August 1, 2012: Michael Boneham, President and MD, Ford India

You must be watching the good market response to the Renault Duster. Does it make you more confident about Ford's upcoming EcoSport SUV or do you see it as a challenge?
It sort of encourages me because it demonstrates that the market is responding to SUVs in a different form. The Duster and the EcoSport, which is a little smaller being sub-4 metres, are revolutionising SUV-ness. I am quietly confident that people will be equally positive, if not more, about the EcoSport given where we have positioned it.
You have been focusing on B-segment cars. When will you start looking at the C segment?
We recognise as part of our research and focus on India that about 70 percent of all cars sold are small cars and B-segment cars – we don’t see that changing at least for the next eight years. The reason is that the market is driven by people moving from two-wheelers to four-wheelers. They tend to move to B-segment cars first. In fact, interestingly, over 65 percent of our customers are first-time car buyers; so what we are seeing is that the C segment is still relatively small. So, we will watch and make our assessment as we move forward as to whether that’s a segment we want to move into. What I will say is that most of the products that we launch till mid-decade will be small cars because that’s where the volume is.
You have just reached a milestone of 400,000 engines at Chennai. What is its significance for Ford’s growth strategy in India?
We have demonstrated our commitment to India. What we announced is a total capacity of 340,000 units with an increase of 80,000 units in diesel capacity. That demonstrates not only our response to the domestic market but also recognises the flexibilities that we have in our facilities. We have responded to the changes in the Indian domestic market moving from petrol to diesel. We have the flexibility to switch from petrol to diesel as both engines are produced on the same assembly line, if a swing happens again (we hope not as dramatic as a dramatic swing is too much, especially for our supplier base). Ford’s manufacturing policy is about flexibility and responding to the market quickly and we have demonstrated that. We have a capacity to produce 200,000 vehicles and we are ramping up and getting ourselves ready for the very exciting EcoSport launch in Chennai, which is where we will be building the vehicle.
What about engine exports?
Exports are continuing, with the vast majority of engines exported being petrol and this is really a response to the change in the domestic market. We have a crank line, the first in the Ford world, where we can do both petrol and diesel cranks on the same line. We are exporting about 40 percent of the overall engines that we produce. So they are providing good income to the country, demonstrating the capability of Indian workers, Indian knowhow and technology combined with Ford’s global systems. We expect the big demand for the EcoSport to be in the domestic market but we will also export the EcoSport from Chennai.
Which export markets are you targeting withthe EcoSport?
We have not announced that as yet but very clearly we are doing very well in the markets that we are exporting the Figo to, like South Africa, Mexico and Asia Pacific as well as the Middle East and Saudi Arabia and we are trying to identify more markets as we move forward.
As Ford gears up to launch the EcoSport, what numbers are you looking at? How many variants can be produced from that platform?
Customers will determine that but I think we can expect a big demand in India and for exports because it will be a good product to possess. In terms of derivatives, obviously the approach will be an entry level vehicle and many other derivatives in both petrol and diesel which we will talk about at the launch.We announced at the Delhi Auto Expo that we will have an EcoBoost engine as part of the engine family and will also have a diesel engine at launch in response to the market demand. So customers will have a great choice.
The EcoSport will be powered by the International Engine of the Year 2012: the 1-litre EcoBoost. Will this engine be manufactured at both the Chennai and the new Sanand plant and what are the numbers you are looking at?
We will talk about it as we get closer to launch but a vast majority of engines will be produced at Chennai. Both the facilities will be flexible but I am not ruling out the possibility of the EcoBoost being manufactured at Sanand.
What is Ford’s roadmap in terms of new products and exports?
Six new products other than the EcoSport are in the pipeline. We are also looking at a number of other segments besides the small car category and Ford will have a great range across the key segments where we believe we can be very competitive in India.
What have been the highlights of your manufacturing operations at Maraimalainagar?
The first highlight for me is the people. I have been here for five years and I have learnt to understand how they think and what they do, and I have been so impressed with their capability in Tamil Nadu. For instance, the technicians are diploma holders, ambitious, want to get ahead aggressively, and this capability of people gives us the leading edge in competition. Secondly, our focus on our people is critical in terms of development internally and we have internal programmes to develop technicians so that they can ready themselves for the next step up. Tamil Nadu is very supportive of manufacturing and that has not changed, despite changes in government. There is a transparency in the state’s industrial policy and the governments are very supportive of the automotive industry, Ford in particular. Hence, there is a very good environment for us from the government perspective. Proximity to ports is also very important for us given our export strategy. Still, some work needs to be done on port development which is happening, and that is important for us in terms of both engines and vehicles. All of this gives us great confidence that Tamil Nadu is a great place to invest in and gives us great access to exports through port development.
What are the impediments to further growth for Ford in Tamil Nadu? And how does Ford see its contribution to the state’s growth?
I think we have contributed really significantly to employment with about 10,000 people across India, with a large number in Tamil Nadu. Ford is no longer just in the automotive business. It has the Ford Business Services Center and Ford Technology Services in India. Then, if you look at the supplier base in Tamil Nadu and the consequential employment, when we focus on one job in Ford that applies to four jobs in the supplier base; so there is a multiplier effect. Other options for development in the state will obviously be multi-faceted transport solutions, because it is not only about cars but having good roads to drive on and alternate overhead rail systems. Infrastructure is one area that needs to be worked on, besides which there are power concerns and water is critical to the state which they are working on.
Any more investments in the pipeline at Chennai?
The diesel engine enhancement programme involved an investment of $ 72 million on top of the billion dollars already invested. The answer to investments is yes for further capacity and requirements for the EcoSport and other products coming into the facility. We will make those announcements as we move forward.I would like to think that the great reaction we get to the EcoSport will lead to employment enhancements but we will wait and see. At present, our capacity of 200,000 units is sufficient but depending on market demand and exports, we will look at further expansion.
What are the obstacles to greater exports from Chennai? How much would Ford have benefited from a direct rake from the plant to the port?
I think the only obstacle that I see, is that we need to get access and ingress from the port to a better and higher level because at the moment we can only get vehicles into the port after 10pm. The government has put in a plan for a road that allows access without having to go through the city. It is very critical that the road is completed quickly and we need that.There are two other alternate port sites in the state, besides the Chennai port, of which one is operational and the other is almost ready. So the infrastructure is moving ahead. The road access and easy port ingress and egress are absolutely critical for us.
Why did Ford choose Sanand and Gujarat to locate its second plant? Will the Sanand plant play a more important role as next-gen models are planned to be produced there? What will be the role of the Chennai plant in the future?
The reality is that we looked at Sanand and other sites from a geographical positioning in India. We have a great base in Tamil Nadu in the south east and we also wanted access to the north and the cost of logistics of moving vehicles from the south is very hard. So establishing something in the north-west complements south east. It does not mean that we are taking off the foot from the pedal of investments in Chennai. We will continue to invest there because we are very comfortable with the people, government support and infrastructure development but like any other good corporate we are looking at expanding our manufacturing base close to demand, ports and markets.
Will the next-gen Figo be the first car to roll out of Sanand?
The global Fiesta has already been launched and the EcoSport will be rolled out in early 2013 out of the eight products that we had planned till 2015. Beyond that the majority of the remaining six vehicles will be small cars and what we will manufacture at Sanand first will be a big surprise.
Both Chennai and Sanand are integrated manufacturing facilities with flexi-engine plants. What is its significance for Ford?
Essentially, it demonstrates two things; one we need flexibility to change to customers demand globally and because we are going to be the preferred supplier of low displacement and fuel efficient diesel and petrol engines, we need that flexibility. The market preference in India has changed and what we are looking at is a situation wherein that flexibility allows us to respond quickly and gives us opportunity to meet short-term needs. We are serious about doing business in India and serious about exports from India. No other MNC in India exports engines to the level that we do.
Ford has been a proponent of diesel cars but has been a strong votary against increase in diesel pricing and taxation. How does Ford visualise the roadmap of diesel cars compared to petrol cars for itself and for the industry?
At the moment, we are doing 80 percent diesel and 20 percent petrol cars. Whether that mix continues depends on a number of factors including government policy, customer preference and availability. The 80,000 units increase in capacity of diesel engines at Chennai will take waiting time to nil.
What are Ford’s future plans in terms of distribution network, servicing and spare parts and which models are driving its growth in rural markets?
About 80 percent of new vehicles introduced in the last two years have been in Tier 2, 3 and 4 markets. You need to be there to grow the confidence of the customer in terms of service capability by focusing on cost of ownership, part replacement and schedule maintenance. We have 10 mobile service vans pan India and have grown our sales and service outlets to 230.
Ford has moved its entire marketing team to Delhi. Is retaining talent in the South difficult?
We have not moved all of them and some of the marketing guys are in Delhi. Essentially our focus in Chennai is on manufacturing, engineering, purchasing and other businesses as in business services that is a very substantial portion. Our slice in Delhi is for advertising positions and marketing and sales as Delhi is where 20 percent of all cars are sold. We need to position ourselves well up there with major manufacturing centres in Tamil Nadu and Gujarat.
Does it mean that after Sanand you will look at Delhi NCR?
No – I think we are comfortable in our selections at this point of time and the combined capacity of the Chennai and Sanand plant, when operational, will be 610,000 engines and 440,000 cars with opportunity for further growth which is sufficient. The positioning in Gujarat gives us good access to the north and the Gujarat Industrial Development Corporation will provide us good rail links. The investment story in Tamil Nadu and Sanand will be ongoing.
What about exports from the Mundra Port?
Mundra Port will enable exports to western markets enabling cost savings. We are talking to different markets such as the Asia Pacific and Africa, besides Mexico and the Caribbean for exports. We will look at developing markets because the cars that we build will fit into those markets better.
Recently SIAM launched the voluntary code on vehicle recall. Does Ford agree that vehicle recall should be based on a voluntary code or should it be made mandatory by the government?
All of the auto manufacturers are very responsible since they operate on the global scene. So everyone is committed to the voluntary policy and India is no different for us.
Recently SIAM launched the voluntary code on vehicle recall. Does Ford agree that vehicle recall should be based on a voluntary code or should it be made mandatory by the government?
All of the auto manufacturers are very responsible since they operate on the global scene. So everyone is committed to the voluntary policy and India is no different for us.
How do the recent labour problems at Maruti Suzuki impact the automotive industry?
We were dismayed by the shocking reports and it was a sad day for the automotive industry. It is critical that we maintain good relations and have open lines of communication with our employees. That is what Maruti was doing. These events don’t engender a positive view but the opportunities in the market are significant and we have to keep improving relationships.
What is Ford India's targeted growth in the current fiscal in view of the industry slowdown?
We are depending on the festive season to drive optimism and growth. The combination of high interest rates, additional taxes on small cars and large vehicles in the Union Budget and lack of confidence in the global markets have had a negative impact.