"Growth will pick up, the slump is a short term condition"

Unfazed by the economic slowdown, 52-year-old Ronald Moore, chairman & managing director of the Rs 850-crore Cummins India Ltd and MD for all other Cummins operations in India, feels that, compared to world economies, even a five per cent GDP growth rate should be good enough for India. In an interview with Rajiv Saxena, he explains how the US-based $ 5.6 billion Cummins Engine Co Inc, the world’s largest producer of diesel engines above 200 HP, has mastered the art of tackling economic cycles through its operations spread over 130 countries. Excerpts:

How has the

economic slowdown affected the heavy engineering industry, in general, and the diesel power generation industry, in particular?

The general economic slowdown has certainly had an impact on the demand for power. But we see this as a very short term, possibly a one-two-year, economic condition. There will still be tremendous need for growth in the power sector in the long term as India continues to grow probably at GDP ofsix-seven per cent and industrial growth of eight-ten per cent. As big units would be set up, we don’t see, in the next 10-15 years, the supply of power matching the demand. We are still not changing our strategy of increasing product lines and expanding capacity to meet the long term demands that we anticipate.

There is merit in that contention. However, I don’t think that what we are seeing today is being primarily caused by the economies of the rest of the world. We still have good export volumes coming out of Cummins India. The kind of growth we saw in 1995-96 was unusual and was filling a demand gap that was there because the products prior to that were simply not available. As this demand gap began to get satisfied the economic slowdown came. We are not sure we’ll see the economy come back to that high level of growth rates- 11 per cent industrial growth. Once this cycle is over, it would normalise at probably six per cent of GDP, seven-eight per cent of industrial growth, possibly even higher than that. But looking at the world economies, even the 4-5 per cent GDP growth rate of India is good… and we we would see India as a key market for Cummins Engines worldwide.

Yes. They are not happy today because of what has happened in the last year and a half. They have not been through such situation before. But the general feeling is that things will get better in the next 12 months. However, I feel the way the Indian economy is growing and the demand that the consumer is placing on the manufacturers and the industry in general is going to sustain itself regardless of the political situation unless of course you have a complete reversal of some of the policies started in the last five years.

Yes. Exports are being used by lot of companies to protect themselves. But even if this short term economic dampener was not there, you’d still see a significant, aggressive trend towards exports. For our V28 engine, for example, I can say that we are the single supplier for Cummins worldwide. We have several other series (of engines) that we know we will be extremely competitive worldwide.

We have encountered this kind of activity in South America, particularly Brazil. It was almost a parallel situation in Mexico about 10 years ago. But still today Mexico is a very important market for Cummins and is growing very rapidly. We know what markets we want to be in and what our customer base is. We know that there are going to be economic cycles and we are very used to dealing with them worldwide. So we do not change our basic strategy of continued growth. Our focus will alwaysremain on providing the customer with a quality product at a very good value package and supporting him in its application.

We are trying to offer complete packages to customers. Oil is really the life blood of engine. We are offering the qualified Valvoline oil through the CDSS network. Our joint venture with Fleetguard in India ensures the right filter for the customer. Thus we are offering a one-stop shop type of operation to the customer. Cummins has tied up with Valvoline worldwide. There are agreements in Brazil, Argentina, Australia, China, Malaysia, UK etc.