After a year in the red, India's largest car company is back in the black with Rs 55 crore in profits, even as sales grew to Rs 9,295.3 crore from Rs 9,219.6 crore.

So just what did Maruti's CEO Jagdish Khattar do right? Three things: cut costs, cut some more, and then some more. As the market remained sluggish-car sales in the year are estimated to have shrunk 5 per cent-Khattar attacked costs through an aggressive value analysis and value engineering (VA-VE) programme, which is estimated to have saved Rs 55-60 crore.

Localisation was accelerated across all models. The big story here was Alto lx, whose local content has gone up to 88 per cent. An increase in the local content brought down the costs and boosted margins. VA-VE also lowered the cost of components sourced from vendors and reduced inventory levels at all stages. Productivity shot up along with a 19 per cent reduction in employee strength through a voluntary retirement scheme, and a rise in employee attendance to 96 per cent from 91 per cent.

While Khattar is happy, Disinvestment Minister Arun Jaitley must be downright ecstatic. The good news couldn't have come a day sooner for the government, which plans to divest part of its 50 per cent holding in Maruti first in favour of equal partner Suzuki Motor Co. of Japan through a rights issue, and subsequently float an initial public offering.

-Suveen K. Sinha

BAJAJ AUTO
Still On The Back Seat
Bajaj Auto's mobike sales surge, but it still lags laps behind market leader Hero Honda.

Bajaj Auto may no longer be the largest two-wheeler manufacturer in the country-Hero Honda is at pole position-but brothers Rajiv and Sanjiv Bajaj are revving up. ''Hero Honda has been making just bikes for 15 years, we started much later. There's no point talking about overnight leadership,'' says R.L. Ravichandran, Head (Marketing), Bajaj Auto.

Last year, Bajaj did close to 6.6 lakh mobike sales. The Munjals closed the year at a little over 1.4 million, with the Splendor accounting for two-thirds of those sales. Bajaj is counting on the Boxer to take on the Splendor. Ravichandran expects to do sales of close to 1 million in the current year on the back of robust Boxer sales. But then Hero Honda will move up by then to 1.65 million. Bajaj has never been used to playing catch-up, and Hero Honda is in no mood to provide the practice.

-Brian Carvalho

INTERVIEW
"Advertising Has Under-Valued Itself"

Lee Daley: Gunning for srategic psychology

For Lee Daley, the 39-year-old worldwide co-CEO and Chief Strategic Officer of WPP's year-old 'challenger agency' Red Cell Network, the bane of the advertising profession has been its lack of strategic psychology. On a recent visit to India to formally ink the joint-venture in EquusRedcell, Daley spoke to BT's Shailesh Dobhal. Excerpts:

Isn't Red Cell's 'challenger agency' positioning just another way of handling conflicting businesses within WPP?

No, absolutely not. Our lead discipline is strategy and creativity, not account management. We define 'challenger clients or brands', whether they are number one, two or three in the market, as perpetually hungry and antagonistic about their market condition. And we are more co-optive with clients and much more agnostic in what we believe to be a relevant creative solution, which may lie way outside the conventional advertising business. The inside truth in the way we do business is what most global clients will tell you today that they are not resource but imagination constrained, and that their creative partners push creativity into very narrow channels.

How is the structure of the ad agency changing?

The old agency model where account management people could be pure-play administrators and good dinner hosts is over. That means you have to hire people who are strategically smart and add value. Advertising for a very long time has undervalued itself, simply because it only had a service, not a strategic, psychology.

Agencies have to move to a professional service model where they are paid on cost plus time, plus results. And begin to understand how to propagate, benefit, and profit from their own innovation. And there is more chance to do that particularly as the entertainment economy becomes more dominant, with opportunity for brand embedded entertainment content a la Hollywood and US television networks.

Can you explain your proprietary processes in Accelleration(tm) and Eclectic Networks?

Accelleration is strategic processes built around workshops with clients where we very intensively build strategic hypothesis, examine scenarios, look at possible outcomes from making particular strategic decisions towards a brand communication solution. Finally we arrive at a single compelling core proposition idea for the brand in what it needs to be in communication. The essence of Eclectic Networks is that we are able to bring the technical knowledge and sociological perspective of people outside the agency-doctors, bio-chemists, engineers, et al-in the advertising process. Every single person within Red Cell has a personal eclectic network, which kind of builds a 'Council Of Gods' around our business.

McDOWELL
NEXT ON THE BLOCK?
After breweries, a strategic divestment in the spirits division of the UB empire is on the cards.

After selling 26 per cent of the UB's beer division to Scottish and Newcastle for a cumulative value of Rs 420 crore, group chairman Vijay Mallya says he is not averse to a strategic divestment in McDowell, the spirits division, which owns 53 leading brands including Bagpiper, Black Dog, Signature, and Diplomat. ''I am open to the idea of divesting a strategic stake in McDowell at the right price,'' admits Mallya. The company is the sixth largest spirits company in the world and has five brands which sell more than a million cases, and three brands in the world's top 100 selling liquor brands. However, despite a turnover of Rs 1,002 crore for the nine months ended December 2001, net profit was a paltry Rs 14.81 crore. Any new partner coming in is expected to unlock values of McDowell's brands. No time frame for the divestment has been fixed as the company is examining various options, according to Mallya, who plans to devote more time to his new role as a Rajya Sabha mp-and less time to the spirits.

-Venkatesha Babu

FIAT
The Prancing Horse Power
The pitch and now the pit. Fiat's working hard for a new image in India.

Well, we should have seen it coming. At the sixth Auto Expo 2002, in January this year, Michael Schumacher's red Formula Ferrari taking pride of place, bang at the entrance of Fiat India's stall, was as much of a crowd-puller as the question of its presence there, given that the show was essentially meant to display Palio, along with its Indian ambassador, Sachin Tendulkar.

So it was no surprise when Fiat India unveiled the latest Palio ad campaign, shot in Fiat's Maranello plant in Italy, featuring Palio and Schumacher in his Formula Ferrari. That's the Italian car-maker's attempt at presenting its new face to India. The ad's voice-over, ''From the makers of Ferrari comes another winner, the Fiat Palio,'' is a way of not just highlighting the linkages between Fiat and Ferrari or even saying that Palio comes from the same stable. More importantly it is an attempt to establish Fiat as a technologically cutting-edge car brand in a country where memories of tin-plate Premier Padmini or the unsuccessful Fiat Uno are still fresh in the consumer's mind. What's next? Schumacher in flesh and blood visiting India?

-Shailesh Dobhal