Interview with Subu Nagasubramony, Managing Director, Visteon India Operations

Company Description: Visteon is a leading global automotive supplier with $15 billion global sales in 2012 and operations in climate, electronics and interior products. Visteon’s family of businesses include Halla Visteon Climate Control Corp. (HVCC), majority-owned by Visteon and the world’s second largest global supplier of automotive climate components and systems, Visteon Electronics, a leading supplier of audio/infotainment, driver information, centre stack electronics and feature control modules and Visteon Interiors, a global provider of vehicle cockpit modules, instrument panels, consoles and door trim modules. Visteon has facilities in 29 countries and employs through its various businesses, including unconsolidated operations, approximately 55,000 people.

What reasons and factors brought Visteon’s attention towards the Indian automobile sector?

There are multiple reasons for Visteon’s interest in India. Back in 1991, when economic liberalisation of the country was setting in, we (as a part of Ford Motor Company) signed our first joint venture with Maruti Suzuki. At the time, lots of OEMs, including the Ford Motor company, started looking at India as a potential destination, and all of them wanted to test out the market conditions here. Hence, our reasons for coming to Asia were to be visible in the radar of the global OEM’s wishing to set up shop in India. And as a part of a global OEM itself Visteon had ambitions to enter Asia in a big way and grow in the market. Today, we have a strong presence in the Asia Pacific region, which was all driven during that period of economic liberalisation. In 1986 we established Halla Climate Control, a joint venture between Mando Machinery and Ford Motor Company in Korea. Manufacturing was on of the main factors, as that is what we focus on from day one. When our main Chennai plant was established it was a Ford auto components plant, and then after the global separation it became Visteon.

Why did Visteon separate itself from Ford Motors globally?

Business is an entity that constantly keeps changing, it is never stagnant. Visteon was part of Ford Motor Company, but later the management and share holders decided to spin Visteon out as a separate company. The separate identity of Visteon would enable it to go out and pursue other customers as well hence making it independently strong in the market. And today the strength of Visteon comes from the diversity of its customers, for example, Hyundai, Ford, Renault, Nissan, Maruti Suzuki, Mahindra & Mahindra and many more.

Visteon has been present in India for almost two decades. How has been your growth through the years?

In 1993 we started manufacturing in our plant in Bhiwadi focusing on the Maruti Suzuki business. The year 1998 was the start of the Chennai plant, when Ford and Hyundai decided to set up shop here. This was the time when we started manufacturing all the three products---- electronics, climate and interior---- all at the same time from day one. Then we opened the Pune operations unit for both interiors and electronics. We started the software operations in Chennai in 2001 with a mere eight employees, which today has risen up to 500 plus employees. We have grown and added to our capabilities in terms of manufacturing sites, engineering sites and software centres. We have five manufacturing sites, three software centres and this is not the end of it, as requirements continue we will keep expanding in this market. Consider electronics, we started off very small making mechanical clusters for the Santro, and currently we make 200-300 clusters a day. Today we make somewhere around 1.5 million clusters annually. In the last four years we grew seven times in revenue and year on year that number is growing over 30pc with booked businesses. We expanded the exclusive plant that we set up for electronics. It is a state-of-the-art facility with every OEM praising it as the best possible plant for electronic auto components in India. It is an ISO certified 100pc clean-room with ESD, temperature and humidity control. We have our own assembly lines, we create our own clusters, audios, climate heads, etc at our plant. We had established that separate facility in 2009 and have expanded that three times till 2013. A lot of people came across and mentioned that why did you not make the plant big enough. That is the kind of growth we made which we could not even anticipate.

What kind of changes have you observed in the Indian automobile market and demands from OEMs?

The demands from OEMs reflect demands from the customers. In India there is a huge middle-class population aspiring and wanting to own a personal vehicle with cool features, advanced electronics with easy human-machine interaction and connectivity. Another important aspect is the comfort of the atmosphere inside the vehicle, where our air-conditioning systems come into play. Then are the performance and the fuel efficiency of the vehicle. The demand is coming from every corner, be it comfort, or personalisation, or features, or the design of the car. And then is the fuel efficiency which is a very vital topic and will always be an area of constant development for automobile manufacturers. We have a lot of products which support these parameters of car manufacturing. And then there is  the importance of being green, it is an unsaid expectation. Nobody mentions that they want a green car, but when a customer goes to buy a car and the OEM provides green features, the customer likes those options. There are some green technologies which are enforced by the government, like the Bharat IV or Bharat V emission norms, which are regulations and manufacturers have to strictly adhere to. Beyond these regulations are green technologies which have an impact on customer expectations from their new car. Hence, expectations run into all these areas--- green, eco friendly, fuel efficient, comfortable, HMI, electronics, interiors, and we happen to play in all these segments. We have also seen a dramatic change in the fit and finish and quality levels expectations. Every year the quality level steps up a notch in every program. For us it is not much of a challenge because being a global player we have already designed to those levels. Even if sometimes an OEM does not ask for those specs, we overwrite those and mention that these are our standards to which we would test to. In terms of fit and finish, the OEMs have become a lot more conscious, and they are asking us to do more quality studies with the users and tell them what the users want. This is where we as a global player can contribute better.

You mentioned quality studies with the customers. What are these and how do you go about these research studies?

These are called Consumer Pursuit Quality studies or CPQ as we call them. OEMs and we enter into an agreement and together we go out to study the quality perception of the end consumer. These studies are for different products such as interiors and electronics. We select a set of test consumers who experience the touch and feel of sample interiors and provide us feedback. We collect all this information and put it all together into actionable data. Then we take the results of these studies into the design of our products. These researches are both qualitative and quantitative. We study that whether consumers want round vents or square vents, they like a digital speedometer or analogue, do they like amber illumination or white illumination. We do all these researches directly with the end consumers in clinics where we call them, line up ten cars, remove badges and cover them thus removing any brand bias. Removing the brand bias gives us pure statistical data which tells us what customers actually want from their cars. Then are the features, OEMs have limited amount to put in a certain feature, and our research tells them exactly what features will get them the highest consumer perception that they see value in. Value based analysis is what we do and OEMs appreciate that a lot. We have done a lot of such studies in India and globally.

How are your exports and imports panning out?

We are mostly importing some parts from our intra-company imports and also exports as well. We have a few other clients also from whom we import. Our manufacturing business is primarily focused on domestic business. Our software business is 100pc export oriented. There is always a balance between exports and imports.

The market is going down a steep slope. How has this affected Visteon’s imports, exports and domestic business?

The market downfall has affected us just as it has affected everybody else. The rupee depreciation affects every business in so many ways, and import happens to be one of them. We are hoping that it is a short term trend and things will look back up again. We do focus on natural hedging, in the sense export more and import less, but you need scale. Export just for the sake of export is not what we are looking at. We prefer export when there is a benefit to our manufacturing global footprint. We look to balance imports and exports through long term action planning, to be sustainable globally. Our business is not just in India, we have business in Korea, North America and Europe. Some currencies move up, some move down, hence we cannot keep changing our manufacturing footprints and import and export strategies based on such fluctuations in the market. For the domestic market again we hope it is a short term trend and believe things will improve. Indian market has huge potential and we are positioning ourselves to tap into that potential in the future. We are working on the short term issues through but we do not think that will define Visteon in India. We are not changing any of our investment strategy or customer strategy or product strategy. We believe it is one of those waves which keep on coming and going and we stand committed to this market.

In terms of the skills of the workforce and technicians, how would you define your employees?

We think our people are very capable intellectually. They are dedicated and trainable. The only issue is our system, which brings up our people through education to work in automotive companies or in fact any other industry, could improve. We want them brought here, train them, engage them in our discussions and fully get them plugged in with us and not merely work eight hours shifts and going back. We want them engaged in industrial activity. Safety is an important parameter for us and we keep the very high always. People happiness is one of the key factors in our company. But as we mentioned earlier, we would be happier if some of the training of our people happened through our education system. If you consider the software, which happens to be our key export, our workers are possibly the best engineers in the industry and have been praised by every OEM. If you consider audio unit for the next Volvo, or the cluster for the next Ford vehicle, or Jaguar’s re-configurable cluster, all of these are done here. These people have to be very capable to be sitting here and doing 100pc of the work from here.

Lastly, how do you portray the future of Visteon?

We want to be the supplier of choice for all our OEMs here. We want to be known for the highest safety standards in our operations and for the best quality products. We wish to be the most responsive supplier to our customers and be known for making them successful. We want to bring our automotive intellect into everything that we do, not just be a parts supplier but add value to what we do for the customer.