'I am really happy if I am able to forecast two years into the future today.'
Andreas Schell, CEO, Rolls-Royce Power Systems, on tapping India for manufacturing and engineering, the move towards electrification, challenges of driving business in a fast changing world and the growth outlook for 2018.
Andreas Schell, CEO, Rolls-Royce Power Systems, soon after signing a JV agreement with Force Motors, talks to Sumantra B Barooah about tapping India for manufacturing and engineering, the move towards electrification, challenges of driving business in a fast changing world and the growth outlook for 2018.
The JV with Force Motors is your company's first in India. Tapping the cost advantage and the emerging market in India are obvious reasons. Beyond these, what purpose does such a move serve?
We live in an ever-changing world. I feel that in the past couple of years change has accelerated rapidly. I do think that businesses have to do just with their own tempo, their own pace towards the external factors. After having been in a situation where globalisation was the trend and where you were very well in a position to export product from your home base all around the globe, I think we are entering a period now where to a certain degree we will have to have local production in key markets.
Therefore, we took the decision to move the 1600 series engine into our joint venture with Force Motors here in India. There is a market here, but also with the opportunities of a lower cost base here in India we will be in a position to export from India.
Andreas Schell, president and CEO, Rolls-Royce Power Systems and Prasan Firodia, managing director, Force Motors, at the announcement of the JV on March 20, 20`18.
It must have been also a very challenging decision, because shift of production could also lead to job losses. How much of a challenge did you face and how did you tackle that challenge?
There are currently around about 60 employees that assemble and test the engine in its present facility in Uberlingen and we have taken care of all of our employees. They have subsequent jobs lined up for them, so no one is going to lose their job over this activity that is an agreement with our workforce in Germany.
So, no job loss because of this shift.
No job losses in Germany because of this transfer.
You indicated that perhaps the scope of the engine in terms of the power delivery could be expanded. Can it be brought down also?
Both are possible of course. Bringing it down, you still have some base cost in the engine so that is a more difficult undertaking. Expanding that engine to reach a wider power range in the upper end is absolutely possible and this is why we not only put the production of the engine into the joint venture but we are also going to set up our R&D here in India.
How big would that R&D base be? Would it be for global requirements also?
Presently MTU (Rolls-Royce Power Systems) has already plans to set up its own engineering work force of 150-200 engineers in Pune. However, there will be also a number of engineers in the joint venture.
And those 150-200 will do jobs for global operations as well?That is correct. They will do jobs for global development. However, they will also support the joint venture.
Recently, another global powertrain supplier, Cummins, which is more into automotive applications, has also embarked on a transformation to electrification. The sectors in which you are working in don’t warrant that shift as of now, but eventually do you see that shift in the sector? If yes, how are you planning for that shift?
There will be definitely a shift and we can see in some of our end markets already a trend towards more electrical content. As a business leader, I try to be upfront with it and at the forefront of that change rather than wait for it to happen. That's why in rail applications and in marine applications we will make a foray into hybridisation, but we will also be looking into more electrical solutions in the power generation business.
How challenging is it becoming to drive a business in the world today, which is also witnessing trends like protectionism?
I have been in business with complex technically sophisticated products for 15 to 20 years now. When I started my career, we still did 20-year forecasting. Today, I am really kind of happy if I am able to forecast two years into the future. I think the intensity of the changes has definitely increased. However, we have today much better tools, much better analytical tools and I think it is required from business leadership today to respond in a more dynamic manner.
Is that also a reason why collaboration is increasing in the world like never before?
I can’t speak for everyone in the world. I can speak for myself. I really do believe that in today’s world in order to respond to some of these challenges, partnerships and collaborations are very important.
Because you don’t have the luxury of time now to get the return on huge investments?
Rolls-Royce Power systems posted 6 percent growth last year. Is that kind of growth sustainable? Would emerging markets play more supportive roles?
Stay tuned. I look forward to yet another positive year, but it’s too early to call a final number.
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