From a terrible condition two years back, Pininfarina SpA, the iconic Italian automobile manufacturing, designing and engineering company is bouncing back with renewed vigor. The company which has trimmed its workforce by 90% with the exit of the automobile manufacturing business, is being backed by the Mahindra Group.
Tech Mahindra and M&M announced to acquire majority stake in your company in December 2015. Since then what has changed?
The agreement for the transaction was signed in December 2015 but the actual transfer of asset happened on 30, May 2016. So we are eight months into the transaction. The only thing that has changed is that since the closing of the transaction we have a much strong financial position. That was indeed needed by the company. By virtue of such a strong shareholding we have gained so much credibility in the market. This is one of the critical success factors. We are still an independent company, because we are listed on the Milan Stock Exchange and majority of our board of directors are Independent Directors. This shows we are truly independent. We deal with several auto makers who may be competing with M&M and Tech Mahindra, so it is relevant that we remain independent. Though we do transactions with different entities of the Mahindra Group, we have access to the world.
Has the financial situation of the company improved?
As per of the agreement the debt of the company has been restructured therefore the situation has improved. I can not reveal any numbers because now we are in a silent period.
There was a purpose behind Tech Mahindra acquiring the company. Has that been achieved?
Tech Mahindra is a service company and their products are into multiple verticals. What probably is not known is that they have a large size business in manufacturing engineering. They serve clients that are complementary to our clients. Despite we operate at arm’s length, when we combine our capability we are among the largest engineering houses of the world. The major difference is that we have the design capability that others don’t have. We can do strategic design, can design the product as well the experience of the appliance and then we can engineer those. That is key and that really makes us difference in the market.
The acquisition by Tech Mahindra was supposed to bring engineering service outsourcing and design & styling together to enhance customer experience. How much has Pinninfarina/Tech Mahindra combine succeeded in doing this. We have not seen too many customer acquisition or significantly higher impact of Pininfarina’s skills in Tech Mahindra’s financial metrics.
I would say definitely yes. We have gained a large contract two months back. We have shown three vehicles at the Shanghai Motor Show just last week. These are concept vehicles which will be rolled out in three to four years. One of the reasons why we were able to gain this large contract is because we offered Italian design with Italian and Indian engineering. That means we are really offering a competitive advantage to our clients. The investment by the Mahindra Group has been highly beneficial for our future.
Though it was clarified at the time of the acquisition that M&M will have little or no role to play other than being financial investor, Dr Pawan Goenka, MD, M&M has on several occasions mentioned that Pininfarina would design a vehicle for M&M. What has changed since then?
Yes, it is confirmed that M&M has no active role to play in Pinnerfarena. They don’t have any board representation. We hold transactions with M&M at arm’s length. They are clients of us as they were in the past. And they will remain so in the future. As far as Dr Goenka’s announcement is concerned, we will not be able to elaborate because we are not allowed to communicate anything regarding our clients without their approval.
So you are developing a car for Mahindra. And what progress has been made so far?
Again, can’t say. We don’t disclose about the product development of clients. Since 2010 M&M is among our clients. We have developed products for them, we have serviced them in multiple fields and we will continue to serve them in multiple fields as well. Our design and engineering is not limited to cars, we design buses, mini vans, tractors, farm vehicles and agricultural vehicles and off road vehicles. Therefore M&M since is a diversified conglomerate, we entertain relations with them since 2010.
Has the relationship gone little further post the investment?
Well. There is no link between M&M being an investor in Pinnerferena and the relationship we have on a commercial basis.
How can you be relevant to emerging markets like India?
Though we are best known for designing the Maserati, the Ferrari, the Rolls Royce and other luxury cars, 70 to 80% of our designs are for mass vehicles. In 2015 we were awarded for having designed the best SUV of the year in China. This was among 52 new SUVs. That car was sold for 12000 Euro in that market. So that means beauty is not necessarily means high cost. In reality beauty makes your products attractive and objects of desire and therefore they can sell more.
Pininfarina stock fell sharply from Euro 4 to euro 3 after the acquisition announcement. It is still trading at that value. Have your clients moved away in disapproval of a competing auto major acquiring you?
We have not lost any single client. In reality we have acquired more. I think the deal has been seen positively by the market. Because they are now dealing with a company that is much stronger financially, that is eventually backed by such a large group. Clients are happy that this iconic brand is able to provide the service globally and at a competitive edge. So we are very happy about it.
There was a reason behind selecting the Mahindra Group not any other business group. When we went through the options, among other elements we considered the culture fit between and Pininfarina and the potential investor. Having dealt with Mahindra’s different firms for some years, we were not only convinced that the people are just perfect as indeed it is. The market sees it and clients recognized that immediately.
After the transaction, how many new clients have you added?
Certainly the business is growing. I can’t comment on precise details. Tech Mahindra has over 800 clients, we have 160 clients. If 10% of Tech Mahindra clients would be acquired by us that would mean 80 new clients. So I have responded to you.
You were historically into manufacturing activity. When asked at the time of the acquisition you had said “we shall see in due course’. Any movement in that front?
Manufacturing is something that we discontinued in 2010. What we manufacture today, we have gone back to our roots of being coach builders. This means what we manufacture is the one offs and limited series upto 10 or 20, or 50 cars in total. We don’t have in our strategy to go back to manufacturing in mass vehicles.
Your India business was 9% of your revenue at the time of acquisition China’s contribution was 6.5% and Europe 65%. What is the scenario now?
I can’t comment because of the silent period.
How your employees reacted in the past year? The unions had expressed displeasure.
The company had gone through a difficult journey. In 2007 when I joined the company we had 5000 people. We were producing 70,000 cars per year in four factories. We had 900 million debt. All of a sudden the market disappeared, the economy collapsed in 2008. The market for contract vehicle manufacturing disappeared. Therefore we decided to exit that business and repositioned the company.
Now the company is 550 people. So 90% (of staff) has gone. We have 40 million Euro debt. We have paid most of the debt. The company is not any longer a contract vehicle manufacturer. It is a pure design and engineering services company with manufacturing limited series. So it was a painful process. Despite that the fact that everyone has been affected to certain extent due to the changes, to certain extent people are happy that the company has emerged from that terrible period in a very different form and shape now. And it is going back to its own past glory.
Our people are very proud of being in Pininfarina and they are loyal to the company. The unions are very happy because they see the progresses..
Has there any further retrenchment?
No. In reality because the business is growing we are appointing few persons.
Any plan to amalgamate with Tech Mahindra?
These two companies are independent companies that are going to the market together as some associations would do. That is what I can tell you.
