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AUTOMOTIVE Can Kim walk the talk? Daewoo India seeks to renounce a troubled parent and eke out an independent existence. If you happen to run into Daewoo Motors India CEO Young-Chang Kim one of these days, the first thing you will most likely hear is: ''Please distinguish between Daewoo Motors Korea and Daewoo Motors India.'' He says newspaper headlines that don't make the distinction have been tarnishing the image of Daewoo Motors India Ltd (DMIL) since all bad news about its South Korean parent-there is plenty of that, thanks to its continued financial woes-is taken to be bad news about the India operations as well.
So, the talk is fine. But walking it won't be so easy. DMIL depends on import of completely knocked down (CKD) kits from Korea to put together its cars. True, the local content in its cars is high-78 per cent for Matiz and 90 per cent for Cielo and Nexia. However, says a rival: ''The crucial components for DMIL's products, such as engine and transmission parts, come as imported CKD kits.'' The umbilical cord is evident when Kim speaks about his relief now that the production in Korea has gone up recently after lenders released more money following the union's consent to cut jobs: ''Only 200 employees from the Changwon plant (which provides DMIL with Matiz parts) will be retrenched. DMIL is assured of uninterrupted supply." In all, the company is laying off 6,500 in Korea. Even if DMIL were to be independent, there are things Kim needs to take care of urgently. Not the least of these is money, which Kim needs now more than ever as he prepares to launch three new cars-Lanos II (1,500 cc), Nubira II (1,600 cc and 2,000 cc), and Magnus (2,000 cc). On a conservative estimate, it takes Rs 300-400 crore to launch a new car depending on its size, fresh capacity needed, and the localisation level. Besides, Kim may need to upgrade Matiz, whose rival Santro launched an upgrade (Zip Drive) in mid-2000. Kim claims that DMIL is in good financial health: ''The turnover has increased 248 per cent to Rs 1,308 crore. There is a net loss due to the transmission and engine division (all of this capacity is idle as it is not compatible with DMIL's cars), but our passenger car division has made a cash profit of Rs 34 crore in 2000.'' He has been cutting costs, targeting to save Rs 70 crore in 2001-02 through operational and financial restructuring. He is also determined to spin off the engine and transmission capacity into a separate subsidiary by the end of next month and find a strategic partner, if a buyer is not available, by March next year. All this could help, but DMIL's creditworthiness has just taken a hit with reports of defaults on payments to IDBI and ICICI. Concedes Kim: ''There is some late payment. We will complete those in April.'' There is still no light where the money needed for the launches will come from, especially since it won't come from the parent. The depressed car market-it is estimated to have shrunk 3 per cent in 2000-01-doesn't make things easier. Kim says he can make DMIL grow from strength to strength. But he will have to try that with one eye on the calendar, what with General Motors deciding to relook at Daewoo as a possible acquisition. -Suveen K. Sinha
A new CEO, a new plan. For Bata, both need to work. It's a sight that Bata India's CEO of two months, Chandu Morzaria, must hate seeing. Right next to the footwear major's flagship store in Lindsay Street, Calcutta, there's an upstart rival Khadim's equally big outlet. Worse, not infrequently, the crowd at Khadim's is bigger than that at the Toronto-headquartered company's. But, then, Morzaria (a Kenyan national of Indian origin) knew all along that his home-coming would be far from hunky-dory. Bitter labour strife, supply problems, and growing competition have hit the company hard. In the fiscal ended December 31, 2000, Bata reported a decline in income to Rs 761.29 crore from Rs 774.63 crore. Worse, net profits halved to Rs 15.60 crore. The result: investors have been sending the stock down from one low to another. Since March, 1999, the stock has plumetted from a high of Rs 282 to a current low of Rs 42.60. Morzaria, an appointee of parent Bata Shoe Organisation, and a key member of the Bata Millennial Plan, has been brought in specifically to arrest the slide. As a first step, Morzaria's stock-taking the Bata brand. Says he: ''There's no doubt in our minds about the strength of the brand, but the trouble is we have not weathered competition very well. It's time we stood up and got counted.'' It will be tough talk to walk. Although Bata leads the organised shoe market with more than 50 per cent share, it is under severe competition from regional brands. While Liberty Shoes has taken a slice out of Bata's share in the north, Khadim and Sree Leathers have started to make serious inroads in the east. ''We recognise Bata as the leader, but with more people opting for branded footwear, we see a huge opportunity in the mid-market segment for ourselves,'' says Dipu Ray Barman, Managing Director, Khadim. True, the company does boast a top-of-the-line range of international provenance, Hush Puppies, but it faces competition in this segment from the likes of Woodland, Red Tape, regional store brands like Regal (in Mumbai) and Mochi (Bangalore), and transnational brands like Reebok's Rockport. And a clutch of niche offerings ranging from Florsheim to Lotus Bawa have eroded what once used to be the company's forte, the formal-wear segment. To complete the brand's litany of woes, in the sports range, it is been displaced from its premier position by Nike, Reebok, and Adidas. But there is one clear winner in Bata's stable-in its children's range, the Bubblegummer and Tiger. The idea now is to make the other brands equally strong in their segments. ''We are not going to be seen as a production-driven company, but as a marketing company, which will play the role of a custodian to the Bata brand,'' says M.J.Z. Mowla, Senior Vice-President Bata India. For a company that sells 56 million pairs of footwear a year, it's a lot of responsibility. -Debojyoti Chatterjee
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Kim is not being a truant child. The parent
had taken the first step in this direction late last year when it sent a
missive whose gist was that the Indian operation had to fend for itself.
