9 min read.Updated: 17 May 2011, 08:15 PM IST Amrit Raj
Prasan Firodia | 40-50% of our core team are young people from the industry
New Delhi: In mid-2009, Prasan Firodia took over the reins of Force Motors Ltd from his father, Abhay. The company was still suffering the effects of the drop in demand that had been caused by the global financial crisis of the previous year. It wasn’t the easiest time to start for the 35-year-old at the helm of the company that was started by his grandfather in the early 1950s.
But the new managing director was able to effect a turnaround in fortunes by the financial year that ended in March, getting a much-needed boost from the recovering Indian economy. Sales, which comprises mostly commercial vehicles and components, more than doubled to ₹ 3,000 crore in the last financial year. The quick turnaround was the result of streamlining the organization, raising professional standards and making the company, formerly known as Bajaj Tempo Ltd, more market-centric rather than product-centric, Prasan Firodia said in an interview.
Firodia said he wants the company to look beyond the products that it currently sells and explore new areas. The company will enter the passenger-vehicle segment by introducing a sports utility vehicle in June and a nine-seater multi-utility vehicle next year. Edited excerpts:
Your firm has a history of cross-holdings, from Daimler-Benz to Bajaj Auto, which can be confusing.
To give you some clarity, my grandfather, N.K. Firodia, started this company by making tempos like Hanseat. This was being done in collaboration with a company called Vidal and Sohn Tempo Werke. This was the time when a lot of consolidation was happening in the German automobile industry. So Vidal and Sohn was taken over by a company called Hanomag. Hanomag got taken over by a company called Henschel, which was later taken over by Daimler.
So one fine day, we found out that Mercedes now owns 26% of our company. That’s how we got into a relationship with Daimler. Then, we licensed from them the engines for our vehicles. Six-seven years ago, we bought back that shareholding from Daimler. Today, there is no shareholding as such. We are partners in Force Motors, which was earlier called Bajaj Tempo. But we don’t have any business with the Bajaj family. We just have cross-holdings in each other’s companies. Bajaj Auto owns 23-24% in Force Motors and the Firodia family owns 9-10% in Bajaj Auto.
How was Kinetic Motor Co. Ltd connected to you?
My family has three companies—Force Motors, Jaya Hind Industries Ltd, MAN-Force Trucks Pvt. Ltd; these three companies are under the chairmanship of Abhay Firodia, my father. We have nothing to do with Kinetic in terms of business at all. We have no cross-holdings, we don’t sit on each other’s boards. We are family, but they were looking at the two-wheeler side of the business, which later on they decided to exit. They are my second cousins.
Your group’s revenue has more than doubled this year. What is the reason for such a big jump?
Yes, there has been a substantial jump. The turnover of the group companies—Force Motors, Jaya Hind Industries and MAN-Force— last year was close to ₹ 1,400 crore. This year we closed at more than ₹ 3,000 crore.
What happened was that in the last few years we had started a lot of new projects with fresh investments. We had put in around ₹ 700 crore in the MAN project (joint venture with MAN trucks for commercial vehicles), and that was the time when the whole economy collapsed. At the same time, our existing products from Force such as Minidor collapsed all of a sudden. The market changed to bigger three-wheelers, getting into the (Tata) Ace kind of a segment. Minidor, which used to be a substantial part of our bread and butter, completely vanished. We stopped producing other products such as the Matador. There was a change in the market dynamics substantially, and there were huge investments. We were not getting any return. Then we started getting our act together. We corrected our product positioning, technology portfolio, got new emission compliant engines. So all this took us about two years. And last year was the year when we, sort of, cleaned up confusion we had, and started to move again. We brought in a lot of new people, we pooled in a lot of new talent. Now, 40-50% of our core leadership team are young people from the industry. Now, the situation is that the top 15 guys in the company are not from inside. These are not the ones who were growing up the ladder here. With them came the professional environment. So we changed the top brass. We got in younger people across the board and the company.
Was it difficult for you to shift the focus of the company from commercial vehicles to passenger cars?
Now we have three divisions—commercial vehicles, personalized vehicles, agricultural vehicles. It is not as simple as giving these three different names. Over the last two years, we have made a lot of effort in changing the organization’s culture from product-centric to market-centric. We have launched a completely new dealer-management system with help from Wipro. This is a four-and-a-half year programme. The total outgo on this project is ₹ 15 crore. Wipro will do a complete data management system from the dealer end. The entire campaign on the front end will be handled by them, in terms of data to analysis. This way, our dealers and their staff will get trained. That will bring us closer to the market. Second, we have tied up with IBM, which is upgrading our IT (information technology) infrastructure at the back end. On that we have spent close to around ₹ 20 crore. This is in order to improve the data transaction, which has to be clearer and wider. These are some of the small things we have done before getting into this business.
Isn’t it too late to get into the passenger car business?
I don’t think so. Look, we are a small OEM (original equipment manufacturer); and for us, in the long run, the strategy is definitely to be a major player in the van segment. But we thought this was also a great opportunity for us to go through the learning curve; and also, if we do well in this segment, it will have a huge positive rub-off on our existing product. Also, the other thing, in terms of the product, you need to have the product to get into a particular segment. Or you can identify a segment and decide: let me create a product for this segment as it is a booming segment, or you create a separate market altogether. Like for us, the three-wheeler market was created by us. In that segment, our product Minidor sold over 200,000 units. So we are looking at both the opportunities.
Is this product a sort of brand-building exercise for the group?
Not just brand-building, but it has lots of positives to it. Of course, brand-building will have to be done because the product in this segment has to be supported by advertising, branding and by promotion. It is going to be a product coming out of the Force stable. So the Force name also gets promoted. The customers who are using a Trax or a Traveller can associate with the product and say that it is from the same company which makes all these products. The idea is to make it a brand ambassador product for the company. The bigger reason for us to get into this is that we had available a concept which could be put out in a four-wheeler in a very short time frame, and at an investment which was very attractive from our perspective.
On this project, the investment is close to ₹ 150 crore. This is much lower than what others spend on a particular product. Other companies, when they get into a particular segment, look at huge volume, and for that you need huge infrastructure, which takes a lot of money. We were able to do it in ₹ 150 crore because the area in the SUV (sport utility vehicle) segment which we are targeting is where the market is 60,000 units in India and I will be happy if we could sell 4,000 units in the first year. This is a new initiative from the company from a long-term perspective. We are not looking at it as a short-term venture. As long as customers are satisfied, and industry looks at us and says: “that company has moved into another league". That’s what is more important for us at this stage. That was one of the key driving factors to get into this segment. It’s a very challenging task for us. We have been in the CV (commercial vehicle) segment for years. Now, we have to move out into other spectrum, which is very challenging and extremely exciting.
You will be using a Daimler engine in your SUV. Won’t that make your vehicle expensive?
Our SUV is a Daimler driveline. The engine, the gearbox, the axles… everything is from Mercedes. The DNA of the engine is similar to what a Mercedes C-class has. This is a Euro IV 2.2 litre engine, 140 bhp and over 300 ft-lb torque. So the driveline is top class. Secondly, the fact that our SUV is a fairly large—space is going to be another USP (unique selling proposition) for us. We are going to offer a lot of room. In our understanding, Indians like space as Indian families are large as compared to Western families. Our ride handling is tuned by Lotus in the UK. We flew vehicles there—they were tested in the UK extensively; and then the Britishers came back here to do testing in multiple locations within India. So we have the best-in-price product in that segment. Our electronics, vehicle dynamics are all evaluated by Mercedes-Benz Technologies, a vehicle consultancy company which is a 100% subsidiary of Mercedes-Benz. They do evaluation for other companies like Audi, Porsche. So we have got these external elements to support us. We hired a German specialist on styling. The vehicle will be priced ₹ 12-14 lakh. At this price, who would not like such a vehicle?
How will the branding strategy shape up?
We have hired Lowe Lintas for front-end communications. We are looking at a brand ambassador for the car, either from cricket or Bollywood. We have to keep in mind one thing—that this is not going to be our mainstay; this would be secondary. Our core business is commercial vehicles, which will continue to be our bread and butter business.
Will there be more products in the passenger vehicle segment?
Yes. The second product which we will be launching by the end of next year is another van. We already have Traveller. The new van will be smaller and cater to the personalized vehicle space. This vehicle will target the hospitality sector and large Indian families. We are looking at an eight- or nine-seater van. We had an off-road product called Gurkha, which we will be relaunching in six months. We will also be launching the new Traveller, which will have more seating capacity.
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