Financial Daily from THE HINDU group of publications
Monday, Dec 02, 2002
`Ford set to roll out exciting new models' Mr David E. Friedman, MD & President
CHENNAI, Dec. 1
IT is just over a year since Mr David E. Friedman took over as Managing Director and President of Ford India Ltd. The year, according to Mr Friedman, has been one of behind the scenes activity, when the spadework was done for making the Ikon a "true blue Indian car" and preparing for the launch of "products that will excite the market".
In this interview, Mr Friedman looks back at the last year , discusses the year ahead and outlines Ford India's business plan. Excerpts:
How would you assess your first year as chief executive of the company?
It has been a good one. A year ago, we had talked about launching the Mondeo, growing the Ikon, expanding the export business, and optimising opportunities in manufacturing and outsourcing in India. Subsequently, we announced our collaboration with Hindustan Motors to make the Ford engines and gear box in their factory in Indore.
We are talking of global component sourcing for Ford from India. The Mondeo has been successfully launched, the Ikon continues to hold the pre-eminent position in the market, we have expanded the export business, and started component exports to China. We are continuing to look at opportunities to leverage India as a source of products and components.
It has been a busy year, but some of that is behind the scenes. In the end you will see positive results and moving the business forward.
Almost everyone anticipated that economic growth will start to accelerate in the second-half of this calendar year . So far, we have seen stagnation and are yet to see the 6-7 per cent growth rates that had been forecast.
Does this mean you will have to readjust your strategy?
We are an Indian company and the fundamental thing is to adapt to the environment here. This is the fourth consecutive year of flat passenger car sales. We have done two key things. One, focus selectively on looking at new models, Mondeo being the first one and looking at how to leverage Ford India for Ford Motor Company. If the growth does not come solely from the domestic market, we can also do it through the export market and through the components business. In the three years of the Ikon we have established a good supply base.
This combination of building our presence in the domestic market through product innovation as well as leveraging our relationship with suppliers to build export business is what we are doing. What we have found is at times of 4-5 per cent growth rate, the auto market is fairly stagnant. When you can see 7-8 per cent growth rate, the auto market leaps up.
What is your take on getting the 7-8 per cent growth rates?
It will be interesting to see the Government's approach for the Budget. I believe that the Government is frustrated by the slow growth rates and the lack of feel good factor. High growth has to be accompanied by strong consumer demand. You cannot just push it through fiscal policy - you can get growth by building roads and construction, but only so much. That has to be accompanied by consumer demand.
The US has been propped up by consumer demand. Japan, on the other hand, has had no growth although they have spent a fortune on infrastructure in order to prop up the economy and that has not worked.
The Kelkar Committee report talks about opportunities to rationalise tax structures, and automobiles are a good example of this. Automobiles continue to be taxed as luxury goods. It will help if there are tax reforms aimed at stimulating consumption by making consumer products less expensive. You will then have greater demand, which can be used as part of the engine to get the economy growing quickly. The Chinese have done this. If you can get consumer spending in these areas, it helps fuel economic growth. They have been reducing taxes steadily. That is not a bad model to follow.
The engine localisation programme is important from the company's point of view, but what does it mean for the consumer? Lower prices?
The Ikon is going to be a 90 per cent plus Made in India car in terms of local content. It becomes a true blue Indian car. We have matched our business model to the local environment. We will be able to compete head on with anyone in the value we offer, cost and price structure, and quality.
In the short-term, pricing is determined by the market. Long term, some of these pressures that in the past had pushed up car prices are not going to be there. Although, this programme starts with engine and gear box for the Ikon, it permits us to do powertrain for subsequent new models. We have the ability to bring in new models with optimal cost and pricing. We will be looking at derivative engines. We have the ability to expand beyond the Ikon range and produce engines for subsequent new models.
What about the new models being planned?
There are a lot more coming. We have been working on a lot of things. The foundation is now in place to effectively introduce exciting new models in the market. As we go through the next 12-24 months, you will see more products coming into the market from Ford as well as continuous upgradation of the Ikon.
In the kind of economic scenario, what kind of growth are you expecting in the passenger car market?
This fiscal, I am hopeful to see five per cent growth. We are seeing that while the number of car buyers is fairly stagnant, those who are buying are buying better and buying up. The average transaction price is increasing. People who bought two-box cars a couple of years ago are buying three box cars. There is a little bit of growth in the D segment.
What about the year ahead?
We need to move forward the domestic business. I am comfortable with the model we have to do that. We have been working on new products that will be innovative and exciting to the market. They are Made in India products, which means they are at a cost and a price that will be attractive to the market. Second, and equally important, in the long term Ford India needs to grow worldwide in importance for Ford Motor Company because there is a lot Ford India and its relationships in India can do for Ford worldwide.
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