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Chairman's Speech 2008

Wednesday, July 30, 2008

Ladies and Gentlemen,
I have great pleasure in welcoming you to the 59th Annual General Meeting during the Diamond Jubilee year of the Company. Successful completion of 60 years of serving this nation with relevant products, adding momentum to its economic progress and touching, though often invisibly, the lives of its people is a matter of joy and pride.
An occasion such as this is appropriate for a look at the past and for thanksgiving. When we rewind to 1948 and the thought process that led to the formation of Ashok Motors on 7th September that year, in Mr Raghunandan Saran we find an entrepreneur driven by the mission of nation building. True to that philosophy, the product line soon shifted from cars to commercial vehicles because that was seen as an opportunity to serve a larger section of the society.
The first major product introduction, the Comet truck, is reflective of the role this Company has played over the years. Built keeping in mind the operating conditions obtained at that time, the product became a major success and robustness and reliability became integral brand values of the Company’s products.
Over the years, the Company created a creditable track record of moulding a nascent commercial vehicle sector in the country with pioneering technologies and product concepts. No doubt, access to global technology was an advantage enjoyed by the Company. More importantly, the choice of technology was determined by the unique requirements of the Indian market. Somewhat incredibly, in the 70s, in the face of vehicle shortage in relation to freight availability, registering authorities used to permit 25 percent overload, marked up on the manufacturer’s recommendation and some States even allowed up to 50 percent overload. This was proving to be bad for the vehicles and bad for the roads. Your Company advocated rationalisation of axle weights and gross vehicle weight in line with international practice causing less damage to the road surfaces. This paved the way for higher payload vehicles, improving operating economics of the operators.
Introduction of these vehicles required corresponding development of engines, transmissions and axles. Your Company led with the country's first turbocharged engine and gearboxes and axles to go with the higher power engines. Your Company has also been proactive in improving safety of vehicles, by introducing air brakes with dual line safety systems. Along with power steering, another first from your Company, these have since become standard fitment. Recognition of product development as a customer-inspired function came early in your Company. The series of products that anticipated market requirements is a testimony to the well-entrenched practice of keeping one’s ears close to the ground.
At the end of the fourth decade came the expansion phase, with units set up at Hosur, Bhandara and Alwar to create an all India manufacturing presence. This was also the time long-term partnerships were forged with global technology leaders.
The next significant chapter in your Company's history was marked by economic liberalisation. In seizing the new opportunities that opened up in the years that followed, the backing and support of the Hinduja Group in the last two decades has been crucial. The infusion of vital capital and technology triggered the modernisation of the Company’s physical infrastructure which still continues. New benchmarks have since been set in manufacturing, product development and HR infrastructure and processes. The first decade after the economic liberalisation was marked by quality and efficiency improvements to reach global competitiveness. That set the stage for the multi-pronged growth plans - capacity expansion, globalisation and diversification – details of which I had shared with at the last Annual General Meeting.
By a happy coincidence, the Diamond Jubilee of the Company also marks two decades since the entry of the Hinduja Group. The Hinduja Group has repeatedly reiterated its commitment to the growth of its Indian flagship - and has followed that up with matching action, creating the confidence to seek global growth. The holding company of Ashok Leyland, renamed Hinduja Automotive Limited, spearheads the ambitious growth plans of the Group to achieve significant presence and leadership in the auto industry, across geographies and in adjacent sectors including auto components, foundry products, technology and engineering services, automotive electronics, construction equipment and defence products.
In furthering growth through partnership, Ashok Leyland's joint ventures with Nissan for its entry into the Light Commercial Vehicle business, are of great significance. By tying up with a world renowned vehicle manufacturer, your Company is close to realising the long-nurtured ambition of offering a full spectrum of commercial vehicles. The partnership is set to benefit from the combined strengths of the two partners: Ashok Leyland’s manufacturing competitiveness, core engineering capabilities and an established marketing network, combined with Nissan’s product development capabilities, its proven product portfolio and a global marketing network.
60 and on the Go
It is this organizational stance of drawing inspiration from the past to drive with confidence into the future that was sought to be captured in the Diamond Jubilee theme line: 60 and on the Go.
Early this week, we had a significant function to dedicate our Technical Centre to engineering excellence, when the facilities and the work carried out there came in high praise from guests drawn from the global auto industry. You will remember that two years ago, the Hinduja Group assumed full ownership of LRLIH Limited (now known as Hinduja Automotive Limited), the parent company. That set your Company on a new course of seeking growth globally on its terms, with no constraints on selection of technology and markets. That decision by the Group was also a statement of confidence in the Company's capabilities.
The last two years have seen unprecedented internal capability building in the area of product development. Legislative mandates and changing market preferences have resulted in new product introductions at increasing frequencies. The product development task is compounded by the fact that the country has been straddling two stages of emission norms for some years now. There is a perceivable shift in the market in its preference for fully built vehicles, thanks to better productivity and the opportunity to earn from the day one. This brings into focus opportunities in cabs and specialised bodies.
To cope with this and to attain self-reliance in technology management, there has been a significant step-up in the emphasis on product development. The annual outlay has more than doubled in the last two years. Major additions have been made in the infrastructure for testing, validation, virtual work and other product development processes, with the latest - and in many cases - the first of their kind in this country. Manpower has nearly doubled in two years and has crossed 600. Equally significant, the process of product development is constantly being fine-tuned to meet legal and market requirements with reduced time to market, getting it first time right every time. Formal processes to capture customer voice, with programmed interactions between product development and marketing is in place.
A strong product portfolio known for reliability and revenue earning potential has been a major strength of this Company over the years. We are determined to maintain this advantage.
By utilizing capacity expansion programmes as an opportunity for technological rejuvenation, your Company has created a manufacturing infrastructure that is contemporary – and we are determined to keep it so.
With over 40% of our executives below the age of 35, the organizational momentum is high with the combination of energy and experience.
The ‘Unitruck’ that was unveiled during the dedication of our Technical Centre is a technological blue print of future product development and how the Company will build its vehicles. By adopting global product development and manufacturing practices, the Company has greatly enhanced its capabilities to grow in global markets.
Economy and the Market
During the year under review, after two years of 9% plus growth, GDP grew at a lower yet healthy rate of 8.8%. However, higher cost and reduced availability of funds combined with spiraling input costs impacted demand for the truck segment which fell 6%. Thanks to a creditable performance in the bus segment where the Company regained its premier position and aided by improved revenues from international operations, engines and spares, the Company turned in a satisfactory performance, details of which will be shared by the Managing Director in a presentation to be made shortly.
I take this opportunity, to express my thanks to all the share holders for their continued trust in the Board of Directors and the Management of the Company. I am grateful to the Hinduja Group, our principal shareholders, for their full support and valuable guidance. On behalf of the Company, I would like to also thank all our customers, dealers, suppliers and other business associates for their support and co-operation without which the success of the past 60 years would not have been possible. The Company has been fortunate to have had enlightened leaders and committed and competent employees. Organisations are built on human contributions and the contributors over the six decades are innumerable. I look forward to your continued support in the Company’s exciting journey into the future.

Yours Sincerely,
Mr. R . J. Shahaney
Chairman, Ashok Leyland Limited