SSANGYONG SETS THE BALL ROLLING WITH TIVOLI. Goenka impressed with Korean commitment

Pawan Goenka believes that the Tivoli will give SsangYong Motor the scale in markets like Western Europe and hopefully make it a strong entity. Following the launch in Seoul last week, the chairman said that seeing this product take shape was like watching a baby grow.

Goenka, who is also Executive Director of Mahindra & Mahindra which acquired the Korean automaker four years ago, is clearly impressed with the efficient timetable set out for the Tivoli. The launch date of mid-January 2015 was set way back in November 2011 when work on the project started.

The diesel engine, likewise, was scheduled for launch this July and Goenka had requested the team to advance it. “They have indicated this will now happen on June 1 and I am 100 per cent sure that I do not need to ask if this date will be kept,” he said. It is this level of Korean discipline and commitment which has been a phenomenal learning experience for M&M.

For a company that was literally in the wilderness for many years, the kind of information SsangYong has on product planning is mind-boggling. “ “It is amazing how much SsangYong has in its armour and the logic in its product planning impresses me a lot,” Goenka said.

The partnership between the two companies is working well with each exercising the flexibility to adopt the other’s practice so long as it makes business sense. SsangYong’s information technology system in Korea, for instance, is a replication of M&M’s and this is true for its human resource management model. The Indian owner, in its turn, has a lot to learn in the product planning process.

M&M has seven expatriates for some key functions and this has helped immensely in cross-learning and adopting good practices. “The biggest sense of close working is in purchase because it is a clear win-win where we combine the lessons of India and Korea and reduce costs for both companies,” Goenka said.

This is thanks to common sourcing where in the Tivoli, for instance, the engine was taken out of the platform put in place for M&M. Nearly 30 per cent of sourcing is common for the two engines leading to significant cost benefits. Last month, M&M began supplying the transmission pickup unit to SsangYong. The same unit that goes into XUV 500 will now go into the Tivoli. “We have kept the two companies independent and whatever we do is on a commercial basis,” Goenka reiterated.

On paper, a lot can be done on the synergies equation but the duo is only too aware that they cannot compromise on what each brand stands for. While there was no issue adapting to Korean suppliers since quality was not an issue, the converse was not quite true with only a handful of Indian suppliers meeting SsangYong’s needs. Despite the cost-savings, the company’s confidence in Indian competencies will take time to build up especially in quality.

The Tivoli has not been earmarked for India thanks to its price tag of ₹15 lakh which will not find too many takers. This was equally true for the Rexton which barely generated sales of 100 units a month despite high customer acceptance. “We could like to create a strong SsangYong brand in India but this will need good numbers. It is a chicken and egg situation for the moment,” Goenka said.

On the global stage, M&M has good brand recognition which goes beyond automotive to areas like IT and tractors. “What our association will bring to SsangYong is customer confidence and what we get from them is Korean quality and value,” he said. For the moment, the job is to ensure that the Tivoli generates enough numbers to optimise the company’s Korean plant capacity of 2.5 lakh vehicles annually. Going forward, the focus will be on the B (Tivoli), C (Korando) and D (Rexton) segment platforms. The next big move is the US market where SsangYong will be the representative SUV brand while M&M will stick to tractors, scooters and electric vehicles.

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