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Why Cummins India thinks the damage to economy is self-inflicted

Murali Gopalan | Updated on June 04, 2020 Published on June 04, 2020

Ashwath Ram, Managing Director, Cummins India

The lockdown was imposed for way too long, and will need up to a year to recover, says MD Ashwath Ram

Ashwath Ram believes the Covid-19 lockdown in India was extended way too long even while a gradual opening up is now underway.

According to the Managing Director of Cummins India, which makes diesel and natural gas engines for commercial vehicles, every other country in the world where it operates had restarted operations a lot earlier. “This means 100 per cent of our plants and offices in China, the US, Brazil and the UK were all operational,” he says.

In contrast, Cummins India was virtually at zero per cent levels even while most other parts of the world had higher Covid-19 infections and deaths. It is this harsh contradiction that irks Ram.

“So, what is the message that we are conveying? That we care about our people? However, everybody cares about their people but they are not letting their economies die in the process,” he says. In Ram’s view, the damage caused to the economy by not working is staggering and will take a long time to heal. “We have forced millions of migrant workers out of the system and it is going to take six to 12 months or whatever to recover from all of this,” he says.

What is worse is that “we have done the damage ourselves”, which is keeping in line with a pattern. “We are usually in a great position in terms of costs, quality etc and then we do do something to damage ourselves,” adds Ram.

Chaos and arbitrariness

In some States such as Maharashtra, where Cummins has its operations, the lockdown has seen only complete chaos and arbitrariness. The last few weeks have seen further clarifications to directives issued by the Centre which have generally been more stringent.

District collectors and municipal corporations in Maharashtra prescribed independent guidelines “which were draconian”, with enforcement officials adding to the mess by making up their own rules. As Ram says, most orders were unclear, which caused a lot of frustration among industry stakeholders “to get something going”.

He admits that people are afraid to speak up since they could be branded unpatriotic or constantly spreading a sense of negativity. “That is not the intent; the goal is to get thousands of jobs going and not let the damage be so deep that the repair takes two years to happen,” says the Cummins India chief.

Right now, even while most of its India plants have opened up to varying levels of capacity and shift timings, there are other challenges to deal with. Employees come from all parts of the country and many returned home during the lockdown.

Getting them to head back now to Pune, for instance, will not be a walk in the park. They would need to be quarantined for 14 days before they will be allowed to work. This, in turn, poses a new hurdle since the company does not have residential complexes to house thousands of operators, for instance. As Ram says, more complications could follow with housing societies and local communities insisting that “since these people have come from outside”, they are at risk to other residents. “It is going to take a couple of months for all of that to fix itself,” he says.

Global perception

What also worries Ram is the fact that the long lockdown coupled with a lack of clarity could take its toll on the international community’s perception of India. “There is only limited patience global customers will have before they start making alternative arrangements — how much ever more it costs them to keep their businesses going,” he cautions.

This makes it even more imperative to “come back very quickly”. With Unlock 1.0 now underway and marking a very slow and steady march back to normalcy, speed is the need of the hour. If India is not able to scale back up within the next 50 days, it runs the the risk of giving others an opportunity “which was completely in our hands”.

According to him, this will make countries like Indonesia more attractive — where people work smoothly without any supply chain and logistics issues. “If we can’t get our act together, we will lose our business to them,” he adds.

This has happened in the past: the last time the US and China were at loggerheads and “flinging tariffs at each other”, the countries that benefited were Vietnam, the Philippines, Mexico and Bangladesh, with India nowhere in the reckoning.

“We cannot be complacent and happy that the US and China are fighting with each other economically and we are going to gain as a result. It is not guaranteed,” says Ram.

The prolonged lockdown has also disrupted activities in the Cummins India supply chain. With 800 ancillary suppliers spread across the country, even if one or two of them are in a containment zone, it simply means that some production cannot happen.

“We are now dependent on importing those parts after having localised so much and doing all sorts of crazy things just to get the business open up and survive,” rues Ram. Even while admitting that things will be back on track eventually, the futility of this exercise can be annoying. “We have inflicted needless pain on a whole bunch of people for very little gain,” he adds. In a way, the lockdown has been difficult for industry, especially from the viewpoint of having clear policies in place since it is the “fuzziness that bothers people more”. Ram also admits that this is a short-term setback for Cummins India, which will be made up eventually.

“Yet, this was a time when we could have capitalised on opportunities around the world. It could have helped us bounce back faster and this will take us a little more time to do that now,” he says.

A case in point is the company’s tech centre, which was also shut down during the lockdown, resulting in 2,500 engineers sitting at home, with a ₹1500 crore investment, “doing remote or partial work”. Nearly 60 per cent of that work is done for global customers, which pretty much puts in perspective the pain inflicted.

“Unless the economy opens up quickly and we bounce back while keeping the promises we made, we will lose out,” warns Ram while pointing out that it is still not easy to do business in India. For now, the demand side has been hit so badly in the automotive space that a recovery is not likely till late-2021.

“Our priority is to support our customers first and ensure that our products will be the best in the market. We will try to help Cummins globally by exporting more and optimising costs in the best way possible,” he says. There have also been some lessons learnt during this pandemic, be it in work from home (WFH) or planning for a de-risk strategy in the future. Cummins India, for instance, has “always believed” in a dual supplier strategy, which has come in handy. Going forward, says Ram, the company will have multiple suppliers not only in India but a backup in other regions so that the show can go on when a shutdown occurs. Likewise, there is also a need to have a rethink on residential strategies for the future, especially when similar pandemics could break out in the future.

“The idea is to recover at a faster rate and have some kind of housing arrangements so that we are not caught off-guard,” says Ram. There will be more focus on WFH options for office workers while processes, systems and people will be looked at “in a renewed way”.

According to him, Covid-19 is an inflection point for the global economy and things will not get back the way they were before this happened. “Our work spaces, manufacturing strategies and structures will change pretty significantly,” declares Ram.

Published on June 04, 2020
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