BackIt is the worst slowdown in 3-4 decades: Vinod Dasari
The Ashok Leyland MD talks about the current slowdown, and the firm's efforts to increase its presence across India
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New Delhi: Ashok Leyland Ltd, India’s second largest maker of trucks and buses, got about 10% of its employees to quit last year, offering its executives a voluntary retirement scheme. That, managing director Vinod K. Dasari says, was a part of a deeper “Cut Fat" strategy to allow a leaner company to quickly grow its market.
In an interview, Dasari, who’s worked in the automobile industry for more than two decades, also spoke about the Hinduja group company’s efforts to increase its presence across India, especially in the northern markets dominated by larger rival Tata Motors Ltd. Edited excerpts:
How tough is this slowdown?
It is probably one of the worst and one of the longest in three-four decades. I have been with this industry for more than a couple of decades and this is probably the worst that I have seen. Usually, it is cyclical but this time not only it has lasted much longer and it has been deeper. We never had a 25% drop (in the current fiscal) on top of a 25% drop.
That must have forced you to rectify a lot of things at the back-end.
Actually, you look at it as an opportunity to look at things, which otherwise you did not have time to look at, including looking at things where our customers are also struggling. We don’t look at Ashok Leyland per se. We look at entire ecosystem—suppliers, Ashok Leyland, dealers and customers—together. Even if one of these is not profitable, entire ecosystem will fail. And, sooner or later, the market will recover and then we will struggle.
We look at improving the performance at each level. Whether it is supplier by giving them incentives…whether it is dealers by helping them increase their market share, help them sell more parts. For the customers, we are trying to say…how can we increase the performance of their existing vehicles by doing some repairs and maintenance work or if you have a new vehicle requirement, how can I bring you a vehicle which is far above the level of its performance.
Do you have something specific planned for your suppliers?
Yes, we have. What we do is we map the suppliers who are very dependent on Ashok Leyland and on whom is Ashok Leyland very dependent. We talk to them about how can we give them more business. It’s the best time for them to improve the quality system. We have done that and we are working with about 37 such suppliers. We are looking to improve their performances using the downturn as an opportunity.
You also issued VRS to at least 10% of your employees.
It is done.
Can you share some details about that?
I don’t want to tell you specifically as to what each employee got. We are staying away from saying how much money (we spent on that). But it’s a very good package and people were very appreciative about it. It was only for executives and not for the workers. We are yet to decide whether we will have to do this with workers or not.
Would you require one for your workers as well?
Hopefully not. Hopefully, the market will come back. There are enough retirements happening among workers. When you create a new factory, you hire a whole bunch of workers while hiring of executives is a linear process. So, when retirements happen among workers, they happen in bulk. If you look at our Indore plant, you will have retirements of around 200-300 workers almost every year in the next 2-3 years. In the early 1980s, we had hired a lot of people. We may not have to have such a scheme for workers. But I can’t tell if the market continues to be like this, we might have to.
What are the other cost-cutting measures that you have undertaken?
We are looking at how do we reduce our working capital. There is a whole set of things that we are doing, which we call “Cut Fat". It includes cutting working capital costs, cutting travel costs, cutting admin cost, cutting warranting cost.
Equally, there is a whole set of people working on what is called “Growing the Market". We are continuing with the pace of expanding the network. Four years ago, we had 200-odd network, today we have 600. Any place in the country, where people say “yahaan Ashok Leyland ka mechanic nahi milta hai" (we can’t find an Ashok Leyland mechanic here), we will have a workshop there within a month. We will put it ourselves if we can’t find anybody else.
We have added parts stores. If somebody says “yahaan Ashok Leyland ka parts nahi milta hai" (we don’t get Ashok Leyland parts here), we will set up our own parts store. We have added 200 in the last couple of years in this downturn. If we find somebody to do it, it’s fine. Otherwise, we will do it ourselves.
We have invested a lot in quality and new products. We are taking some 200-odd executives from the factory and giving them an opportunity to work in the frontline. These are people who are not neglected or unwanted in the factory. They have potential to grow and we said let’s use this as an opportunity to tap their potential when the factories are not running full time in a year. They would get to see what the customers want and learn from what they want.
We have not stopped or cut any investment in network, quality. We continue to say that nearly two-thirds of our vehicles would go truck on truck. I could stop that tomorrow and I will be saving ₹ 40,000 on every vehicle but my customer likes the factory-fresh vehicle. He likes the vehicle with zero kilometre running. Those things that are valuable to the customers, we will not touch.
Would you agree that Ashok Leyland lost on opportunities that emerged from Tata Motors losing momentum in the market in the last three years? New manufacturers seem to have capitalized on that.
I am not sure if we lost an opportunity to gain something from Tata Motors or from somebody else. I am not going to talk about what my competitor does or does not do. All I can tell you is (that) we have grown faster in the north than (in) the south in the last three years. That should tell you something. We have grown faster in ICV (intermediate commercial vehicle) than we have grown in MCV (heavy commercial vehicles) or HCV (heavy commercial vehicles). That should tell you something.
The fact of the matter is even if you take out the segments that I have talked to you earlier and only look at M&HCV, we have not lost market share. I am not saying we will defend it at any cost by discounting the way…we will compete on the basis of our products performing better and networks supporting better. Our industry is not like car industry. Our vehicle is a capital item, a customer is buying it to generate revenue and profits.
There is speculation that your joint venture partner Nissan Motor Co. Ltd will buy a stake in Ashok Leyland.
There is no denial or confirmation as such. See, if I deny it then it will be a story. If I confirm it then that will be a story. This partnership is a 50:50 joint venture and there is nothing beyond that. I can categorically say that Ashok Leyland is not for sale. All of these are rumours. I am a professional. I don’t control the share but, as far as I know, Ashok Leyland is not for sale.
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