The Hindu Business Line : Toyota's small car likely to be ready by 2010-11

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Bangalore Feb. 14 The Toyota Kirloskar Vice-Chairman, Mr Vikram Kirloskar, in an interview with Business Line, shares his views on a variety of issues facing the auto industry including the proposed small car project of the company.

Excerpts from the interview:

Auto parts' makers have been pressing for zero duty on raw material imports including ACMA. Do you think their demands are justified? (Mr Kirloskar also heads the Toyota Kirloskar Auto Parts in India.)

I think there is a need for some level playing field. You cannot have two different positions. I don't think anyone is saying that imports should be stopped. I think it is a reasonable demand. In our case it is slightly different because we export more to Thailand though we import certain parts for Corolla.

Most of the auto analysts say that the power is shifting from OEMs to tier 1 suppliers who are joining hands with tier 2 suppliers to jointly bid for projects.

My experience is limited to Toyota or the Kirloskar group. I don't think it is an issue of who is more powerful. It is hard enough trying to make profits. Power play is not an issue at all. In fact all the players are struggling to come out with business models, which can help everyone.

But tier 1 suppliers are taking bigger decisions than every before.

Toyota has always worked along with tier 1 suppliers. I am sure when they develop a new car, they work in a highly collaborative manner. It is basically an issue about sharing of knowledge. May be the involvement of tier 1 suppliers and industries down the line is much more than ever before now. It is more about sharing of knowledge.

Tier 1 suppliers are no longer merely suppliers but are our partners now. You have to get tier 1 suppliers as well as others involved in projects. Otherwise, the costs will go up. Today the role of R&D is much more. The carmakers are more concerned about safety, lower costs as well as environment and for this R&D is much more. You can't have a terrible design and make the car very efficient. The best products are those, which are well designed and well manufactured.

Among the emerging markets, where does India stand? Will we go the South Korean way where only one domestic player (Hyundai) is left in the auto industry?

From cycles to Rolls Royce everything is being sold here. We have great innovative guys in this country. When the Tatas' Rs 1-lakh car hits the road, it is going to change the face of the market. One can understand if the market is growing at 5 per cent, but at 20 per cent it is an amazing growth. It is a long way off before such a scenario emerges in the country.

What is the progress on the small car project?

The truth is we are don't want to make a small car just for the sake of making a small car. It has to make money. It has to sustain the brand value. It must have all the safety features. Innova for example is perhaps the safest car in India. While retaining all these qualities it should be able to compete with Maruti and still make money. We know it is not an easy job. Our engineering and marketing people are struggling. There are no secret strategies here. Toyota makes small cars, which are as safe as the large cars it makes.

In case you can't achieve these goals, are you going to abandon the project?

No. What I am saying is that it is not easy. It is very tough. You will see an announcement in six to eight months. No one is trying to hide anything here. In spite of all the money Toyota has, the project should still make good business. Almost everyone including the purchase department has cost targets and that is the kind of work, which is going on currently.

When do you think the car will become a reality? Aren't you already late for the Indian market?

It could be 2010 or even 2011. We will try our best. People don't drive the same cars for 20 years any more. They replace their cars every two years now. The issue is not about being late but about coming out with a correct product, correct quality and correct price.

Toyota Kirloskar has bucked the industry trend as far as wages for its employees are concerned. You revise wages every year. Won't that lead to higher costs at a time when most of the carmakers have wage pacts once in three years or more?

I think Toyota has been fair. We put pressure on increasing productivity. Cost reductions come out of improving quality, improving logistics and not just from lower labour costs. It is about how efficiently you can reduce costs in all spheres. For example, in our Kirloskar factory in Kolhapur, if you compute the total capital employed, nearly Rs 1 crore is behind every employee. Therefore wages are not such an important issue but the capability of the person is. I think yearly wage revision is an interesting concept. It forces continuous dialogue between the workers and the management.

Are there any plans to increase your stake from 10 per cent in the joint venture?

No, there are no changes. Toyota works on small incremental changes. The other day I was in Tokyo for an event and there an auto consultant asked the head of the company about Toyota's strategy. He replied that there have been no changes in the last 40 years. "No wonder, there is no work for us," the consultant replied. That's why each of the change is so small that it never makes a story.

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