When a visit to VW triggered launch of IE

In 1967 I visited a dozen automobile and auto component units in West Germany and UK courtesy the German government and the Society of Motor Manufacturers and Traders, UK. The Press Bureau of German Industry, representing the consortium of six large German capital equipment manufacturers that built the Rourkela Steel Plant, also provided facilities to visit manufacturing plants of the consortium. The visit was a great opportunity to expand my knowledge horizons on manufacturing.

I was then editing the automobile magazine Mobile and another devoted to the two wheeler industry, Trade Wheel. At that time India was producing less than 25,000 cars spread over three manufacturing plants. The licensed capacity for commercial vehicles and motor cycles/two wheelers was 30,000 each.

At Wolfsberg, Volkswagen was producing its famous small car, the Beetle. In the three hours I went through the assembly line the single model Beetle in different colours was assembled, the production clock moved by 750. The PR executive explained that the daily production averaged 6200 cars in three shifts.

Germany was then at the peak of the post-war boom; after quickly reconstructing the war-ravaged manufacturing plants in the 1950s the German economy was in full bloom. I saw similar hectic activity in the other automobile plants I visited including Daimler Benz, British Motor Corporation, Leyland Motors, Rootes Motors and Standard Triumph.

Returning to Chennai I reckoned that it will be decades before the automobile industry will grow in stature comparable to developed countries; considered a luxury, the licence regime will not be inclined to give priority to personal transport. I decided to shift gear; opted to launch the first economic journal of south, Industrial Economist as a fortnightly and phase out Mobile .

The launch of IE in 1968…

IE was launched on 15 March 1968. The then Tamil Nadu minister of industry, V.R. Nedunchezhian, released the journal; the first copy was received by the renowned economist, Dr. P S Lokanathan. The well-known economic journalist, P R Srinivas, worked for us as editorial consultant for a decade. Famous cartoonists, N Thanu and Gopulu, adorned the cover and inside pages with their brilliant strokes. The doyen of stock-broking, (Chitra) S Narayanaswamy presided over the function.

The start was auspicious. IE evolved in quick time as THE economic magazine of the south; there were not many landmark economic events in the south that were not covered by IE; most of these, with comprehensive special supplements. The rise and rise, the rise and fall and the stagnation of hundreds of corporates in the south were depicted in detail. There were critical analyses and wholesome appreciation of corporate performance. The archives of IE provide rich material on the course of economy, especially of the south, through the last 40 years.

It was so much easier to raise capital!

Accessing the market for raising capital was not much known in the initial decades of IE. Visionary leaders like R Venkataraman extended rich assistance and persuaded new generation entrepreneurs to enter business assisting them with licences. RV also used the state financial corporation and other development institutions to provide not merely term loans but also handsome equity support.

How facile was the setting up of an industrial unit was provided by the house of TVS. Till 1960 TVS was known for its efficient operation of bus services in southern Tamil Nadu: Southern Roadways (of TVS) also operated an efficient parcel service covering the entire southern India. Sundaram Industries, headquartered in Pudukotai, specialised in re-treading tyres and also in the production of rubber components. TVS was also the distributor of cars, commercial vehicles and spare parts. Under the lead of T S Srinivasan, the youngest son of T V Sundram Iyengar, over 300 acres of land were acquired in the early 1960s at Padi, then on the outskirts of Chennai city. The first of TVS' auto component units, Wheels India, was inaugurated in 1962. Of the outlay of Rs.200 lakh, Rs.25 lakh each were contributed by TVS and the British collaborator Dunlop and Rs.150 lakh was taken as term loan from development banks. The funding was on similar lines for the other units – Sundaram Clayton, Brakes India and Lucas – TVS which were set up with foreign collaboration in quick time over the next two years.

An embarrassment business leaders wanted to avoid…

The promoters were not thus familiar with raising funds from the market. A couple of decades later the Central government insisted on corporates broad-basing equity and forced the promoters to offer a portion of equity to the public.
T S Srinivasan presented to the media the public issue of Sundaram Abex. The issue was modest and it could have easily been provided by a single family of the promoters. When I raised the issue of the need for multiple collaborations for similar technologies (already technology for brake linings was accessed from Ferado, UK and Bramec of Germany, a director of the promoters, S Narayanan, pulled me back and TSS commented: "this is why I told the industry secretary, of the unnecessary effort and cost involved in going to the public."

When the PRO got his production figure from us!

Transparency and information to shareholders were not much heard of. In the 1960s I used to publish the production figures of TI Cycles and Standard Motors. The Murugappas appointed Markand Desai, who had earlier lived in London, as public relations officer. He was curious to know where- from I got the figures (he was not aware of the production figures of his company!). I told him that the annual report of the department of industries of the state government mentioned the production figures of the organised sector. And we had only one manufacturer of bicycles in the organised sector in the state!

From the next year he used to collect the figures from me ahead of publication! It took decades to expand the content of disclosures. The Dhirubhai magic of massive expansion of the shareholder-base, the expansion of the size of capital and more enlightened regulation helped. The need to access capital overseas also helped the move towards greater transparency and disclosures.

Corporates are still slow to adapt ethical practices…

Corporate social responsibility and other ethical corporate practices were slow in evolution. Essentially these have been products of liberalisation and market-orientation. Corporates have not been tolerant of event fair criticism. Large newspapers were appreciating the value of corporate advertisements and have been content to provide space liberally even for routine staid performance; criticism of corporate performance, corporate shenanigans and nepotism were avoided (such discretion, curiously, is not often seen in regard to commentaries on political actions as the media barons are confident of the cyclical nature of power)!

The Satyam episode points to the still persisting serious gaps in corporate disclosures and adherence to the norms. Significantly, Satyam and its chief B Ramalinga Raju had received wide encomiums for corporate governance. I remember Singapore's Lee Kuan Yew eulogising Raju in his address at Delhi a few years ago. In the present dispensation company managements appoint external auditors at fat fees (though in law the shareholders in the annual general meeting appoint the auditors, most company managements that hold majority shares call the tunes). Unfortunately the sensible suggestion of rotating the auditors every three years has not been accepted. The slow grind of judiciary also contributes to auditing firms' unethical practices continuing to operate without let or hindrance. (PwC was charged with negligence in the Global Trust Bank collapse several years ago; the case not been decided yet; and PwC were appointed auditors by Satyam).

More realistic financials…

The present melt down hopefully will enable companies to change their practice of toiling to present growth in financials quarter after quarter. Having witnessed serious erosion in top and bottom-lines over the last few months and suffering real decline in production and market cap, corporates need to reconcile to presenting more realistic and more credible pictures of performance. The time has also come for introspection to look at wasteful practices, cut costs and move towards greater efficiency.

Why this proliferation of car models?

I revert to the Volkswagen experience. In the post-war years of reconstruction, Europe focused on cost efficiencies through volume production. Germany was happy with the small car Volkswagen and produced it in millions for years; Britain was content with the Morris Mini quite suited to the narrow width of streets of London and Birmingham; France mass-produced its Renault and Peugeot and Italy its baby Fiat. In the post-war years Japan likewise evolved through the small car.

India should have opted to limit the variety of automobiles to a few models. IE has been pointing to the dis-economies involved in the small volume production of dozens of models to modest capacities. Mass production will bring along with it cost economies, focus on continuous improvement of technology and ease of maintenance. Maruti Udyog succeeded through such a strategy and evolved as a highly efficient producer of cars. Hyundai and Daewoo followed this pattern to good results; but others like Ford have been slow to take the lessons.

Ratan Tata's Nano is bound to make waves precisely for this reason. The Tatas have embarked on a truly dream small car priced around a lakh of rupees. The large volume production has the promise of making this as popular as the Model T of Ford and the Volkswagen Beetle. The challenge involved in producing this car to a modest price is bound to be followed by efforts to impart more and more of high tech features.

Hopefully these efforts should also lead to concepts like hybrid cars that would achieve quantum savings in fuel consumption. The Toyota Primus is a runaway success in the US. Upto speeds of 50 mph, it draws power from the batteries which get recharged effectively while running. A life time warranty is provided for the batteries. Fuel efficiency for this compact car is in excess of 20 km per litre even in the speed- crazy US. Contrast this with a similar-sized car giving on city runs 8 to 9 km per litre of petrol!

Focus on research and analysis…

As IE enters its 42nd year it looks back with satisfaction to the several milestones it had crossed. In some respects even sheer survival appears an achievement! Eastern Economist, Capital and Commerce, our contemporaries in 1968 through 1980s, had stopped publication. The going is not easy for specialized publications. Thus we value more than ever the support of advertisers, contributors and readers.

In line with the massive expansion of news television channels, print media is losing its place in the presentation of news. With the facility to witness a cricket or football match in any part of the globe and with the internet updating news almost as instantly, print medium is on the wane. IE thus has been focusing increasingly on research, analysis and improved presentation through expert commentators and writers. We will endeavour to sharpen such reports. We welcome constructive criticism and suggestions for improving our endeavours.