Calling India the second-most strongest pillar for Wabco global after Germany,
Wabco hopes that India will go on to become a manufacturing hub after being a
engineering superpower. Jacques Esculier, Chairman and CEO of Wabco Holdings
talks to J Srikant about the braking system major’s India operations and what role the
country will play in its global operations.
Q: Globally, almost all the Tier-1 suppliers have made their growth projections based on emerging markets? What is it for Wabco?
Esculier: We are seeking growth everywhere in the world. For me, ultimately there will be no emerging markets. For the last 10 years, Wabco has globalised way ahead of any other competitor; not to go and seek opportunistic revenue from emerging markets. The vision that we had 10 years ago, and that will continue to be on top, is that we will ultimately face a world
of global manufacturers with roots everywhere; Wabco wants to be part of all those newcomers and support them wherever they go. So the power of our company right now has been to precisely anticipate this kind of globalisation of truck manufacturers and not just seek regional opportunities here and there. Sure enough, we certainly enjoy and appreciate revenues coming in from all over the world but Wabco supports key regional manufacturers who are growing globally – that is where growth will come from in the future. Today, we are still enjoying a lot of regional growth.
Q: Can you elaborate on your strategy for Asia – in terms of share of business coming from this region?
Esculier: Asia would represent today 20 to 25% of our revenues and it is growing fast. But again, Asia cannot be taken in isolation from what I told you earlier. Some of the growth in Asia comes from our support of European customers coming here. Some of the growth in other countries will be coming from the Indian or Chinese manufacturers going to those places which makes it not only Asian revenue but global also. For us, Asia represents not only revenues but is also a major source of capabilities that support the world of Wabco.
Q: Is India also part of your growth trajectory? Can you elaborate?
Esculier: India is a region where we obviously see a lot more growth than traditional markets like Europe or the US. There was a little glitch in the last two years but it will be repaired very quickly and I think India will be on a very nice growth path. More importantly, Wabco India is a major element of our global network that is all tied together. We manufacture, in India, a lot of the products and systems that support our customers worldwide. Indian engineering, with over 300 engineers, is the second pillar of our engineering network, first one being in Germany. That has its own value because German engineers develop new and advanced technologies whereas Indian engineers are efficient at addressing mechanical products. The value of Indian engineering has always been its focus on what I call ‘frugal engineering.’ Cost focused engineering is not something German engineers have been working on. The association of both makes it incredibly differentiating for Wabco. We want to support all local manufacturers in their objectives, providing them all the technology they desire to support differentiation as a global manufacturer. That is something that should provide a lot of growth opportunities.
Q: When you unveiled the new brand in India in 2011, you had mentioned that Wabco is passionate about technology, leadership and globalisation. However, in emerging markets, there is a fourth factor – cost affordability. How is this factor steering Wabco?
Esculier: That is very important. First of all, cost is part of innovation; it is a part of globalisation – the centerpiece of execution. In 2009, when we took over a joint venture with Sundaram Clayton, which became Wabco India, we inherited an incredibly powerful company focused on execution excellence. Wabco India has been rewarded platinum award by Japanese society for manufacturing excellence three times in a row. Their mindset is all about continuous improvement. We have been feeding that culture with further concepts from Wabco Global that they have embraced more powerfully than other areas of our network. That helps them be more competitive. It’s not cost at the price of but cost in addition to an unbelieveable focus on quality, durability and efficiency. This is a magical combination. I recently visited two of the five manufacturing sites and was very happy to see some of the best practices which were even brought to Europe.
Q: Have you seen a kind of a role reversal where India is focusing more on quality whereas other countries are chasing cost effectiveness?
Esculier: Ultimately, as the market is becoming global and transparent, everybody will have to aim at the same standards in terms of reliability, quality, technology and cost. Cost becomes a major driver across all markets. India is adopting new technology and the T1 Prima truck racing event is an example of this. Each market has its strengths but they are also adopting practices to address weaknesses.
Q: Different companies have employed different strategies like local for local? Wabco has been present in India for over 5 decades? What has been your experience with product development?
Esculier: Till 2004 – 2005, the team has been addressing local engineering needs and enhancing their capability of developing frugal and efficient product designs. Since then, in 2009 when we took over this joint venture, we have leveraged this ability to integrate it into developing the most efficient and competitive product and system for the world. We have more than double the engineers in Chennai, from 140 to 350, to the point where certain products are systematically developed in India. I’m looking at even the more advanced systems; I would say the electronics are developed in Europe with a lot of software made here. We always bring Indian engineers to the equation, to increase efficiency.
Q: So do you see sourcing from India growing in the future?
Esculier: Absolutely. That is in engineering. But now we also have to talk about manufacturing – as we said we have one factory that we keep growing that is fully dedicated to supporting the outside-India market and then we also have an increasing focus on leveraging the network of suppliers to send their parts to other Wabco factories worldwide. The combination of the three makes it an unbelievably powerful hub of Wabco Global.
Q: Wabco, in India and globally, is known to be a major supporter of OEMs and a major chunk of your business comes from that segment. How is your focus on the aftermarket?
Esculier: Aftermarket sales are a fundamental part of the value proposition that we offer to OEMs everywhere in the world. It is one thing to say ours is a good product and system; but it is another thing to support customers of our customers’ in the field when they have problems, when they need support and spare parts; this made Wabco to develop over decades a network of distributors and support staff second to none. We have 7,000 points of contact across India, 150 specialised service centres to assist orders. Wabco overall is looking at the aftermarket as a major differentiator in the world. Not only from the revenue standpoint; we certainly enjoy revenue, fast-growing revenue actually, but it is also about the value proposition we provide. We can support customers of one region anywhere in the world as they export their trucks and buses. So aftermarket is of extreme strategic importance to us.
Q: What is the split at present between OE and aftermarket?
Esculier: Globally it is around 25%. In India about 21%.
Q: Wabco is one of the sponsors of T1 Truck Racing. What is your take on this truck racing event?
Esculier: There are different dimensions to it. I will start with the impact it has on the picture of India as a contributor to the world of commercial vehicles. I think it opens the door and makes visible India progressing very rapidly on the path to technology, raising it to a standard that makes this kind of event possible. I would also look at Tata as a key customer for Wabco global, not only for Wabco India. We have been a partner to Tata Motors for almost fifty years in India and are very proud to enable them demonstrate the power of their technology as a message to global truck manufacturers and truck users. Highlighting our technology as a part of this event is also very important to us. ACI
