India is a tremendous market for us: Alan Mulally
CNBC-TV18?s Shereen Bhan was in conversation with the man who brought Ford back to life - Alan Mulally, earlier today. Here are excerpts from the interview.
CNBC-TV18's Shereen Bhan was in conversation with Alan Mulally, the man who brought Ford back to life, earlier today. Here are excerpts from the interview:
Q: India is clearly an exciting market. It's a market that every global automotive giant wants to be a part of, but you are investing in markets like Brazil and China. If I were to ask you, in terms of costs of business, in terms of ease of doing business, how does India rank in your pecking order as an investment destination?
A: India is very competitive and as you pointed out it is a tremendous market for our customers. Also, we have very successful and efficient operations here. We have just announced that we are expanding our operations in Chennai. We are also going to build a new plant in Gujarat and we are going to be introducing eight new vehicles in the Indian markets over the next few years.
Q: If I were to ask you to give me an investment number for India because you have done about $757 million if I have got my numbers correct for your second factory and about $142 million to build the new EcoSport. So, on a cumulative number what would the number look like for 2015 in terms of your India investment?
A: We don't break out the future investment for plenty of reasons but clearly the Indian market and our Indian operations are very important part of our Ford plans worldwide.
Q: You talked about India being a competitive market but is it as competitive as China? What is the difference between China and India at this point of time and how competitive is Brazil in comparison to India?
A: What is really quite incredible is the similarities in the market because what people want are great vehicles, complete family of vehicles, small medium and large cars, utility trucks, but they also want in every vehicle that they buy the finest quality, most fuel efficient, the best safety features, and of course, very smart designs. In Ford's case they want the most affordable because we can do that with our scale and those customer requirements are so similar for America, for Europe & also for Asia-Pacific, which allows us now to bring these vehicles to these markets much more efficiently.
Q: So, would that be Ford's positioning for the future - stylish, most affordable?
A: Well it really is, its very interesting that its goes back to Henry Ford's original vision that he laid out in 1925 and that is to make the best vehicles in the world but also to make them most affordable, so that everybody can appreciate travelling on the countries' highways around the world.
Q: There is a lot of exciting experiments on the Indian automotive market at this point in time. You had Tata Motors launch the low-cost car, Nano, which has met with a tepid response in the market place contrary to expectations. We have just had Bajaj put out a four-wheeler born out of the cost structure of a two-and a three-wheeler. Let me start by asking you on your thoughts on the low-cost vehicle and whether that is the market that Ford would like to capture and that is the market between Rs 1.3 and 2 lakh in India?
A: Our focus right now is really on what we call B and the C sized vehicles which are the Figo, the Fiesta, the Focus and of course the new EcoSport, so that's really the heart of the Indian market and that's where we are well positioned with vehicles here in India and also around the world.
Q: You are not looking at the low-cost cars. Is there a reason why you are not looking at the low-cost cars if you want to be an affordable brand?
A: We are a very competitive and affordable brand, but we are focused on Figo, Fiesta, Focus and EcoSport right now. We are looking to ------ at those additional markets going forward.
Q: Your thoughts on this four-wheeler that Bajaj Auto has just launched. It is not a car, it's an upgrade to an existing three-wheeler, which is an Indian icon in that segment. It has the cost structure of a two- and a three- wheeler and the technology has also evolved from a two- and a three- wheeler. What sort of a future would you say that a product like that will enjoy in the four-wheeler market?
A: The most important thing that Ford does is honour its brand promise to the consumer and they love the Figo, Fiesta, Focus, EcoSport-sized vehicles, so that's what we are going to focus on going forward.
Q: Talking about what's happening as far as the global automotive business is concerned, growth is expected to be around the five percent mark. Are you seeing a return of some sort of confidence in the American markets at this point because the jury is still out on which way the market is going to be headed?
A: Yes, we are. If we look around the world, we see a gradual recovery in the economy in the US and the Americas. It is a slower recovery on economic development but also US was in a very severe recession as we all know. (In) Europe we are very concerned about sovereign debt issue but it is a very significant market. It is relatively flat right now and, of course, Asia-Pacific has moved down from pretty high growth rates to very significant growth rates but lot more sustainable. So we were very positive about the global growth and as you pointed out, we see averages over five percent a year going forward globally. The new thing about Ford is that we are positioned in each of these markets around the world where we believe it might be the finest family of cars and trucks.
Q: What about China? Because the big question mark is on how much China is going to slow down and its impact as far as global automotive giants are concerned. Clearly it is the Chinese market along with markets like India that are fueling growth in the Asian region. What are your thoughts on China?
A: We are just starting with Asia-Pacific as you pointed out. In Ford's case because we support our customers worldwide, nearly 70 percent of our incremental sales going forward will be in the Asia-Pacific markets starting with India and China. As far as the growth rates both in China and in India they have slowed a little. I think that is a positive sign because everybody is worried about inflation as they should be and they would like to have nice steady economic growth which is a lot more sustainable. We are very positive with the actions that we are seeing in place in Asia-Pacific.
Q: I want to talk to you about the goal or milestone that people are expecting and that is when do you move to investment grade. You were upgraded in October, you are now at BB+, but still a notch away from BBB. What is your own expectation, your own sense?
A: It's always been our goal that as we develop our new products, we grow the business that would repay our debt. We get our cost structure correct, reinstate the dividend and clearly based on our operating performance now, we are very close to investment grade. We are very gratified to see our credit ratings increase. This is so important for us because we also finance a lot of the vehicles and their cost of capital is that of the parent grade. So, the fact that we are now one notch below investment grade is a fantastic development and that's the next step.
Q: There's a lot of speculation that Alan Mulally is on his way to hanging up his boots and perhaps once you achieve the milestone of getting investment grade is when you will finally decide to step down. I think I can guess what your response to that question is going to be. I know you love serving Ford, but is there a plan in place on when you would like to step down?
A: No, we do not have a time table for that. You are absolutely right. I am absolutely honoured to be asked to serve Ford. I am so pleased for everybody associated with Ford. The fact now is that Ford has a great product lineup, it has created a very strong business, it is profitably growing for the benefit of everybody. So very exciting time to be serving in Ford.
Q: How much more time do you give yourself? I know you enjoy what you are doing. Your passion is about what you are doing but how much more time do you see yourself serving Ford. A lot of comparisons have been made between Apple and Steve Jobs and Alan Mulally and Ford. What would happen to Apple post Steve Jobs and what will happen to Ford post Alan Mulally? How do you respond to that?
A: The most important thing is that Ford has a very clear strategy. We are focused on a full family of vehicles. We are focused on the Ford brand, best in class, operating all around the world where our customers are. So the most important thing is we have an entire team. All of our dealers, all of our suppliers, all our employees absolutely know the Ford plan that we have talked about. We have got a great set of leaders ready to continue on the Ford plan. I just want to point out, we were with all of our Ford store owners, (and) the dealers last night throughout India and they were so excited that the laser focus that Ford continues to have on this full family of best in class vehicles. So, I think that the plan is in place, the strategy is in place and I think Ford is going to continue to serve its customers.
Q: I know the company has come out and very recently denied reports of an external official search to look for a candidate to actually replace you. I know Bill Ford has in the past several times stated that they would like an internal candidate to be the successor. Are you open or is the company open to looking at an outsider and is it the reason why you are keeping this so closely held in terms of the succession plan because you don't want to ruffle feathers internally?
A: I think succession planning is so important in every company and Ford has a very well balanced process. As you pointed out, you clearly look at all the potential candidates inside Ford and outside Ford and as Bill has pointed out, one of my number one objective is to further develop the team and a set of candidates that could continue to lead Ford.
Q: Have those people been identified? There is a lot of speculation that there are four contenders. Have those people been identified?
A: They are very visible, they are terrific leaders and so its understandable why people are focused on all of the leaders, but this is the finest team that I have ever worked with. They are talented executives, they have a very solid plan and we are performing. So, I think Ford is in very good shape going forward.
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