ZF is a leading worldwide automotive supplier for driveline and chassis technology, with 121 companies in 27 countries. In 2012, the group achieved a sales figure of EUR 17.4 billion with about 75,000 employees. ZF was founded in 1915 for the development and production of transmissions for airships and vehicles. Today, the group's product range comprises transmissions and steering systems as well as chassis components and complete axle systems and modules. Being a global technology player, gives ZF the advantage to leverage its knowledge and expertise for the development of newer markets while keeping in mind the country specific requirements, says Piyush Munot, India Managing Director, ZF. Excerpts from the interview.
The off-take of equipment has come down drastically in the last couple of years. Has this imp[acted ZF?
ZF is well prepared for the future, thanks to its focus on the growth markets of Asia and North America. Also, a wide product range, its innovation strength as well as its global presence, offsets the group from underperforming markets or the cyclical nature of business.
What is the impact of the devaluation of rupee on ZF's performance?
The current economic scenario with a high CAD and the rupee's depreciation has increased input costs across many sectors amidst weak demand environment. This also pushed companies to further accelerate their localisation across the entire value chain. At ZF, we expanded our localisation portfolio from the backhoe loader driveline to also include wheel loader aggregates with a strong focus to harness the full potential of Indian supplier and production base. Besides this, ZF is continuously taking advantage of the rupee depreciation and has integrated exports as part of the local strategy.
What are ZF's value-for-money propositions?
It is always our endeavour to bring value to our customers via superior technology that meets end consumer requirements. With this orientation, we have developed a three pronged strategy:
Focus on localisation: Through our local engineering resource and supplier development programme, we are working towards increasing the local content in our product solutions.
Focus on lower product lifecycle cost: Through increased system efficiencies, thereby reducing operation costs (fuel, maintenance, etc).
Focus on after sales support: Providing support not only at the design stage but also considering the after sales support strategy to bring higher value to Indian customers.
What services does ZF offer?
We have consolidated our footprint in the CE business with a wind power facility located at Coimbatore. The synergies that we will derive from this consolidation will prove advantageous to our customers. Besides this, we are looking at diversifying the application of our products and extending them to tow tractors and pick and carry cranes, in order to offer products with higher applications to the market.
What are the technology trends in the CE market?
In the field of construction machinery, ZF is one of the technology and innovation leaders worldwide. The developers' focus in this field is on reducing consumption and emissions, increasing productivity, driving comfort and safety as well as increasing the ease of operation and reducing noise. As a systems supplier, ZF concentrates on the drive as a whole and combines axles and transmissions with advanced software functions.
Numerous milestones in the development of construction machinery are attributable to ZF. With the cPOWER, ZF presented the first CVT transmission for construction machinery to the world. By advancing the CVT powersplit technology known from agricultural machinery, the cPOWER provides significant consumption benefits and productivity increases with a level of efficiency previously inconceivable.
ZF is also committed to the advancement of alternative drives, not only on the road, but also for off-road applications. The company is a pioneer in this field and developed the first hybrid drive for construction machinery. An electric motor with a capacity of up to 120 kW supports the conventional drive and prevents high power peaks. This significantly lowers fuel consumption and reduces the load on the drive. By integrating a hybrid module with the proven Ergopower transmission, ZF takes the logical step toward the future and by doing so, continues to develop innovations of great value.
What are the solutions offered by ZF for different segments of CE industry?
ZF has developed and manufactured driveline systems and axles for construction machinery for half a century now. It has always been the objective of ZF engineers to develop and enhance components in a purposeful manner to meet the increasing requirements of the market. In this process, they rely on the Group's enormous knowhow, proven in millions of cases, in the field of driveline and chassis systems. Starting with the 2-speed reversing transmission used for wheel loaders in the past, ZF today equips a wide range of construction vehicles with state-of-the-art axle and driveline technology.
What is your R&D spend?
The ZF Group invests about five per cent (2012: EUR 861 million) of total revenue in research and development every year. In order to further strengthen and expand ZF's position, the group will invest over EUR one billion also in the years to come. This focus on research and development has led to company to develop pioneering product solutions in the past and give futuristic concepts that will improve motion and mobility across automotive and industrial segments
How do you assess the performance so far in 2013?
Demand for mining and CE, to a large extent, mirrors macro-economic indicators; consequently, the high interest rate regime, slowdown in infrastructure investments, liquidity crunch and several regulatory roadblocks have led to a sharp decline in demand for mining and construction equipment (MCE) during the past 3-4 quarters, with the slowdown being particularly pronounced since April-12. Deferment in private projects and slow pace of infrastructural investments were among the key reasons hurting construction equipment volumes while the curb on mining in several geographies has impacted demand for mining equipment. This situation has pulled down the performance of the OEMs and consequently the entire value chain. That being said, there have been certain policy measures that the government has taken to stimulate growth. We are hopeful that these should help us close the fiscal at the same level as the last one.
The long- term growth enablers for India continue to be investments in infrastructure, especially the 12th Five Year Plan's infrastructure thrust to drive CE demand.
How do you look at the growth potential three years down the line?
In the next three years, growth potential will be tied to a stable government, which would greatly influence India's macro-economic conditions. There is hope for a turnaround but also uncertainty of when that will come about.
What is the future growth strategy for ZF in the CE market?
ZF already offers backhoe loaders and wheel loaders aggregates to the Indian market. We envision a good growth potential for these products in line with the growth of the overall CE market in India. We have also recently strengthened our business development footprint for the Indian market through establishing a local engineering resource. The engineering team in India will focus on product strategies in order to address better product positioning for the local market through design-to-market exercises.
Additionally, the local resource will support our OEM customers in their new projects, bridging the geographic divide between India and Germany, thereby reducing lead times for a faster response and effective project to business conversions. We will also continue to watch the demand for transit mixers and soil compactors and decide to localise them when the time is right.
ZF has developed and manufactured driveline systems and axles for construction machinery for half a century now.
The engineering team in India will focus on product strategies in order to address better product positioning for the local market through design-to-market exercises.