Tuesday, September 16, 2014
By Jitendra Singh
Lessons learned by auto industry during slowdown period
After a crippling 2013-14, when car sales declined 6 per cent, the first such drop in 13 years, the Indian auto industry is now on the rebound with four consecutive months of growth. Looking back, CEOs say the slowdown wasn't entirely a disaster; several lessons learnt during the difficult year will help them make the most of the coming growth phase. “A slowdown is a good time to review the business and tries to reduce cost and improve efficiency," says RC Bhargava, chairman of Maruti Suzuki. The company did plenty of that during the slowdown, not just at the top-management level but by also involving the rank and file. Maruti actively sought cost and efficiency improvement suggestions from its employees.
It received 350,000-400,000 such ideas. About 75 suggestions that were implemented saved it Rs 300-400 crore in cost, according to Bhargava. For example, Maruti used to source components from vendors in a trolley, which had disposable plastic covers. A suggestion to use a more durable cover resulted in the company reusing the covers. While the initial cost was more, the company saved in the longer run. Chennai-based Ashok Leyland also navigated the slowdown with a similar mindset.
"We looked at the downturn as a blessing in disguise," says Vinod Dasari, its managing director. "This was our one opportunity to fix what was wrong with the company and prepare ourselves to be future ready. That was our whole theme (through the slowdown)." The commercial vehicles maker reduced working capital significantly, almost halved its debt (Rs 2,500 crore), sold non-core businesses, and made the organisation leaner and more efficient.
Read complete story at Economic Times