"We are committed to India and we will make it a success"
Wirtgen Group, the German headquartered manufacturer of mobile road construction and mining equipment has decided to start a greenfield manufacturing facility near Pune. On the sidelines of a meeting at New Delhi announcing setting up of new plant Mr. Stefan Wirtgen, Chairman, Wirtgen Group in his Interview with S.K.Khanna said, "we are convinced that India will be one of the largest markets in the world - we have to be present and active in India - there is no doubt. We are committed to India and we will make it a success."
A hearty welcome to you Sir from NBM&CW on visiting India to unveil Group plans for this country, including setting up of new facilities here to strengthen Group's presence in the country. Where the proposed facility is likely to be located and investment involved?
We chose to go to Pune. We were quite impressed with the quality of the supplier base which was located around Pune and we are therefore convinced that we can assure the quality of our products. The facility will be located just 45 minutes drive outside the city-center of Pune. It will be on 25 acres with an initial investment of roughly €8 million.
When the proposed facility is likely to be operationalized will it be, a manufacturing base or an assembly operation? When its product lines are expected to join country's industrial stream and market place?
We hope to be operational by the end of the second quarter next year. The proposed facility will serve multiple purposes. It will be our head-office for our activities in India and we are also operating sales and service offices with parts stocking in Mumbai, Ahmedabad, Delhi, Hyderabad, Bangalore, and Kolkata to be close to our customers. The facility in Pune will also have a modern workshop and an increased parts stocking facility. There will also be a training center which will allow us to train operators and employees of our customers on road equipment. And of course our Pune facility will be a manufacturing and assembly facility in which we will build products tailored for the Indian market.
What segment of Wirtgen's product range is likely to serve more effectively the emerging complex infrastructure requirement, following India's renewed focus on infrastructure developments?
As you know Wirtgen Group is the world market leader of mobile road construction equipment with the most complete product offering in the industry. We believe that all our products are suitable to increase the effectiveness of the Indian road building industry. Through our brand Vögele, we offer a full range of asphalt pavers from footpath to highway applications up to a working width of 16mtr both on tracks and on wheels. With our Hamm brand, we offer one of the most comprehensive range of compactors in the world. The Wirtgen brand is the world leader of milling and recycling equipment. —especially in this line of products, I see tremendous potential as these technologies are standard today in all developed countries. On top of this, Wirtgen offers a complete range of slipform pavers and surface miners which both have a leading position in India.
Since Wirtgen entry into India and tested waters of the Indian market place, how strong remains Wirtgen optimism that its association with this market will give it excellent investment and revenue returns?
We have been represented in India with an owned subsidiary for almost two decades which demonstrates our strong commitment to the Indian market. We are convinced that India will be one of the largest markets in the world and we will have to be present and active in this country— there is no doubt. We are committed to India and we will make it a success.
Wirtgen Group is one of the most reliable source of products and services for road and allied construction and the processing of materials around the glob. Will you please tell us something about its evolution as a family construction business to its present internationally reputed machinery orientation, Group's acquisitions, its international operations and presence, manufacturing facilities and its core business areas.
My father Reinhard Wirtgen started the company in 1961 as a contractor in road rehabilitation. At one time he started to develop and build his own equipment to remove or repair damaged road surfaces – hot milling equipment, hot recycling equipment, cold milling and cold recycling equipment. At one point he had to decide to be either a contractor or a manufacturer and he decided to become a manufacturer and as a consequence he sold his contracting business. Regardless, we still know that what it means to be a contractor and this is reflected in the mentality of our service organization. In 1997, my brother and me took over and completed his vision to be a full-line provider of road equipment with the acquisition of Vögele AG and Hamm AG. In 2006, we also added Kleemann GmbH – a well–known manufacturer of crushing and screening equipment - to our product portfolio. We always believe that we should have direct contact with our customers—as a result today we operate worldwide network of over 55 owned sales and service subsidiaries. In other countries in the world we always try to find out the best distributors to assure the best service for our customers.
What is Group's prime focus on R&D in engineering new products and what percent of sale is set asidefor R&D and sales promotion and marketing to promote business operations internationally and at the local country level? What is the implication of recession on such activities?
Product development is a prime focus in our company and we are convinced that we have the largest engineering team in the mobile road construction equipment industry. We are committed to always provide the most effective and innovative solutions in all our product-lines to our customers. Recession did not have an impact on the size of our engineering team, in fact we increased our engineering organization in the last 12 months. We have a long-term vision on our business and fortunately we have no shareholders who look for a short-term profit. We therefore are convinced that we need to further invest in our products to stay ahead.
What is Wirtgen Group's overview of the global construction equipment business recession? Why certain regions like the US and Europe are badly hit and are not recovering quickly despite massive stimulus packages made available to them, while regions in Asia under the same stress are not seriously impacted and if impacted are recovering sooner rather than later. How soon the global equipment market could cross the hump?
The construction equipment industry has been affected tremendously over the past few months. After a period of dramatic growth many companies have increased their manufacturing capacity accordingly and were suddenly confronted with a market that practically disappeared. Large adjustments to the work force were very often the result. Nevertheless certain segments within the construction equipment industry have been more affected than others. For example, the earth- moving and concrete equipment industries have been more affected than the road building equipment industries as countries very often seem to spend stimulus money on road construction and repair. We agree with your observation that the US and certain parts of Europe are not recovering as quickly as the developing countries such as China, India and other parts of Asia. Many countries in Europe and the US have experienced inflated growth in certain segments which was very often bought with "cheap"money and was out of line with the real demand – we have now to deal with effects of these policies. Asia on the other side has a real demand to further develop their industries and infrastructure – we are therefore convinced that growth rates will come back to previous levels rather quickly. Unfortunately, we do not have a crystal ball but we are hopeful that we have seen the bottom of this downturn. As a conservative company in terms of finance policies, we are glad that we have a strong balance sheet which allows us today to continue to invest in our business and remain independent.
Wirten presence in India has been graduated to a manufacturing capability taking advantage of the present focus on infrastructure development. How would this transformation further consolidate Indo-German trade and economic relations, which has been the most successful story of economic and business cooperation between any two countries?
When we invested in Pune we were surprised how active and supportive the Indo-German Chamber of Commerce was. In fact, our home-state Rheinland Pfalz had a representative to support us. We experienced that Germany enjoys a relation full of trust with India which is basis for any investment decision. We are therefore very optimistic about the future development of Indo-German relationship.