FORD’s EXIT FROM INDIA: A HISTORIC PERSPECTIVE

I pen this article not as an OPINION PIECE but as a business historian – giving the 100-year historic perspective. So as to why FORD didn’t succeed in India – the practical issues – there are wiser people to speak on it from the industry. ?

The company that defined mass production with the Model-T more than a hundred years back has decided to stop manufacturing mass produced cars for the common car buyer in India and compete in the below 20 lac segments. Now it will only offer high end models like the Mustang. Several questions arise. Is it end of American automobile manufacturing in Indian context? GM left 3 years back by shutting down its Gujarat plant, now it’s Ford’s turn! Is there a DISCONNECT between American car makers and the Indian public? Does this DISCONNECT run deeper than we think? It’s not that US companies (other than the tech giants) have universally failed in Indian context. Kellogg after some initial setbacks succeeded. McDonalds has a strong presence for more than 25 years now, KFC is around too, so is HP, 3M GE & ALSTOM. India traditionally has heavily relied on Russian weapons, now US companies are making inroads here. The IAF uses the C-17 and C-130 planes and the APACHE attack choppers, the Navy the ORION submarine hunter and the Army has a number of American electronic equipment, missiles and howitzers. ?

The right question to ask is: - WHY AMERICAN MASS MANUFACTURERS HAVE FAILED TO MAKE AN IMPRESSION IN INDIAN MARKET? Five names come to mind – GM, FORD, WHIRLPOOL, CARRIER and TECUMSEH. The last name is lesser known, as it is a B2B compressor maker, supplying to the OEMs like Whirlpool, Voltas and other A/c and refrigerator makers, where I worked as a costing manager for five years in Faridabad. Today sadly the Faridabad plant, which used to make 1.5 million units in a year 20 years back is a mere shadow of its former self. Whirlpool – the once leader in consumer durables has ceded market share to the Koreans, so has Carrier. GM never had a hit model in 23 years of its existence in India and left totally. The only two exceptions are HP & 3M – both these US firms have plants in India and are doing very well. The five other US mass manufacturers who had plants in India have either left/leaving or are a mere shadow of their former selves, ceding ground to the more aggressive Korean/Japanese competition and fast improving homegrown companies like M&M & Tata Motors.

To understand why US Mass Manufacturers (exceptions not counted) have failed to survive in the changing Indian context, we need to go back to the HISTORIC CONTEXT. More than a hundred years back after the SPANISH FLU, GM & FORD with CHRYSLER – the Detroit Big 3 defined the global auto industry with mass manufacturing, multidivisional organization structures and management accounting – the 3 Ms of 20th century industrial civilization – which dictated strategy and financial goals and for nearly a century the Big 3 has been driven by the principle of SHAREHOLDER WEALTH MAXIMIZATION – resulting from the 3-M philosophy, innovation efforts were always linked to this paradigm.

Today the 3-M philosophy is outdated and archaic. Industrial Economics has given way to evolutionary economics and network economics – THE BRAMHA. Changing consumer perceptions in SHARING ECONOMY has resulted in more demanding and aggressive customers, powered by the social media and IOT – who are not willing to spend money on premium priced products, stressing on the value for money factor – THE VISHNU. Finally, Tech V 4.0/5.0 technologies are fundamentally altering the business landscape – automating and increasing human productivity – THE MAHESHWAR – the destroyer of the old and creator of the new.

So, three forces – BRAMHA/VISHNU/MAHESHWAR have been gradually, inexorably and steadily altering the business and social landscape for last 20 years since advent of PLATFORM BASED BUSINESSES like APPLE, FB, GOOGLE, ALIBABA etc. The current pandemic has only accelerated the rate of transformation REPEATING HISTORY AFTER 100 YEARS SINCE THE SPANISH FLU. The 3-M philosophy has given way to the 3 C philosophy – COORDINATION (Design led product innovation) – COLLABORATION (on digital platforms) – CO EVOLUTION (paradoxical and counter intuitive thinking, combining global-local approaches) and INDUSTRIAL ECONOMICS (SHAREHOLDER CAPITALISM) IS GIVING WAY TO NETWORK/EVOLUTUIONERY ECONOMICS (STAKEHOLDER CAPITALISM) with the 3 C approach.

Companies who understood this fundamental shift have gained ground in last ten years. For example, SAMSUNG has a chip designing and manufacturing facility – both at NOIDA, Uttar Pradesh in India where a team of Indian designers study the changing Indian consumer behaviour (Coordination), has very good vendor management and knowledge management systems over a PLATFORM (Collaboration) and continuously interacts with SAMSUNG’s other units round the world (Co-Evolution). A similar approach has been adapted by HYUNDAI and the results are there for all to see (of course SAMSUNG has benefitted from the worsening geo-politics between India and China, affecting Chinese companies like Xioami and others).

The question arises again – The five companies I mentioned, did they never succeed in the Indian market? They did! Speaking on FORD alone – the company had a big success with its first generation FIGO and ECOSPORT more than 10 years back. Both were typically a FORD – brilliant ride and handling, built quality and high-speed stability. However, FORD failed to understand the changing context, BRAMHA-VISHNU-MAHESHWAR – the three forces acting in unison and altering the landscape inexorably, which the pandemic accelerated since 2020. The result – the second-generation versions – FIGO, ASPIRE & FREESTYLE, despite competitively priced failed to catch the Indian car buyer’s imagination, which is rapidly changing since 2015, with arrival of the SHARING/GIG economy.

So Economics (Bramha) – Consumer Behavior (Vishnu) and Technology (Maheshwar) has fundamentally altered THE DEFINITION OF CAPITALISM – FROM SHAREHOLDER CAPITALISM TO STAKEHOLDER CAPITALISM – from a philosophy dominated by stock prices to a philosophy whose cornerstone is?AN INCLUSIVE APPROACH, combining and fusing social and business innovation in line with the 17 UN SUSTAINABLE DEVELOPMENT GOALS – compliance with whom may be made mandatory by governments round the world in coming years by way of an increasing CSR/CSV approach (CSV – Creating SHARED VALUE, refer Michael Porter & Mark Kramer's 2011-Jan HBR article on this).

S. Dagsupta

Visiting Faculty Strategy Area

Indian Institute of Foreign Trade. New Delhi.

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