The slowdown forced us to rationalise costs

Written by Malabika Sarkar | Malabika Sarkar | Updated: Sep 20 2009, 03:55am hrs
Just when the automobile industry was showing signs of revival bringing the optimism back among the Indian tyre manufacturers, they are faced with a 10-15% increase in the prices of natural rubber, a key raw material for the industry. Currently natural rubber prices are about Rs 105 per kg. In the midst of all this, Ceat, part of RPG Enterprises, is looking to ramp up its retail presence. In this interview with FEs Malabika Sarkar, Shujaul Rehman, general manager-sales, Ceat, talks about the issues facing the industry and the companys plans. Excerpts:

Ceat was the first company in its category to announce lay-offs as inventory piled up. You may have also considered cutting production. Has the situation improved since

There were no lay-offs by Ceat; production was cut in the third quarter of 2008-09 but since then we are running on 100% production. Yes, the situation has improved and demand has come to earlier levels.

What advantages do you hope to gain after the commissioning of theradial plant at Halol (Gujarat)

The major advantage will be availability of radial tyres for the passenger and commercial segments. Production costs will also be significantly lower.

Retail is an important consumer contact point for tyre brands. What are your plans to spruce up retail, given that tyres are a low-involvement category

Ceat was the first tyre company to get into tyre retail seriously with Ceat Shoppes for passenger tyres and we have moved into commercial tyre retail as well with Ceat Hubs. We feel that tyre retail has a good future keeping in mind the way retail has panned out elsewhere in the world. Ceat Shoppes will get a big fillip once our Halol plant gets under way.

Tell us about your customer contact and service programmes.

We know our customers and their needs. We keep a track of their requirement and our focus on improving our quality on a regular basis helps us in retaining them. We have also launched a programme called Ceat Royale wherein we interact with them on a professional and personal level. We also have a dedicated team of service engineers whose job is to ensure high degree of customer satisfaction and customer retention by ensuring a 24-hour redressal of their problems.

Have you benefited from the government-imposed ban on the import of Chinese bus and truck radial tyres

Radial ban has had a marginal impact on the demand for Indian tyres. Companies with radial capacities have benefited.

You have reported a net profit of Rs 60.20 crore for the first quarter 2009-10, ended June 30, 2009, against a loss of Rs 10.67 crore in the first quarter of the previous fiscal. What are the factors that contribute to this performance

The slowdown forced many companies including Ceat into major value engineering and cost rationalisation exercises. We had a cross-functional task force looking at costs across the value chainfrom production to distribution. Production and sales plans were made to focus on the bottomline. We planned higher growth in the domestic replacement market which is most profitable and our highest possible replacement sales helped us clock highest ever profit.

Chinese imports and slowing demand are forcing companies to cut production to protect their bottomline. When can you expect this situation to come under control

Chinese imports are definitely a threat; despite poor quality they sell because of low prices. Another reason they sell is because of evasion of duties and taxes. The current government policy has stopped evasion of taxes. Passenger car users are brand conscious. Quality and brand image plays a key role in their decision. We dont see any major threat as Chinese products are perceived to be poor in quality.

Your plans for the rural market...

We have a vigorous distribution expansion agenda: we are planning to be present directly in all towns of 20,000-plus population as we see rural demand increasing. We have a dedicated team for rural sales30% of our field force is dedicated to rural servicing and we see it going to 50% in the next 12-18 months.