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Chairman's Speech 2010

Tuesday, July 27, 2010

Ladies and Gentlemen,
It is my pleasure to welcome you all to the 61st Annual General Meeting of your Company. I recall informing you last year, at the AGM, as to how your Company was weathering the storm of the global recession. Today, I am happy to say, that those testing and trying times are firmly behind us and we are back on a growth path. As you will see from the presentation to be made by the Managing Director, your Company’s first quarter results, though impressive, has to be viewed against the low base of the first quarter of the last fiscal which was particularly bad for the reasons explained at that time.
While many global economies are still finding the going tough, the Indian Economy has been quicker to recover, thanks to its strong fundamentals. Prudent financial management has been one of the primary reasons for achieving a GDP growth rate of 7.4% for the year 2009-2010. Going forward, we are bound to face fresh and stiffer challenges but India has come out of this crisis stronger, leaner and future-ready. Surely, it augurs for better things and times going forward.
A rapidly recovering economy, on the back of well-timed Government stimuli and RBI-funded liquidity, helped revive the Indian automotive industry. What’s heartening was the Central Government’s accent on infrastructure development that accounts for over 46% of its total plan outlay.
I am happy to share with you that your Company too has scripted its own recovery much on the same lines as the Indian Economy. Learning from the stern lessons that the recession taught, your Company has emerged stronger, more professional and future-ready.
Capacity enhancement, range expansion, diversification and spreading global footprint
Your Company has built its growth on the four pillars of capacity enhancement, range expansion, diversification and increasing global footprint all of which have been supported by a slew of efficiency improvements, competitive product development and significant investments in high calibre human capital.
Capacity enhancement
In March 2010, your Company inaugurated a new, state-of-the-art manufacturing facility at Pantnagar in Uttarakhand, which represents its renewed focus on the markets of North India. The largest of Ashok Leyland’s plants, it will enhance your Company’s annual installed capacity to 150,000 vehicles. The plant houses one of the most integrated manufacturing facilities in the commercial vehicle industry, with best-in-class industrial architecture combined with cutting-edge manufacturing technologies.
Another major step your Company took was to set up a globally bench-marked bus building facility at Alwar. Equipped with modern machinery, this facility is manufacturing the high-end Ultra Low Entry buses that are already running on the roads of New Delhi and other Metros.
Range expansion
The joint venture with Nissan Motor Company, that will make Ashok Leyland a full range player, is well on course. The first products of the JV are set to roll out by mid 2011 from the existing Hosur plant and your Company will then be competing in one of the most robustly growing segments in the commercial vehicle industry. Concomitantly, your Company is continuing its efforts to acquire the land for the setting up of the greenfield facility.
Diversification has been the third pillar on which your Company has built its growth story. Your Company’s JV with John Deere to enter another adjacency – the construction equipment business – is also very much on schedule. The JV’s facility is fast taking shape at Gummidipoondi and, as announced earlier, pilot production will start towards the end of this year and the first product – the backhoe loader – will hit the Indian market by early 2011. Here again, the perfect synergy between the two partners has resulted in a strong, vibrant and mutually beneficial partnership. The facilities of Ashley Alteams, a joint venture with the Alteams Group to produce high pressure die cast high-precision aluminum extruded products, was inaugurated in January 2010. Your Company is already present in the foundry business through Hinduja Foundries, and this JV will further strengthen its ability to meet the foundry demands of the automotive and telecommunication sectors. Hinduja Leyland Finance Ltd., your Company’s financing arm, commenced operations during the year with a network of 130 centers across 16 states and is well poised to play a vital role in improving Ashok Leyland’s market share in the North and East.
Spreading the global footprint
Your Company has always sought to capitalize on the opportunities thrown up by global markets. Although the Middle East, that has for long been a mainstay market, is still reeling under the recessionary impact, your Company has looked at fresh second hemisphere markets and some of the SAARC countries for growth. Latin America is one market that is firmly in your Company’s sights.
The integrated facility at Ras Al Khaimah, UAE has already started to produce buses of international quality. With an annual capacity of 2,000 buses, this plant which will eventually also manufacture trucks, will feed the GCC countries and the African markets.
Product development
Product development has been central to your Company’s growth plans and our Managing Director will dwell on two examples of its success - the U-Truck platform and the new ‘Neptune’ engines. The Global Bus Programme is working towards developing buses that will meet and even exceed international standards in terms of on-board electronics, safety and comfort features and degree of customization and appropriate technical support will be sought where required.
At Auto Expo 2010, your Company showcased HYBUS, India’s first Plug-in CNG Hybrid Bus that represented the latest in green technology for mass transportation.
As you already know, your Company is the largest supplier of logistics vehicles to the Indian Army. This year, it took a new and significant step by developing a range of Armoured Vehicles and mine protected vehicles specifically configured to combat terrorist and insurgency threats. Targeted at the para-military forces, three such vehicles were displayed at this year’s DEFEXPO and were very well received.
Enhanced efficiencies are critical to sustained success and your Company has launched a number of major initiatives towards this end embracing all the key functions – Product Development, Strategic Sourcing, Marketing and the Shop Floor. One has been to integrate ‘Quality’ into every aspect of functioning, internally or during external interface. Lean Six Sigma is another initiative in this direction which is all about cutting wastage, increasing flexibility and hence making the Company more competitive and profitable.
Your Company has continued to nurture human capital and one novel initiative launched in Pantnagar is BLESSING, that seeks to equip the youth of the region with better skills and knowledge to be effective shop floor associates and even qualify them for managerial positions eventually. The continued success of Mission YEs and the spread of a robust Mentor-Mentee programme are building blocks in this process. Your Company has also won some very coveted awards like the Rajiv Gandhi National Quality Award and the IMC Ramakrishna Bajaj National Quality Award both for excellence in the manufacturing category.
I take this opportunity to express my sincere thanks to all the shareholders 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 continued support and guidance. On behalf of the Company, I would also like to thank all our customers, dealers, suppliers, our JV partners, other business associates and employees for their invaluable support and co-operation in the year gone by and in the years to come.

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