Commercial vehicle (CV) industry is the lifeline of the economy. It does more than just moving freight. It carries the responsibility of moving people and passengers safely and efficiently. $2.7-billion Wabco, which has its headquarters in Belgium and corporate office in the U.S., is a global technology leader and supplier of safety and control systems to CVs.
Post-acquisition of majority ownership in its Indian joint venture with TVS Group in 2009, Wabco has significantly expanded Indian operations, and made India a key global design and manufacturing hub.
Its global Chairman and CEO, Jacques Esculier, who was recently in India, spoke to The Hindu about Wabco India and its contribution, growing interest in ABS (anti-lock braking system) and AMT (automated manual transmission) in the country, among others.
How has been the journey post-restructuring of your Indian arm?
Wabco India has brought to us an amazing market positioning in this very important part of the world. Though market conditions were disturbing, we didn’t stop at all to increase our investments here.
If you look at the investment curve in every dimension whether it is people, capacity or capex, it has been growing significantly. We have doubled the number of engineers in India since 2009.
The capex, which was then $2 million, was over $10 million last year. We added two new factories to take the total number of manufacturing locations to five. Despite weak market conditions, we added 100 leaders for various positions last year.
Out of the 11,000 global workforce, 3,000 are in India. In terms of top talent, two people in the leadership team of Wabco global are from India. In every aspect, we continued to invest, and we will continue to do so.
TVS group is a pioneer in the automotive sector and one of the respected groups for manufacturing standards. Was there any learning for Wabco from its JV with TVS?
Actually, we learnt a lot from Indian operations, which had revenues of Rs.966 crore in 2012-13. I have a lot of respect and admiration for the TVS group. Wabco taking over the JV (then Sundaram Clayton) was one of the important steps based on an established business relationship. As we were taking over the helm of this company, we have worked hard at preserving the culture of company — focus on continuous improvement — and that was the key achievement.
TVS has very strong knowledge and success in the world of TQM (total quality management). It is not by chance they received so many prestigious awards. So, the major differentiator for me was the culture that came from the TVS group.
The passion of people in doing what it takes to satisfy the customers and drive the company on the right path. I really didn’t want to lose that and we have worked hard and even quite succeeded in marrying the culture of an American company while preserving the unique culture here even though we realised that there is enormous amount of intersection in those cultures.
Could you elaborate on the India sourcing strategy? We gather that your India sourcing has grown 10 times in the last five years.
It is true. The value of parts sourcing from India grew from Rs.20 crore in 2008-09 to about Rs 200 crore in 2012-13. By the end of this fiscal, we would have almost doubled it when compared to previous year. However, capabilities and standards of manufacturing in our facilities and suppliers are still evolving. We are continuously bringing the standards up in Indian sourcing business to the global level, as we keep adding technologies and products to the Indian operations.
For example, we export air compressors out of Chennai and almost every market worldwide uses India-built compressors in CVs. We supply parts to BMW in Europe from here. We are going to add air suspensions in that basket. Also, for brake chambers, we are globalising the manufacturing,and Chennai is a major centre of differentiation for us. Of course, cost is an attractive part in our India sourcing strategy. But it is not cost in terms of dollars, it is the value you get and that is what is very attractive.
How has Wabco group been leveraging engineering and manufacturing capabilities of its Indian arm?
We have leveraged significantly to make India as a major hub of Wabco. We have a three-pronged approach. Firstly, we decided to leverage the power of their ability to manufacture. We have expanded manufacturing capabilities here continuously since we took over.
A unit at Mahindra City near Chennai facility was established primarily for exports. Wabco India is now producing significant volumes of parts and systems for overseas markets. Secondly, we leveraged the very powerful network of its supplier base.
Indian arm has developed its suppliers to feed various factories of Wabco in other parts of the world. Third area, which is the central dimension of our strategy and with which we have benefited highly from, is the world of engineering.
Wabco is very well known to be the innovator in its space. We invented almost everything around safety systems and efficiency systems involving compressor. But Wabco India has developed the ability to maximise efficiency and minimise the cost in design areas.
In West, it is about creating new functionalities, but here the focus is on efficiency and cost. What we have been really building is the bridge between both. Because intersection of both will be the differentiator and nobody else will have that advantage.
Is the Indian arm also designing and developing products for global needs now?
With frugal engineering expertise, India has been efficient in doing something at lower cost, and if you keep adding technologies to that you end up in fairly competitive position in the global picture. This is what we intend to benefit from Indian operations. In Wabco India, we are trying to take the best of two worlds and create a differentiator.
As part of this, firstly we have sent quite a few products to be completely designed here in India with full global responsibilities. So, there is no more responsibility for those products in Europe. So, we have designed products out of India that are now very successful in other markets. One of them being an actuator for vehicles of Daimler and Scania was entirely designed in India. Secondly, we have used Indian engineers to adopt our technologies from Europe to support customers in emerging markets beyond India. For example, we leveraged Indian engineering capabilities to win business in Russia. In most advanced products like the next generation braking systems that are being developed based on a modular concept, electronic parts of the whole system were designed in Germany, but lot of software was done in Chennai. Also, the mechanical part is being leveraged through Chennai capabilities and that is the most important piece of value we get.
How is the Indian CV market evolving for safety systems such as ABS and AMT ?
It needs certain level of maturity in the market to accept such concepts and integrate. But India is not a unique case. It is like all other markets and finding its way to mature. The government has a role to play for implementation of ABS in a big way in India. But the question is when. As happened in other countries, the government in India is asking for advice, direction and guidelines for implementation from the industry, and which, I think, is very natural and healthy. We are now in the phase of debating, consulting and discussing it. We can surely expect that the government would decide when it will happen. In the case of AMT, our focus now is to highlight the value propositions of such concepts, convince the market about the benefits and bring the market to a level of maturity where it will be seen as a natural evolution. We can’t just impose aggressively because it won’t work.
When you have shortage of drivers, you can actually hire fairly new drivers and they will not abuse the mechanical systems because the AMT will prevent that from happening and thereby resulting in lower maintenance cost. That is the technology we are introducing right now and it is already featured on city and airport buses in India. Ashok Leyland has already taken it and Tata Motors will soon adopt it.