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Progressive manufacture of automobiles.

At the time of creation of Pakistan in 1947, there was not a single plant in the country engaged in manufacture or assembly of automobile or their parts. Very limited and elementary assembly operations started in 1953 with assembly of Bedford trucks and Vauxhall cars from semi-knocked down its. During the fifties and sixties a few more simple workshop type assembly units where set up for assembly of a small number of trucks, buses, jeeps and motorcycles. All these plants continued to engage in limited assembly of vehicles from semi-knocked down kits with negligible local content and value added. Easy profits in automobile trading, lucrative concessions in Customs duty and Sales Tax on assembly from CKD Packs, unwillingness on the part of assemblers to invest capital and know-how in automobile engineering ventures, lack of interest of foreign principals to assist in localisation of components and absence of seriousness in implementation of local deletion programmes on the part of all concerned, resulted in tardy development of the automobile industry in Pakistan. During the fifties and the sixties, whatever limited automobile engineering activity emerged, it focussed solely on personal and immediate gains to the exclusion of the national interest or society's welfare.

In 1972, thirty two industrial units which fell within the categories covered by the Economic Reforms Order, 1972, were nationalized by the Government. The main objective of taking over the basic industries including automobiles assembly plants, was to give a fair deal to the consumers, workers, and shareholders, maximize production and manage these enterprises efficiently in the greater national interest. These taken-over units included eight units in the automobile and farm equipment group of which one was not in production. Pakistan Automobile Corporation Limited (PACO) was created in 1973 to manage all the automobile companies and projects in the public sector.

PACO Profile

Founded in 1973, Pakistan Automobile Corporation Limited (PACO) is now a major Public Sector industrial conglomerate of 15 companies including 4 joint ventures. Eight of these companies are listed on the Stock Exchange, a number of them have received Corporate Excellence Awards. PACO Group companies are engaged in manufacturing/assembly/marketing of wide range of vehicles; passenger cars, light commercial and 4-wheel drive vehicles, trucks, buses, specialised vehicles and agricultural tractors. Besides, PACO also manufactures motorcycles, engines, bus bodies, refrigerators, airconditioners, tools and dies and automotive components like wheel rims, radiators and castings.

In 1989, PACO groups turnover amounted to Rs. 10,830 million. Investments in fixed assets totalled Rs. 1,276 million. While the group companies are consistently endeavouring to reorientate themselves with modern functional technology. PACO employees over 6,500 personnel, thereby making a substantial contribution to generating job opportunities so vital in Third World countries. In addition to this, over 30,000 personnel are employed by its vendors. To heighten productivity and further assure optimum output, our technical and managerial personnel are sent to overseas principals for regular on-the-job training.

PACO Philosophy

Being a prime force of the automobile sector, PACO has been pursuing a philosophy revolving around: - Acquisition of know-how through transfer of technology; and providing technical and managerial support for the development of infrastructure for a broad engineering base catering to the automotive industries. This has led to the widespread and integrated network of 400 vendors. - Generation of employment through industrialisation. - Improving technical and managerial skills, at all levels, through local and international training programmes. - Entering the export market. The group is playing a major role in the implementation of the country's Seventh 5-year Plan of expanding its technological base, and thereby accelerating self-reliance through indigenisation. Strict adherence to international standards in quality production, maintenance and administrative expertise has led to new plants for Suzuki cars and Massey Ferguson tractors.

PACO has made significant headway towards achieving its progressive manufacturing objectives as is evident from the following contribution appraisal.

Operating Performance: PACO group's operating performance in the key result areas in the last two years and comparison with the year of takeover i.e. 1971-72 is summarised below:

Market Share: The main products being manufactured/assembled and marketed by PACO group of companies are as follows:
 Market Share
Passenger Cars 73 %
Light Commercial Vehicles
Pickup/Vans 94 %
Tractors 91 %
Trucks and buses 65 %
Jeep (4 wheel drive) 85 %

The sales of the above vehicle have grown tremendously at an average annual rate of 155 per cent per annum over the last 15 years from Rs. 253 million in 1971-72 (comprising mostly of trading of build-up vehicles) to Rs. 10.8 billion in 1988-89 (comprising over 98 per cent locally assembled vehicles).

Acquisition of Technology: - Deletion: In spite of the difficulties in the acquisition of technology and lack of adequate participation by the private sector, the PACO group has successfully deleted imported components through indigeneous production for the following vehicles:
 Deletion %
Bedford Trucks 56
Tractors 77
Suzuki Cars 37
Suzuki Vans 35
Suzuki Pickups 39
Suzuki Jeeps 25
Suzuki Motorcycles 47

Deletion of imports through local production has been achieved without compromising international quality standards. Technology and expertise in the PACO Group has been acquired and developed in the following fields. - Assembly: PACO Group of companies have, by far, the best vehicle assembly and painting facilities for passenger cars, light commercial vehicles, trucks, buses, jeeps, tractors and motorcycles. The present assembly capacity available per shift per annum is as follows:
Passenger Cars 10,000
Light Commercial Vehicles 15,000
Jeeps 3,600
Trucks/Buses Chassis 7,000
Tractors 18,000
Trailers 900
Motor Cycles 12,650

With its present assembly and painting facilities PACO can easily meet the country's entire demand for the above range of 4-wheel vehicles. - Processing of Components: With over 20 years of experience and prossessing a range of mechanical and hydraulic presses from 20 to 1200 tons PACO leads in press technology, maximum cushion stroke 450mm for deep drawn components, bolsters area of 3600mm x 250mm automatic blank holders and sliding bed for quick die change, are some of the features incorporated in our presses. - Die Making: Dies are essential for pressing out standard sheet metal parts in large quantities and at high speed. However, die-making expertise is limited all over the world and die making equipment is expensive.

PACO group has established a very modern tool and die making facilities with NC and CNC machines at Naya Daur Motors capable of making dies for complicated and large parts like deck floor, bonnet, long members and tractors rear wheels. - Foundry Castings: In 1974, PACO set-up a semi-mechanised foundry with pneumatic moulding machines, mechanical, conveying systems for sand and moulds, CO2 core sheeters and also resin sand core making system for production of medium size ferrous and aluminum castings conforming to BS grades and backed by quality control equipment.

In July 1986, PACO put into production another most modern foundry of its kind anywhere in the world capable of producing 5,700 tons of intricate thin-walled castings. The castings produced by this foundry are greatly contributing to the progressive manufacturing programme of vehicles in the country, especially tractors, trucks and Suzuki range of vehicles. - Wheel Rims: In 1985, PACO's plant for producing wheel rims for tractors, trucks buses and Suzuki cars, pick-ups and vans went into commercial production. This is the only plant in the country for producing automobile wheel rims and has a capacity of producing over 376,000 wheel rims per annum on single-shift basis. - Engines Manufacture/Assembly: Progressive manufacture and assembly of engines for trucks, buses and tractors and prime movers for diesel generators and pumping sets is being carried out by PACO since 1973-74 by one of its companies, namely, Bela Engineering. - Machining: PACO has in-house facilities for machining of castings. Machining of parts such as brake drums, hubs, flywheels etc. for tractors, jeeps and other vehicles are done with the machining facilities available in PACO Companies.

Vendor Development

With the assistance of UNIDO, PACO has set up a Vendor Development and Training Cell to provide technical information and training to prospective vendors for manufacturing auto parts conforming to international specifications. Modern techniques and methods of maintaining control over quality are also imparted to production and quality control managers. Side by side of the Vendor Development and Training Cell of PACO, Vendor Development is also being carried out by each PACO Company particularly by the manufacturing units of tractors and Suzuki range of vehicles. Uptill now over 400 vendors have been developed who are supplying locally produced components to PACO companies worth over Rs. 1200 million annually.

Joint Ventures: To overcome difficulties in acquisition of technology, foreign capital, efficiency in management and export markets, PACO successfully implemented the concept of trilateral joint ventures in the form of Al-Ghazi Tractors for producing and marketing Fiat Tractors, Hinopak Motors for producing and selling Hino range of trucks and buses, Suzuki Motorcycles for producing and selling Suzuki motorcycles and Domestic Appliances for producing and selling refrigerators, airconditioners and deep freezers. Through joint ventures, PACO has been able to ensure built-in transfer of up-to-date technology, foreign capital and channelization of both these elements into areas of national priorities through overall control of these joint ventures by PACO.

In spite of all that has been done to improve the contribution of PACO Group of companies over the last 17 years, many problems remain to be tackled and new ones continue to arise. New opportunities will occur, new challenges will have to be faced. Fresh approaches will have to be developed to successfully manage the automobile industry in years to come. In future, a management will be faced with problems very different from those of today. The need for creativity in management would be more than ever before. The performance of PACO so far, gives every reason for hope, though not for complacency nor even for satisfaction. PACO stands poised to make an increasing contribution to the automobile industry and national economy to justify the confidence reposed in its by the people and Government of Pakistan.
PACO Group - Basic Facts
Companies 1971-72 1988-89 Change
Total companies 8 15 + 7
Public Limited Companies 3 9 + 6
Companies quoted on Stock Exchange 3 8 + 5
Private Limited Companies 5 6 + 1
Assets (Rs. in million) 347 6238 +2698%
Personnel 5569 6666 +20%

[Tabular Data Omitted]
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Author:Khan, M. Zaheer
Publication:Economic Review
Date:Apr 1, 1990
Previous Article:Energy conservation through better service connection.
Next Article:Automobile production - future trends.

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