September 15, 2012: Gary Johnson, Vice-president - Manufacturing, Ford Asia Pacific and Africa
In an exclusive interview with Shobha Mathur on the sidelines of the SIAM Annual Convention on September 6, the vice-president (manufacturing), Ford Asia Pacific and Africa, speaks about the company’s two-plant strategy for India, developing a local supplier base, engine exports from India, and compares manufacturing operations in India and China.
You are responsible for 19 manufacturing facilities in 11 markets across 11 time zones. How do you manage this?
Alan Mulally, our CEO, laid out the 'One Ford' one manufacturing strategy and one production system for which there are detailed production plans. The supervisors and production members in Asia-Pacific know all the production processes; so only the name on the front door of the manufacturing facilities are different. If you walk inside the plants, you will see the same flexibility, processes and standardisation of time and flexibility to move, based on market demand that makes us world class. For instance, the EcoSport will be built in exactly the same way in all the plants that it is manufactured.Though the time zones are different, you can do a lot leveraging technology like video conferencing. But before the One Ford manufacturing standards, it was different.
Once your Sanand plant goes on stream, what’s the strategy for India with two plants?
The strategy is not only to grow new products but to gain marketshare based on the eight products that will come till mid-decade. In Chennai, we have a capacity of about 200,000 units and 240,000 units at Sanand; so we will have around 450,000 units capacity combined. When you build a facility, there has to be flexibility so that a couple of products like the EcoSport can be made at Chennai. The advantage is that if customers are looking for something different, we can flex volume at the plant or build more volumes of a single product in the same plant.
What kind of localisation levels will the EcoSport have?
We have not announced the localisation for the EcoSport yet. The Figo has local content of 85 percent and obviously the higher is better because it lowers cost and makes us extremely competitive. Our strategy globally is not only to build ourself but also have our supplier base with us so that they can localise. That task gets easier when your scale gets larger.
Ford has indicated plans to develop Tier 2 and Tier 3 suppliers.
The supplier decisions are still at an early stage. At the Sanand facility, you need to have local suppliers but from the localisation standpoint I don’t have a specific number on how many will be global suppliers. But some suppliers will support both plants and some individual plants.
The EcoBoost 1.0-litre will be made here. What numbers are you looking at initially? And will you export the engine?
We will announce it as part of the EcoSport vehicle launch but we will maintain flexible powertrains. The EcoBoost petrol engine delivers great performance of a 1.4 litre, is green, and is part of our global stable of powertrains of EcoBoost engines being developed in North America and Europe and will come this way soon. We are already exporting some engines but the decision on the EcoBoost has not been made as yet. At present, about 40 percent of the engines are exported to Asean or Thailand and we will continue to do so.
China is slowing down, so where does India stand in Ford’s global perspective?
China is slowing down to 18.5 million units, which is probably a more realistic growth plan, and will be 30 million units by 2020 so it is not that slow in total volumes. Similarly, in India it is going from four to nine million by 2020. So in total volumes, Ford’s manufacturing strategy is exactly on target that we have to build seven manufacturing facilities instead of nine, and bring eight new products by mid-decade to India, otherwise you miss the growth.
How do manufacturing costs vary in China and other regions compared to India?
Costs, especially labour costs, are lower in China and India as compared to North America and Europe but with the competition in China’s local market, you have to be competitive in the market you are building in. The costs in India are the best compared to the US, which should mean that building vehicles in India will be the best in the world. And it should be the most efficient. We study our manufacturing strategy and compare our labour costs in India with the US and our goal is to be the best in India compared to other OEMs so that we can deliver low-cost products to our customers. Besides labour cost and cost per unit from the efficiency standpoint, you also have to look at the market as we have to be the best and the most competitive. So the products that we build in India will be mostly domestic with part exports whereas in China we have some of the most competitive vehicles from the cost perspective.
How do you manage international purchase operations for components?
Our core headquarters for purchasing for Asia-Pacific is at Shanghai but there are multiple locations purchasing as well in other regions like in India. Our purchasing organisation is on the same global level as in manufacturing. Big suppliers support us at Chennai and some of our global suppliers will be here at Sanand to grow with us locally and to come into the market because it depends on scale.
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