF stand out is its energy-saving products and attitudes.

Despite the enormous strides in improving energy efficiency in passenger cars, Makhija said as little as 15 to 20 percent of the fuel put into the tank gets used to move a car down the road or to power the vehicle's accessories. The rest is lost by engine and driveline inefficiency and idling.

As a result of optimized design and internal geometries, SKF launched a new series of energy efficient or E2 ball and roller bearings that exhibit significantly less friction loss than conventional bearings of a similar type.

Up to 30 percent of friction reduction in the E2 bearing range applied in a car driveline will save up to eight grams of carbon dioxide emissions per kilometer.

According to Zhang Xinfeng, a professor at the Clean-Energy Automotive Engineering Center at Shanghai's Tongji University, a car generally has 30 to 40 bearings. Almost everything that is rotating in the car, such as the gear-box transmission, normally has one or the other kind of bearing. The friction caused by the bearing will have a direct effect on energy consumption.