Parker: I don’t think it’s something we learnt that’s new but it’s a reinforcement of the fact that you’ve got to watch your cost base. It’s no good being profitable when everything’s in good shape and the industry is growing 10-15-20%. And, quite frankly anybody can make money in those environments. With your cost base you need to be in a position so that when things get tough you can still be eking out a profit. So I think it just reinforced for us the urgent need to reinforce that your cost base is reduced.
How much have you cut costs by?
Parker: Around the region, for instance, we’ve cut 30-40% of our fixed marketing costs...a lot of that through efficiency, not by reducing our communication with the customer. We’re operating as one region. For instance, in ASEAN (Association of Southeast Asian Nations), we’ve had five or six countries all developing independent ads. (That) doesn’t happen anymore. We develop it once for all of those countries.
For Fiesta that was launched in Australia and South Africa we used the same material that Europe was using. We’ve also had to be very careful on our salaried personnel and overall costs. We’ve taken about a 25% reduction all around the region and in some places it’s as high as 40% in some of the more expensive markets that have been more affected by the downturn.
That (the salary cut) would be only for senior management?
Parker: From senior management all the way through the ranks including workers.
What about India?
Boneham: Here we haven’t had any specific redundancy programme but what we’ve done is put a freeze on hiring. We’ve communicated this previously. Obviously, there’s attrition that occurs. So, what we do then is structure the business and do the organization structure so that we can operate with lesser number of people… A lot of times, as John said, when things are going well, you’re not focusing on that base. There are things that perhaps creep in that perhaps are not as efficient as they should be.
India is seen as a good base in terms of talent and capability at reasonable costs and so some things that were done in the region previously are now done in India–some engineering work, some of our material planning and logistics activity for the region is being run out of India.
Could you explain by how much you’ve cut costs in India?
Boneham: We don’t share specific country-by-country numbers. You can be very sure that we’ve cut our cost base significantly. Also here in India, we’ve really hammered in on the cash element because we’re the biggest spender in the region basically other than a couple of others like China. We’ve looked at the use of our cash and our investment efficiency and we’ve found ways to significantly reduce our cash requirement. One of the things we’ve done is match our inventory and production requirements. Previously we would have had, say, up to 30-40 days of supply of vehicles that’s been reduced 60-70%. Our pipeline of vehicles has leaned out significantly and that obviously saves us a significant level of cash. And we’ve looked at our investment as well and found ways and negotiated hard with vendors and so on.
You are making money in India?
Boneham: We’re cash-positive. We’re investing a huge amount of money and we don’t have the volume to pay for that investment at the moment. We plan to in the years to come (referring to making use of their installed capacity).
Ford has big plans for its small car. What kind of numbers are you looking at?