Almost a decade after it entered the country, Ford Motor Co. has a lowly 3% market share in India. But Ford India Pvt. Ltd’s managing director and president Arvind Mathew is an optimist who says he doesn’t look at numbers but prefers to build a brand. Having launched two new models in the past month, Mathew talked to Mint about Ford’s small car plans, issues concerning suppliers and plans for a diesel engine factory. Edited excerpts:
Is the trouble at your parent affecting you?
It doesn’t really affect us. In fact, the parent has been doing quite well in the relative scheme of things. Why, if you look at Europe, it has been doing really well. Asia-Pacific continues to grow. In North America, the projections they have been making to analysts in terms of what sales numbers would be, they are outperforming the predictions. We are still losing money, but losing less money. If you look at the stock price of Ford, it is actually going up. Not only that, quality, too, of Ford and the umbrella (brands), has done very well in America. Quite frankly, (CEO Alan) Mullaly has been in the job for six months. It’s been some good months. You have to get realistic in terms of total market, production capacity, in terms of sales. We went through some tough times in the end of 2006. Now we are getting out of it.
So it doesn’t affect your capital expenditure?
Not at all. It has zero impact on our budget because everyone understands Asia is the growth market and need to make sure we invest accordingly. That has no impact whatsoever. These are three separate businesses—North America, Europe and Asia-Pacific.
We need to be able to convince (them). Everyone’s an investor. You have to make clear your business proposition. If I’m competing with China, Thailand, Europe, North America, you all go to the same board of directors and say, here’s my business proposition. If they accept it, I get the business.
So how’s it been so far?
I would say positive. We’ve been doing all the stuff we are doing (referring to launch of the new variants of Endeavour and Fusion here). So far, so good. Need to look at the fundamentals of the business. I’m not saying just Ford, but looking at the overall equation. When you are competing with China, it needs to be sustainable. That’s where India needs to be doing better. I come back to the same old line of infrastructure, government regulation, etc.
Are you referring to the length regulation for small cars? What plans do you have for this segment?
We are still planning. You’ve got a set of variables and have to deal with that. So we keep looking, but I am in no position to make grand announcements.
What about the Tata Rs1 lakh car? Do you think it is impossible to make a car at that price? Would you be looking at such a segment?
I always focus my products on what the customer wants. If my consumer comes back and says I want a different set of requirements, I will tailor my products according to those requirements. At this point, consumers have a set of requirements and I am selling my cars according to that. I need to see what the Tata Rs1 lakh car is about. I don’t know what it is. I’m curious. I’m definitely not saying it is impossible. Maybe not at Rs1 lakh, at Rs1.2 lakh or Rs1.5 lakh, but they would have done a good job.
Certain car makers are saying they have localization problems due to quality of parts procured here. Are you facing the same problems?
Let’s be clear. Some of our suppliers are world (class) suppliers today. They are producing for the world market. Some Tier I suppliers (those who supply directly to the auto makers) maintain standards with the best of the best. Where you’ve got to be careful is with the Tier IIs and Tier IIIs supplying to the Tier I. Sometimes, if you have a little mix-up, the fall, off the cliff, is pretty steep. We just have to be careful about how you manage the supply base when it gets to that level.
We do a lot of shadow audits into the Tier IIs and Tier IIIs even though it is not my responsibility because it is the Tier I’s responsibility to manage their suppliers. But we have to do it. When you have got a component, like a transmission that has 200 parts in it, one part is all you need to go wrong and it could be devastating. So I run far more quality checks than someone in Japan. For in Japan, they are very, very clear from Tier IV. Here, once you get past Tier II, it sort of tapers off.
Why do you think this is happening? Is it because they are not willing to invest enough?
It’s because the capacity increase has been fairly fast in recent times.
If you track the Indian automotive industry, post 1991, we went through this euphoria mode when manufacturers came in. There was a lot of investment in capacity and then arrived 2001-02, (when) there was a slump and there were a lot of people saddled with open capacity. They were hesitant to invest after that. So (even though) we have seen a fairly good run in volumes after 2004 and they are reluctant to invest in necessary capacity. We have told our component vendors, ‘Look guys, you’ve got to build capacity so that we can then take it to the next level.’ When you get beyond the big names, investment in capacity becomes a bit of struggle.
It’s a challenge we are all facing. There is a food chain—auto manufacturers pick from Tier I, Tier I picks from Tier II and the guy at the bottom, the Tier III, who has to invest in employment in people, in training and the whole chain is getting stretched a little bit. We need to ensure that they meet the quality and also the delivery schedules. Our biggest challenge is to find the right people. We’ve the automotive mission plan predicting huge growth and its fair, its capable. But where are all the people going to come from? Qualified people who stick around—that’s a bit of a challenge at the moment.
Are you getting involved with ITIs to recruit and train people?
No, we are not. We have a fairly good process. We are happy with it. You need to plan for levels of attrition that are manageable.
With new models that are coming in with diesel engine options, you said once you were considering building a diesel engine factory. What has become of that plan?
I will always look to see if I can localize. My Ikon is 90% local, my Fiesta is 80%. I will continue to localize, but I’ll continue to make sure that my supply base is ready for that. So some of the high-technology components, like ABS systems, powertrain control modules, I still import because no one is ready to bring in the technology. I will certainly encourage suppliers to do that but they need to see what’s in it for them. I will give you an example. My Endeavour, the new one, top class diesel, CRDi, has Bosch injection systems, but Bosch doesn’t make them here.
So you are saying it’s more of a supplier problem rather than your willingness?
Yes. I am always willing if suppliers are also willing. At the end of the day, these are high-precision components and to invest in that kind of tolerance levels, you need huge investments.
You have had an 11% decline in sales in the second quarter of this calendar year. And it seems primarily due to the Fiesta, which is pretty much your bread and butter brand. Do you think its sales are tapering off?
You have to understand that the overall market is down. You had a couple of new launches in April and May. So when you put it all in a depressing market with new competition, you would see a little of someone stealing from another. It’s not fair to measure on the basis of a quarter. I’m very confident. When I gauge, I don’t look at numbers but what customers are telling me. That’s what I track.