Oct 01, 2013 06:12 PM IST | Source: CNBC-TV18

Europe is now exporting cars to the US: Motherson Sumi

By and large, revival is coming up in the US in a very strong way, which augurs well for Motherson.

The reason why we have got the management of Motherson Sumi is because off-late a lot of analysts have raised expectations that with the European economy now rebounding, companies exposed to Europe will do well. As the American economy has revived, there are a lot of good cars that are going from Europe to the US, says Vivek Chaand Sehgal, chairman, Motherson Sumi Systems.

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By the end of March, some good results will come from Motherson, he says. Every country in the world will have some basic issues that can come in which could either take car sales down a bit or take it up a lot, he adds.

Below is the verbatim transcript of Vivek Chaand Sehgal's interview on CNBC-TV18

Q: Would that be the right way to approach it or would you say that it is a bit too early?

A: You can clearly see green shoots. As the American economy has revived and there are a lot of good cars that are going from Europe to the US. So, definitely it is a plus. Even in Europe itself you can see some good things happening.

Q: If you could just quantify, what would be the ratio of order to sales, how has it changed perhaps in the last one year and can we also expect an improvement in margins from your European subsidiaries?

A: Improving the margins and numbers and all these things – it is too diverse a thing for me to give it to you in just like 5 minutes or something like that. Every quarter we have tried to improve our performance. This particular quarter we do have one month of holidays in the Europe which is there, but year-on-year you will see a marked improvement.

We are not basically guiding you on a quarter-on-quarter basis. We are confident that by the end of March you will see some good results coming from Motherson and this is in the current scenario. So, you have India, you have Europe, you have the US, you have the global economy, by and large we are seeing revival coming up in the US in a very strong way. In fact I just read a news in the morning that auto sales are going to be higher than 2007 – that is pre-Lehman crisis. So, I believe that all these particular things are auguring well for Motherson.

Always the efforts are there from our side to chip of the costs and to solve the problems and hence deliver superior results.

Q: Let us talk about the year as a whole may be not quarter on quarter comparison. For both your European subsidiaries SMR and Peguform, if you could give us the outlook for the year?

A: We are slated to grow, we are showing a growth of almost 20-25 percent coming up in this thing. The other ones are – SMP is a bit on the slower side, so, may be anywhere in Euro terms about 7-8 percent atleast. But do not forget that SMP is one year old with the group and the new orders that we have, have already come in but they will start fructifying somewhere around in 2014. So, we are at this particular moment in our group trying to put in more plants, trying to improve our capacities, improve our quality and everything to an extent that we can take more of the load off future investments and we are pretty satisfied with what the results are coming.

Q: I can see that for SMR it is the French unit which is actually posting some losses and even for Peguform it is your Spain as well as your Brazilian unit which is showing some losses. Can we expect a turnaround in FY14?

A: France per se is seeing a little bit of a special case where some of the customers are struggling a bit. However, we don’t open plants and close plants just because the customer isn’t there. We are all there for the long term and I think we have to look at the whole companies overall. There will always be pockets somewhere in the world – when you are a global company, you will have these particular nuances (not sure) happening – somebody is up, somebody is down.

We believe that the French company adds tremendous amount of value to the Indian operations, the Thai operations and operations wherever these people are supplying their cars. So, it is okay if they have a marginal loss. I think they are putting a superior effort to reduce that and to take it to profitability. The same thing is with Brazil. We have been able to reduce the losses to a great extent, but Volkswagen is a very important customer for us.

Q: What about the India business because the last 3 or 4 months quite clearly car sales have lagged. What kind of impact that has had on your business?

A: As I said every country in the world will have some basic issues that can come in which could either take the car sales down a bit or take it up a lot. So, I think one should not look at it in a narrow window of 6 months, 8 months. I think overall you will find that the quality of the cars, the value of the cars that are being sold are much higher than what it was in the previous year.

So, there is a plus there as well but we are too much number guided. We should look at the general trend and you will find that the cars that are selling are the high value cars which is a good sign. It is a normal sign for the whole world. So, I am not so worried about it.

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