Magna Steyr offers to help Indian carmakers

Wolf-Dietrich Schulz has a unique offer for Indian automobile manufacturers planning to set up shop overseas. The vice-president (manufacturing) of Magna Steyr says that it makes sense for them to team up with his company because of its vast experience in actually manufacturing cars for the likes of BMW and Chrysler. Actually, the Steyr plant has to be seen to be believed but more on that later.

Schulz says that the company will pay greater importance to low-cost countries like South America, Russia and Turkey which equally have great potential as car markets. “We have a focus on these countries where we apply our systems and engineering services. The idea is to transfer systems to achieve the best and we can offer top-class services,” he adds.

Readers will recall that a Goldman Sachs report had projected the BRIC (Brazil, Russia, India and China) economies as major growth drivers in 2050. In fact, Indian vehicle makers have been eyeing the three priority regions of Magna Steyr. Mahindra & Mahindra has already made public its intent to enter Russia while Tata Motors has big plans for South America (with Fiat) and Turkey.

THE BIGGER PICTURE

Schulz explains his rationale to Autocar Professional in his corporate headquarters at Graz, Austria where a group of Indian journalists have been invited by Magna to see some of their facilities in the country. It has been an unusual trip for us. The flight to Europe took off a day late from Mumbai thanks to a bird hit and by the time we landed in Graz, it had begun snowing. Some of us discovered that our baggage had been left behind at Frankfurt but by the time we landed up at Magna Steyr a day later, everything was back to normal.

Getting back to what Schulz has to say about the obvious benefits for Indian OEMs to consider teaming up with his company: “In India, automakers have to deal with certain local market requirements but this is obviously not the same for other parts of the world. However, when you look at the Japanese, for instance, they are constantly transferring the highest quality levels to the world and do not differentiate between markets,” he begins.

While taking great pains to emphasise that it is not his intention to be condescending about Indian companies, Schulz says that when a ‘not-so-hot’ player enters a tough market, quality becomes a greater challenge. This is especially true when the brand is not so well known in this part of the world.

##### “There could be challenges in the press shop, processes and this is something we can support. The idea is to exceed the normal requirements and not merely meet the norms. This is what we are offering in some markets so that the OEM is successful,” he explains.

It now remains to be seen if Indian automakers are as enthusiastic about the proposal. For instance, in the case of South America, Tata Motors has decided to team up with Fiat which is familiar with the region and also has built up a solid brand over the years. The modus operandi, therefore, for companies here is to opt for allies who know the regions they operate in. Possibly, this is the best way to go about wooing the consumer more aggressively.

There are no two ways about the fact, though, that Schulz is right when he talks of the need to install quality systems in the plant first. This is obvious in the Graz facility which works to clockwork precision while doing contract manufacturing for big carmakers like BMW, DaimlerChrysler and General Motors.

LOGISTICS CHALLENGE

It is the logistics aspect in the plant that is, frankly, astounding. In the case of Chrysler, for instance, 90 percent of the sourcing comes in from the US and the balance from Europe. Thus far, there have been no major goof-ups though the intention clearly is to increase the contribution from Europe for better flexibility. What struck me as being particularly curious was the fact that the company does not really seek any individual branding while manufacturing cars for others (in what is termed ‘peak shaving’ where the OEM assigns a part of the output to Magna Steyr to accommodate a more voluminous model on the same line).

Schulz does not think this is an issue apparent from his deadpan reaction to my question. “Magna Steyr has certain value systems. We could support good branding but it is not our intention to promote our brand. We are more interested that the OEM gets the best from us.” Point taken.