Franceso Carozza, Chairman, SAME Deutz-Fahr India

Could we start off with SAME’s global performance?
Last year our profits have grown by 43 percent while total sales have increased by only 3.5 percent and this was due to many factors. There has been a huge turnaround in our company since 2001. We have streamlined the manufacturing processes, rationalised the number of platforms and resorted to standardisation to a great deal. We did this in three stages by eliminating overlapping models, rationalising features by offering packages and by creating common platforms. As part of our restructuring, we closed some of our spare parts warehouses in France, Switzerland and the UK. By centralising our warehousing hub situated Lauingen, near Munich, we were able to reduce the amount of dead stock. This helped reduce our expenditure on warranty from 2.3 percent of the turnover in 2003 to 1.1 percent now.

Will you be replicating similar exercise in India?
Of course, we will create a similar hub and spoke model taking into consideration the infrastructure facilities available in India. Ranipet, where our plant is located will be the major operational centre, and will support the hubs in Pune for the western region, Indore for the central region and Bareilly for the north.

SAME has invested about $ 192 million during the last five years. What was the objective and what has it accomplished?
These investments are not for capacity alone but also for equity participation in other companies, product development and quality enhancement. We recently acquired a plant in Croatia investing 11 million Euros and we will make further investing there. This could be a matching amount and could go towards tweaking the existing facility as well as enhancing capacity to make around 1,000 combined harvesters per year. In 2002, we invested $19.5 million to acquire shares of Greaves making our operations as 100 percent subsidiary in India. In 2003 we spent about $ 108 in Deutz AG. So far we have invested around 150 million Euros in Deutz AG and we now hold around 40 percent stake.

You also plan to source engines from your Indian operations. How different will that be compared to Deutz?
We will source SAME range of engines from our Ranipet plant to cater to the requirements in markets which do not have to comply with Euro IV and V norms. At the moment the Ranipet plant makes three models of engines. Last year we made around 4,000 tractors and engines for the domestic market. Exports have started in a small way this year and by 2012 the plant will make 15,000 tractors and engines each, of which we plan to export about 3,000 engines to Europe.

What are your short- and long-term plans for global markets and India?
Globally, the tractor markets in the Eastern region including India and China are growing. We are already present in India, and we have created a 100 percent subsidiary in China to enhance our presence there. We hope to commence construction before end of this year. It will have capacity to manufacture 30,000 tractors and production will commence from 2008. Our plan it to phase out production of certain models of tractors in Italy and source from China instead. We also expect our business in Russia to grow rapidly because Eastern Europe is mechanizing in a big way. At the moment we cater to this requirement from our Germany plant, but we will set up a plant in Russia once demand reaches a certain level.

What synergies do you see between your plants in India and China?
We see lot of synergies as these are our only plants in Asia. India will concentrate on the production of 30hp to 70hp tractors. This will be our global sourcing base for this range of tractors, except for specialty tractors used in orchids and vineyards. China will focus on high power tractors in the 80hp to 100hp range. In addition to catering to global markets, the tractors manufactured in both the countries will be sold in both the markets too.

Why do you think SAME has not made a big dent in India yet?
Our logic is to be consistent. In 2003 SAME group’s total sales was 28,933 units and it grew to 32,281 in 2004 and 33,637in 2005. This year we hope to sell 35,000 units. In India we began our innings as a 100 percent subsidiary in 2003 and we hope to cross 5,000 tractors this year. India became our third largest single market this year, next to Italy and Germany in terms of number of units sold. We plan to become more aggressive from now on. A brand new tractor is ready to be launched early next year. Our plan has two components: firstly to achieve 10,000 unit sales by 2010 and secondly to reach 15,000 units by 2012. We are also stepping up sourcing components from India and we are establishing long term relationships with vendors. Sourcing has grown at 40 percent year on year. We have exported about four million euros worth of components so far this year.