India's Sakthi puts faith in second chances

If there's a common thread to Sakthi Group's investments in the U.S. market, it is second chances.

The Indian steering-component supplier has emerged as a player in Detroit's urban comeback by putting manufacturing into a low-cost, tax-abated neighborhood in the city's challenged southwest side over the past three years. It has even acquired Detroit's abandoned Southwestern High School as part of its plan, converting its unused football field into a manufacturing site.

The auto supplier also is giving people a second chance.

To expand its Detroit work force to 565 people, Sakthi has relied on a large number of parolees to produce parts for General Motors and Ford Motor Co. Parolees now represent about a third of its workers, Deepak Bhalla, director of purchasing and facilities for Sakthi's U.S. operations, told Automotive News.

Sakthi obtains incentives through a state program called Community Ventures to hire the former inmates.

Not every one of the 185 parolees has worked out for the company, Bhalla said, but most are excellent employees and some have been promoted to supervisor.

"They definitely want a second chance," Bhalla said. "They made a mistake in the past for which they were incarcerated, and then they're not getting hired by people. We have found that, given the proper opportunity and training and everything, parolees could be good employees. We believe everybody deserves a second chance."

So does economically challenged Detroit, he added.

To date, Sakthi has invested about $115 million in its Detroit operations and may expand again. Bhalla says the supplier is interested in turning some of the high school space into a mixed-use building where Sakthi can create a technical center for training. Those plans are not firm yet.

Sakthi Automotive Group USA is a division of the diverse Indian conglomerate Sakthi Group, which has businesses in auto components, auto retailing, textiles, transportation, food products, education and publishing. Its U.S. auto parts business generated approximately $115 million in revenue last year producing components such as steering knuckles and control arms.

The company came to the U.S. in 2011, passing on offers from some Southern states and opting for a Michigan location. It began with a temporary office in the Detroit suburb of Troy, but two years later relocated to Detroit.

Bhalla credits lower inner-city real estate costs with its initial decision to leave the suburbs, along with incentives offered by both Michigan and Detroit, including benefits from Detroit's Renaissance Zone abatement program and the Michigan Business Development Program.

A year after opening its urban headquarters, Sakthi added a 15,000-square-foot plant to its headquarters to supply Ford. In 2015, Sakthi remodeled an 80,000-square-foot city site near its headquarters to supply GM.

But when it needed more production space to keep up with its customers, it hit a snag. Sakthi wanted to keep its Detroit operations in a tight cluster instead of having them spread around the region, Bhalla said. The challenge was simply a lack of buildable urban acreage, he said.

Obtaining the old high school, just down the street from Sakthi's plant operations, solved that problem.

"We saw that this school closed down in 2012 and was up for sale," Bhalla said. "We thought it was a good idea to buy it. It had more than 16 acres of land, and behind it, its football field had almost seven acres, which we could develop as a greenfield for a manufacturing facility."

Sakthi completed a 120,000-square-foot casting operation there last year.

David White, director of business development at the Detroit Economic Growth Corp., says Sakthi isn't a one-off inspirational story but proof that advanced-manufacturing companies can succeed in urban Detroit.

"Several years ago, it seemed like they were taking a chance," White said of Sakthi. "They have leveraged the assets that are here and continue to grow. That helps tell our story to other prospects."