In a significant strategic decision, Terex Corp has recently acquired Demag Cranes, world's leading German manufacturer of all kinds of cranes, for nearly $1.5 billion. With this acquisition, Terex will own 82 per cent of Demag shares on offer and will become not only the world's but also India's largest manufacturer and supplier of crawler, tower, mobile and overhead cranes. Terex Corp realises the fact that India is one of the top infrastructure growth stories across the world and is poised for continuous GDP growth of 8-9 per cent over the next five years. With total investment plans of over one trillion during 2012-17, India is next only to China in terms of spending on infrastructure activities. Hence, Terex in India wants to be a part of this growth story and help India to achieve its aim of matching other developed economies in infrastructure development. In this direction, Terex has already invested close to $50 million in the last couple of years to ramp up its Indian operations and plans to invest millions more in future. Apart from catering to domestic demand, Terex has big plans to export its construction machinery like backhoe loaders and skid steer loaders to emerging markets in Africa, Middle East, South East Asia, and CIS countries including Russia. In an exclusive interview with EQUIPMENT INDIA, Steve Filipov, President, Developing Markets and Strategic Accounts, Terex Group, shares his views on the emerging markets and the core strengths and competencies of the Group. Excerpts from the interview.What is the present growth pattern in the developed markets like the US and Europe? Is the recovery fast enough, and what is the investment scenario in the US? The recovery in the US and Europe has been not as fast as in the developing markets. Our growth in developing markets is much faster than in the developed markets. Today, the developing markets represent about 35 per cent of the total revenue which is close to $2 billion. We see some growth in the US and Europe in certain sectors where we participate in crushing and screening. We have registered growth in the US and Europe in the Powerscreen range, and also in aerial work platforms, whereas in construction and cranes, the growth has been on the lower side.As far as investment is concerned, the US is not investing enough in infrastructure development compared to India where the numbers here stand at $1.3 trillion. The US government approved a $500 million bill for infrastructure investment which is pretty small as the States have requested 13 billion of infrastructure investments. So the US really needs to do some work on infrastructure and investment. When Obama took office, he put a bill in place for $787 billion. Only three per cent of that went to roads and bridges which is a very small amount. Just 25 per cent of our revenue is from the US, while 35 per cent is from Europe, and the balance 35 per cent is from the developing markets.What is your perspective in the growth potential and changing trends in BRIC nations? How has Terex strategised its moves in the evolving scenario? With regard to the growth potential in BRIC nations, to give an example, in 2004, developing markets' contribution to Terex's revenue was only about 10 per cent. Today, it is around 35 per cent. So there has been huge momentum in these markets. We have three main strategies going in developing markets. First of all, we want to be local-for-local. So we want to produce more products in the country for the country. Secondly, we want to be efficient. So we want to legalise shared services, things like finance, HR, IT, etc, as much as we can. And finally, we want to have proper business practices and we make sure we do a lot of training and dealer development. In developing markets, these are the areas that we really need to focus on to do the right business in the right way.What does this shift in focus mean to the Terex Group in terms of investments and logistics? We have made some major investments, not only in India, but in other emerging markets like Latin America, Russia, and in China. In India, we invested in 2004 in Greater Noida facility which was a JV to start with and later acquired the remaining part. In Hosur, we invested around $40 million in a brand new facility for manufacturing crushers and screens for the local market. In Bengaluru, we developed a team of about 180 engineers and created our Terex India Research and Development to serve not only the Indian market but also global businesses. Recently we inaugurated our Bangalore Corporate Office and have satellite offices in major centres.We have invested in Latin America. We have one manufacturing facility in Brazil making road-building equipment. We have our sales office in Sao Paulo; outside of the developed markets, Latin America is our largest single market which is about $500 million. We have been investing quite a bit in China. We have a new facility for aerial work platforms (AWPs) outside of China; we have a JV that we signed in 2006 on truck cranes. We are probably number four in the truck cranes segment there. We signed a JV in Russia with the largest construction company there with four manufacturing facilities and around 4,000 team members. We are quite excited about that JV and are looking at a few different product lines to take out there, of which one is the Indian backhoe.What was the performance of Terex Group in India over the last couple of years and what sort of topline growth are you looking at? In 2009, our revenues in India were $38 million. In 2010, it was around a hundred million dollars. This year we will finish a little bit on the north of that figure, around $150 million. So if I look at the developing markets, the largest growth this year we have had is from India and Russia, that too, much faster than China. We have probably been about 150 per cent; I think we see some stability there. But I would say the topline should be around 30 per cent, which will be normal for us.Is there any more capex on the anvil, especially in India?Frankly speaking, the investments will be more on products and people. For the next couple of years, you are not going to see infrastructure investment because we have already built that. But you will see what I call human resource investment. Definitely, the focus will be in sales and services primarily because we see huge growth potential in cranes and in materials processing equipment. We are also looking at hiring more team members. More importantly, we will be investing in new product lines - we are bringing light towers here, compact equipment, etc. There is also going to be great focus on enhancing our dealer network. Terex has recently completed the acquisition of Demag. Will the Indian customer benefit from this?Yes, we completed the acquisition of Demag which is globally a $1.5-billion company. In India, they have a facility in Pune. It will take some time to integrate Demag into Terex. Even though in the short term, the Indian customer will not see much change, we are working on to bring synergies in India. As an example, we have a cranes office in Pune and they too, have a factory in Pune. What is your R&D strength in terms of fuel efficiency and environment friendliness?We are doing a lot of investment in Tier-4 in the developed markets, which is a huge spend for us. We are investing heavily in Tier-4 developments, in fact. Our customers in these markets are asking for greener equipment or electric or something that is more innovative. I think what customers want is a reliable product.The concept of skid steers and aerial platforms have not grown as well as compared as the crushing, moving, lifting and loading ones. What is your take on this?We have seen pretty good growth for us in AWPs, especially in the ship-building sector and also in the infrastructure sector where the larger aerial platforms are used. Of course, the volume is not high. This year, we registered 50 per cent growth and probably it will double. I think the Indian market has yet to learn to take advantage of the product and see the value in it. So there is a lot of customer education involved. That is happening and all the players are doing it. A couple of years ago, you would not see an AWP, for example, in an airport. Now you can see AWPs in airports and five-star hotels. AWPs are also used in steel plants and ship yards, and so on and so forth.If you look at other markets where the AWP has really taken off, safety norms put in place have played a vital role. Brazil is a hot market for AWPs. A few years ago they put in a safety norm that no one could use a ladder above eight feet. If that happens in India we are going to see a lot of growth, until then there is going to be pockets of industries like the car industry because the safety norms are in place.Similar is the case with skid steers. We recently launched a new model in the US and Europe. Here in India, we have the Heman range. It will take some time for the volumes to pick up. Some applications are already picking up. Bulk carriers are putting skid steers on a crane and getting it to clean up corners. Steel plants are using skid steers to clear slag and metal debris. Those applications are there and they are increasingly being used. But again the volumes are nowhere; I would call it a niche product.How do you look at the rental scenario for these products? That is a major area. When the rental market really engages, we can see momentum gaining in those markets. Rental penetration has to increase and it is still in its infancy today in India. But as that picks up, people will look for a product that gives a good return on their investment.What is your take on India as an emerging OEM hub in terms of exporting machinery and services to the neighbouring countries?We have started exporting our backhoe loaders to Nepal, Thailand and backhoes for India and Russia, and that is going to be a big piece of business. We have started to export our crushing and screening products manufactured at the Hosur plant to the Middle East, South Africa, Sri Lanka and Nepal. We had an order from the Middle East for the tower cranes manufactured in Hosur. I think India is going to be a strong base.The stricter emission norms in the US and Europe seem to have created a split in terms of products – separate products for separate regions. Will you be following the same system in India? Today, there is a big shift from the past; Tier-4 is going to be for developed markets and Tier-3 and below is going to be for developing markets. So, it's logical to localise the product and differentiate it. In areas where we have not localised, we will need to carry two products which is not easy, but at the same time it is something that we have to do. There is an advantage because it controls where our products are built. You cannot send a Tier-4 product to India because that will not run. That is also good because it enables us to keep higher-end products in a higher-end market and lower-end machines for the developing markets. It is a big investment but it does allow us to differentiate the products between the two markets.As an OEM, how do you look at the increasing and highly fluctuating input costs? As a company, we buy more steel than BMW. It is a different spec steel; we do acquire a lot of steel and it is a big part of our purchasing, almost 50 per cent. Input costs will continue to go up. But we are managing on a local basis. Terex is a new entrant in many of its offerings. How do you look at the competition and what do you think that makes you stand apart?Terex is a specialised construction equipment company. We are in very niche businesses, and are the leaders. In Genie, we are the Number One globally; in cranes, we are in the top three, also globally. In materials processing, we are the market leader not only in India but also globally. With the acquisition of Demag, which is amongst the top three in overhead cranes and ship-to-shore harbour crane products, and coupled with our port equipment, we will be a stronger player in the port equipment business.Construction is a little bit different. We do fairly well in backhoe loaders and are probably Number Four. I would like to see us as a strong Number Two player in the times to come. In backhoes, we had a rocky start years ago, but we are picking up very well, and are seen by customers as the best or the second-best. The signal is quite good and we are here to stay. In material handlers, we are probably the market leader; in compact equipment, we are in the top five. In trucks, we are a regional player, a market leader in Russia and South Africa. In Latin America, we are among the top four.Another important factor is that we have a pretty good distribution network. We are continuing to invest in distribution and putting parts in place and training on a product and giving financing. We recently signed up Tata Capital to our TFS programme in India, which is an addition to HDFC. Today people are willing to pay for Terex quality. Another strong point is that there is a strong residual value attached to our brand. Having a strong brand helps you resell a product, as the total lifecycle of the product is most important to the customer.