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Chairman's Speech 2004

Wednesday, August 4, 2004

Ladies and Gentlemen,
I have great pleasure in extending to you a warm welcome to this fifty-fifth Annual General Meeting of the Company. The report of the Directors and the audited results for the year ended March 31, 2004 have been with you for sometime and with your permission I shall take them as read. As you would have seen, your Company has created some new watermarks in its performance, recording the highest sales in terms of turnover, as also profits.
Following a suggestion made at the last Annual General Meeting, the highlights of the Company’s performance will be shown to you through a presentation immediately after my address.
In the business that we are in, of helping our customers move goods and people, it has been our effort to offer values of safety, comfort, ecology and economy. We have done this not just to meet legislative requirements but and have in fact offered these ahead of and exceeding legislative mandates. You are aware of the pioneering role your Company has played in the introduction of CNG technology in buses. The development work on this new technology preceded market introduction and evaluation by over a decade.
Your Company has been serving this country over the last 55 years and knows it to be a disparate market with variances in geography and operating practices. In order that each customer gets the best match with his particular needs, we have resorted to model proliferation, no matter the additional complexities it has created in our production planning. We now offer in our product range over 150 basic models and their variants, which is perhaps largest for this class of vehicles. Choices enable a customer to pick the most optimal price-value equation for himself.
In the Indian context where freight rates and passenger fares are among the lowest in the world, operational viability is the single most decisive factor of choice. Product variants make it possible for our customers to cover larger segments of the end-customers - without that, services would have been denied to some sections of the society.
At the same time, where continuity in technology can benefit the customer, we attempt to do so, an instance being the ‘H’ engine where, through in-house R&D, we have been able to make the engine compliant with Euro 2 and Euro 3 emission norms, giving the customer the convenience and comfort of familiar technology.
The challenge has always been to produce robust vehicles with adequate safety margin for unfavourable operating conditions and abuse and be able to offer them at the lowest lifecycle cost. Commercial vehicles are often not given due credit for the reliability built into them - we offer warranty of over 150,000 kms, a distance normally covered by an average passenger car in close to a decade! In a constantly changing operating environment, delivering customer value has meant configuring new product concepts. It is a matter of gratification that a high capacity model such as the multi-axle truck pioneered by your Company has grown in popularity to become the highest selling truck category. Thanks to an enabling set of circumstances including improved road network and a soft interest regime, their technical superiority is translating into operating efficiency and profitability.
I would like to bring to your attention a new product concept developed by your Company that has been well received in the market. To answer the needs of Delhi for a high capacity bus, we have developed the CNG-powered Megabus. It has a vestibuled configuration, allowing for 40% additional capacity compared to normal buses. While low floor is technically feasible, the additional cost would have rendered the product unsuitable for its intended purpose. However, the objective of ensuring easy access – for passenger comfort and operational efficiency – was met at a marginal cost by engineering the trailer portion alone as low floor and trials have amply proved passenger satisfaction and operational viability.
As products gain in sophistication, extending scientific service support becomes the responsibility of the manufacturer, so that the inherent values of the product are realized in operation. In preparation for impending emission norms and the required technological changes in vehicles, we have been upgrading and expanding our service network. Over the last five years, the number of authorized serviceoutlets has doubled while the number of workshop bays has increased by over 86%. In eight major States, our dealerships have set up 24x7 helplines. More than a third of our dealer outlets operate mobile service vans. More and more of our dealerships are offering extended hours and night service. While service is becoming an important revenue stream for our dealerships, equally, customers acknowledge its value to them.
Your Company has always believed in the extended definition of the customer to include facilitating constituents such as drivers and mechanics. All new technology and product introductions have been accompanied by training to cover theseconstituents. The Namakkal Driver Training Centre, set up in 1995, is a revenue neutral attempt to impart wholesome training that forms healthy driving and social habits. The Centre recently reached a major milestone of one hundred thousand trainees. The difference the training makes, in quantifiable terms such as fuel efficiency and accident rate, is acknowledged by satisfied customers. Your Company has recently launched two programmes, addressing the training needs of mechanics and spare parts retailers.
Operator viability is a function of product performance, uptime aided by timely service as well as freight availability. The freight transport sector continues to be unorganized, with both the freight providers and the truckers suffering for want of transparent, timely information. Ashley Transport Services Limited, the new subsidiary of your Company, will operate a countrywide transport exchange which will act as a single window between freight providers and truckers. It will make for better uptime, remunerative freight rates and overall efficiency. Transport Exchange is a small beginning and I have no doubt that it will mould the shape of freight transportation in this country even more dramatically than any single product technology.
In moulding the transport industry, your Company also actively participates in industry-wide collaborative programmes including the Core group on Automotive Research and Development (CAR). An innovative project taken up by this Group is illustrative of the vast potential of cost effective technologies to improve system efficiencies and end-user benefits. The pilot project is being implemented at the Koyambedu bus terminus in Chennai, the largest in South East Asia, with a capacity to handle over 2,000 buses. Using Global Positioning Systems (GPS), the project will guide buses in parking and departure, with information made available to passengers. Central to the successofthis project is the selection of an affordable technology and the immense value it delivers. Telematics is capable of immense value addition to vehicle operators and the transport system. It is, therefore, the focus area for the Advanced Engineering Group in your Company which is solely engaged on future technologies.
Delivering values in a cost-effective manner calls for internal efficiencies. A series of planned actions within the Company over the last decade has improved these efficiencies through systemic corrections, productivity improvements and attitudinal transformation. Central to this organizational renewal has been the urge to become an increasingly customer-driven company by aligning all processes to the customer.Through IT-assisted systems including dynamic customer database, the selling and marketing processes as also dealer management, we have been institutionalizing the means to gain customer insight and respond in tune with his value drivers. A pilot project called ‘Sadak Ka Sathi’ (companion on the road) has been launched along the North-North East corridors, to holistically improve operating economics of multi-axle vehicle operators
Customer trust is a competitive advantage we have earned and we are determined to retain it.
The momentum in demand for medium duty vehicles continues, with industry volume up nearly 48% in the quarter ended June 30, ’04 on year-on-year basis. However, there are signs of a relative slowdown in some parts of the country, at least partially on account of the delay and the uneven distribution in the monsoons. Strong economic indicators, continuing investments in infrastructure and the Government’s intent to focus on the agricultural sector augur well for the industry. On balance, growth at a more moderate level than in the last two years is a realistic prospect. At the same time, one should not forget the intrinsic cyclicality of this industry.
As advised in the Directors’ Report, Mr P K Choksey who retires at this AGM is not seeking re-appointment. As you know, Mr Choksey is one of our senior-most Directors having joined the Board in 1983. A person of high professional ethics and integrity, he has also been the Chairman of the Audit Committee since 1987.His contribution has been invaluable. As Chairman of the Board, his mature advice and guidance in dealing with complex issues have benefited me considerably. Over the past few years, Mr Choksey has been expressing a desire to retire from the Board– whereas I was successful in holding him back, he has, this time, made a special plea not to insist on his continuance and it is therefore, with great reluctance that the Board has agreed to his request for not seeking re-appointment.
As stated in the Notice, M/s Price Waterhouse have advised that they do not wish to be considered for re-appointment as Auditors of the Company. M/s Price Waterhouse have been the Company’s Auditors since 1982 and I would like record the deep appreciation of the Board for the excellent services rendered by them during their period of association as Auditors. The Company would continue to avail of services in the areas of their expertise, may be necessary.
I am grateful to all our shareholders for continued trust in and support of management of the Company. I would like to thank our principal shareholders, Hinduja Group and IVECO acting through LRLIH Limited, for their valued guidance support. I am sure you will join me in acknowledging the dedication and the creditable contribution of the employees of your Company making the year under review a record year.
Yours Sincerely,
Mr. R . J. Shahaney
Chairman, Ashok Leyland Limited