September 15, 2012: Jacques Esculier, Chairman and CEO, Wabco

What role does the export facility in Chennai play for Wabco globally?
As you know, big European customers are coming into India really aggressively and usually they connect to all these key markets that are either already very mature or that is going to grow. India is one of the markets that will grow faster than the traditional markets (Europe and USA.) These days, most global manufacturers selling truck and buses are trying to standardise their platforms to maximise usage across the network. So the onus is on us to provide a certain standard of materials everywhere in the world. Earlier, parts manufacturing was fragmented according to eachmarket. We now have the choice to either duplicate production lines to support the same platforms in different locations. This is not very optimal because we are talking about 100,000-200,000 trucks per year and if we start cutting it into pieces, the investment isn’t justified. The second option is to consolidate all the manufacturing of those parts in one location of the world and that’s what we elected to do. That makes more sense financially. So the next question is where?The primary constraint is levels of capability in quality and reliability. We need to look at a place where we as Wabco have a lot of confidence and a confidence that we can rapidly grow with the customers as well. So when you look at all the attributes the centre of excellence where we position this manufacturing capability, it is India that was the best and that’s why we invested here. Obviously the main focus is our internal capabilities but also not neglecting the importance of supplier capability for this centre. Because it’ll be foolish to import a lot of material from across the globe to just assemble here. Right now we have localised about 60 percent of production and in a year we will be at 80 percent. We will try and maximise the use of materials from the local suppliers. This facility already supplies to the USA, China and Europe. We are looking at a few other markets as well to support from this centre. Between April 2011 and March 2012, we exportedRs 124 crore worth of business and this will grow this year after this expansion. This year we are targeting overRs200 crore.

Compared to the evolutionary curve of the markets in Europe and USA, China and India have had a chance to jump certain steps. How does that affect the way you approach these markets?
India and China are fairly comparable. We have four plants there. We have good history there, certainly the leaders by far. They are very good strong capabilities in China. There is obviously a little bit more history and maturity in certain processes in India. But before we apply the majority of Wabco India, for years, Wabco China was actually the best in quality levels across Wabco. In China, we have built three factories in the last seven years. We have done that with the commitment to use the best practices possible. Lean manufacturing in green facilities was the priority. The new plants were built upfront with these qualities in mind. In the rest of the world, we had to transform the older factories from the traditional approach to the modern mindset of lean manufacturing. When we acquired Wabco India two years ago, we found that it benefitted from an extremely mature team that was excessively good in understanding this part of the world. Recently, I was in Brazil and the level of performance there in terms of quality is as good as it is here. Even in Europe, it has almost caught up. So we are looking at standardising our quality at a high level, across our facilities all over and ending up with fairly world-class operations.

What would happen when the other more traditional facilities eventually catch up to the levels of your more recently set-up facilities?
The main objective of these facilities is to serve the local market. It’s a major element of globalisation of Wabco -- to have local sourcing, local product development and local manufacturing. In India, we have a very experienced, valuable and precious capability in engineering for both mechanical and software. We are growing one as we speak in China. True, the market has been bad for a year and a half now, but I think the market will rebuild because markets like India, China and Brazil are definitely growing and enhancing.So I think this facility will keep growing together with customers. As you know, a lot of European and American truck manufacturers have put in huge investments here to join the growth and obviously we are having the majority of the business to support here. So there’s nothing but great growth we see for these three markets.

What sort of a product portfolio are you planning for the Chennai plant? Will it simply be a matter of transferring products from other facilities for a cost advantage or will there be new products from this plant for other markets?
It will definitely be a mixture of both those cases. A few years ago, we transitioned an essential part, the electrical motor of the air suspension unit, to this facility. That was, for decades, manufactured in Europe and we had shifted that to the TVS Group in Chennai. As we assembled the motors here, we thought it would be better to just shift the assembly of the entire air suspension unit here, instead of making it go back to another factory in Europe. One of the products we have planned for this facility is a car air supply unit. This is a crucial part of the Evaporative Emission Control System (EVAP) in a car. We will start production of that here soon. The actuator is one such technology that came from Germany to Chennai after the mechanical development of the part was transferred. The R&D for that continues to happen here. Slack adjusters were completely made here in Chennai for the US market. Germany wasn’t involved at all. And there’s more to come in this model.

What role does Wabco’s software development centre in Chennai play in influencing technologies in other markets?
The software development centre has been growing since 2004-05. We have now around 150 engineers and it’s continuously growing. It’s becoming a major element of Wabco’s success. Obviously those engineers will grow to serve local customers. When we brought our Automated Manual Transmission system, the Optidrive, to India, all the software development was driven by these guys here. But they also take care of product support for more sophisticated products for the European market. There is a level of capabilities in software development in technology and best practices on how to optimise the development of software in India that is incredibly valuable and it is more developed than that in Europe. There’s a convergence of many factors. First is the need to develop software for the local market and second is the availability of talent, capabilities and experience that I think is very unique. We also have to take in to account the cost factor. So that’s why we are strategically concentrating on growing the facilities here.