Why Ford’s small car is made in India

Why Ford’s small car is made in India
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First Published: Thu, Sep 24 2009. 12 41 AM IST

In driver’s seat: Alan Mulally hopes to attract a lot of newcomers to Ford with the Figo. Harikrishna Katragadda/Mint
In driver’s seat: Alan Mulally hopes to attract a lot of newcomers to Ford with the Figo. Harikrishna Katragadda/Mint
Updated: Thu, Sep 24 2009. 12 41 AM IST
New Delhi: After about a decade and a half in the Indian market, Ford Motor Co. is aiming to step up sales volumes by introducing a small car next year known as the Figo. Alan Mulally, chief executive officer of the only big US automobile company that staved off bankruptcy during the global financial meltdown, says the timing is just right for the launch of the Figo in this interview, in which he also talks about the car market and how Ford protected itself from going the way of the other big US auto firms. Edited excerpts:
How does it feel to have a small car finally in India?
Well, it’s very exciting, especially for our wonderful Indian customers, because they’re getting a chance to experience a fabulous vehicle from Ford.
Why has it taken you this long?
Well, I think what we’ve been focused on around the world, especially in the US, were larger vehicles, especially SUVs (sport utility vehicles) and trucks. One of the very special things about Ford is that we’ve really pulled together all the Ford operations around the world to focus on the customer and also to have a full product line of small, medium and large vehicles. The Indian market is a tremendous market and so now, we have a chance to leverage all that intellectual capability around the world to bring a fabulous small car to India.
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Is it the right time for a small car?
I think this is a perfect time because when we look at the markets going forward, about 60% of the vehicles will be of the smaller size, so this is a very important market in India and around the world. It’s just special to be able to launch the vehicle in India.
It’s not just the Indian market that you’re targeting with this car. Ford also has export plans.
In driver’s seat: Alan Mulally hopes to attract a lot of newcomers to Ford with the Figo. Harikrishna Katragadda/Mint
Oh, absolutely. All of our vehicles are on global platforms and so whether it is a small vehicle or medium size or larger, they’ll be on global platforms and then tailored or customized for specific markets around the world, so each of these vehicles is important to each market segment.
The Figo is an exciting name that really reflects the nature and the capability and the personality of the vehicle. It’s colloquial Italian for cool, so it’s a really cool car. I think customers are going to really like all the features that make it a cool car.
Is the name Figo an indication of the buyers you’re looking for?
I think it really is going to attract a lot of newcomers to Ford because it’s exciting, it’s accessible and has tremendous capability. I think people are going to feel that a small car is a neat car, and the fit and finish, the drivability of it, the room inside, are going to be really appreciated. I think you’re going to be able to feel the difference of this new “cool” small car from Ford.
What kind of numbers do you expect with the Figo?
Well, we haven’t released the production numbers. That will be decided by the consumers in the market. Clearly, it’s an aspirational vehicle. It’s going to be a great entry vehicle into this segment. And as you pointed out, this is a tremendous entry by Ford and we’re really pleased to be able to do it now.
Are you happy with what the company has achieved in India?
I think the fact that we established ourselves in India 15 years ago was a very, very important first step. I think we’ve developed a very good foundation in India. We have tremendous engineering capability, manufacturing capability, and India is a key element of the global Ford team. Could we have gone faster? Maybe. But clearly, Ford’s new strategic direction is to emphasize smaller vehicles that people want around the world and to have the Figo introduced in India for the first time is a terrific development.
Ford Figo unveiled in New Delhi on Wednesday. Rajkumar/Mint
Where do you see Ford in India in the next couple of years?
It’s going to be a very important market for us. You’re going to see more vehicles, a complete family of vehicles. And every year, on each one of these vehicles, we’re going to continue to improve the quality, fuel efficiency and add more and more safety features.
Ford has successful cars in India but doesn’t seem to be able to scale this up into one big blockbuster product in India.
With the Figo, this is a real opportunity to focus even more on the Indian market, and we’re doing that because we believe this is a great market with great customers, and Ford has the right vehicle for Indian customers—they’re stylish, they’re fun, they have a lot of capability, they’re great value. These cars, as well as the Figo, are going to be best in class on quality, fuel efficiency and safety.
What’s on the horizon?
It’s so exciting to get the Figo going that we’re going to focus on that today. But you can imagine that with the products that Ford has worldwide, and now we’re bringing those to the Indian market, and that is the plan now. Figo is a very important first step (in that direction).
How is the shift towards small cars going to affect profitability for Ford and the industry?
That’s where the world is going. We really believe that 60% of all vehicles worldwide are going to be of a smaller size, 25% medium size and 15% larger. And the commitment from Ford is that in every country that we serve, they’re going to get a full product line.
Is the Figo going to be made only in India?
We believe that this is going to be a centre of excellence for us and we will continue to export from here, including the Figo. This is going to be a popular car around the world.
How significant is this launch from the global perspective?
Well I think it’s very important because it’s really a proof point about the new Ford, and what I mean by that is when Henry Ford originally established Ford operations around the world, he wanted to participate in every country and every market and provide great opportunity. So, not only could you get great vehicles, but you could also work for Ford and it would contribute to the economy and growth. But over the years, each of the Fords in each of the countries ended up operating very autonomously and so there wasn’t a lot of sharing of a lot of that wonderful intellectual capability around the world. So, the new Ford, or what we call One Ford, is our plan to leverage all of our assets from around the world and bring that to each of our customers in each of the countries. So, a neat, cool car such as the Figo is an example of Ford using all of our capability around the world to bring the very best car we can to the Indian market.
In moving to One Ford, you’ve divested yourself of brands such as Jaguar, Land Rover and Aston Martin.
What we decided three years ago was that the vast majority of Ford operations were associated with the blue oval. And it is recognized everywhere around the world as safe and efficient transportation. It’s fun, it has great styling, and it’s affordable. You can get the kind of vehicle you want from Ford. What we decided to do was really focus on the Ford brand.
The second thing we decided was that we’re going to have a full family of vehicles. So, whether you want a car, utility or truck, you’re going to be able to get the type of vehicle you want from Ford. And we decided we’re going to service all the markets around the world. About one-third of the vehicles will be purchased by consumers in the Americas, one-third in Europe and Russia, and one-third in the Asia-Pacific region.
The next thing that we decided in One Ford was that every vehicle that we make is going to be best in class, not just competitive.
Did One Ford prepare you for the events of 2008? Were you better equipped to deal with the slump than the other two large US automakers?
Oh, absolutely. When we started this new strategy for Ford three years ago, clearly the economy in the US was starting to slow down, it was slowing down around the world.
One of the neat things about divesting other brands and focusing on Ford was that we did it before the slowdown and also, we could go to the capital markets and raise money when it was still available so we could fund this transformation.
I think, clearly, we’re the only company that continued to invest in new products during the worst of times so that we get a chance to sit here today and launch a new car as the economy is starting to stabilize and come back.
Where do you expect the US market to stabilize?
In the US itself, we’ve been pretty conservative on the turnaround in the market, which is appropriate because we’ve been as high as 17-18 million vehicles in the US. We assume that it’ll be somewhere between 10.5-11 million this year, 12.5 million in 2010 and maybe 14.5 million in 2011. A very gradual recovery in vehicle sales with a slow recovery in the economy, which I think is prudent. And it’s very encouraging to see the markets in Asia-Pacific stabilizing and starting to grow again.
As head of Ford, you’ve had a ringside view of the crisis. What’s been your biggest learning over the last one year?
The most important thing in business is to focus on the customer and what the customer really, really wants and what the customer values in the automobile industry—just as in the airplane business, safe and efficient transportation is the foundation.
The consumers want quality vehicles, fuel-efficient vehicles and safe vehicles. And they want a neat design that makes them an even better driver. Also, they want really, really good value. They want to know they’re getting value for their purchase.
The second thing is: is everybody aligned with the company? Why are they coming to work—to satisfy the customer with the best design. Another key learning is to size your production to the real demand.
Another important one is to have a good financing plan. As you pointed out, we went to the markets, we borrowed money when we needed to and now, we’re repaying our money. We’ve gone to the equity markets recently and we’ve raised $1.6 billion (Rs7,680 crore). We’ve paid $10 billion of our debt last quarter, so we’re creating a very strong business to be very supportive of these great products.
Governments have rushed to protect jobs and keep factories open across the world. Would you have wanted them to do something differently?
The most important thing in any industry is to have the production capability match real demand, and one way or another, economics will dictate that. Clearly, we’re seeing a consolidation of the supply base around the world. I think we’ll see a consolidation at the assembly level also. In Ford’s case, we were the first ones to reduce our size to the appropriate demand and it’s serving us so well. Now, when the economy starts to recover, we have the right size and the right products, and we’re able to deliver those products and also make a reasonable return so we can keep investing in the business.
Going forward, environmental concerns are going to cause Ford and other manufacturers to invest huge amounts in retooling of engines. Does that worry you?
I think it’s much better now because we have stabilized on the requirements, especially for fuel efficiency. This is a big development around the world. In the US, we decided to focus on one improvement in fuel efficiency, which is also matched with carbon dioxide reduction. All the states (the 50 US states) have agreed, plus we’ve agreed that between carbon dioxide and miles per gallon, there will be one improvement standard. It’s very interesting that this is very similar to the improvement goals in Europe and Asia-Pacific and so, from a consumer point of view, I think the fact that we’re coming together on these global standards for improvement means that we’re not only going to be doing it cost-effectively but also improving the vehicles.
How is Ford doing on hybrid and electric vehicles?
Very well. The Ford technology road map is, I think, one of the most solid. And if I could, maybe, just give you a little bit of insight on that—I think the most important thing that we do as a foundation is to continuously improve the internal combustion engine, whether it is petrol or diesel. And there are so many enabling technologies that allow us to do that. Plus, we’re using new lightweight materials and also new electronics.
The most important thing is to keep improving the internal combustion engine and then we can move to hybrids. Hybrids usually have an electric engine along with an internal combustion engine. That’s a tougher economic case as you’re carrying two power trains.
But you can continue to make improvements on the hybrids, especially getting the cost down, the battery size reduced, plus making the batteries more capable. Lithium ion batteries look like a real good next opportunity for that.
And then we move to the electric vehicle. And the key there is again the battery technology, but also the infrastructure. We not only want to use electricity in a clean manner, but also generate it cleanly. It’s going to take both governments and automobile companies working together.
sukumar.r@livemint.com
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First Published: Thu, Sep 24 2009. 12 41 AM IST
More Topics: Ford Motor | Figo | Alan Mulally | One Ford | Jaguar |