Search the Internet          Tips  Sites: Finance, Investment

Hero Honda chief says tough road pays off

The head of Hero Honda Motors Ltd which drove to first place in India's huge motorcycle market on the fuel-saving slogan, "Fill it, shut it, forget it", says he has never chosen the easy road and it has paid off.

"I'm not sure who thought of the slogan but it has worked well for us," says Brijmohan Lall Munjal, chairman of Hero Honda, whose motorcycles now hold a commanding 48 per cent share of the domestic market, the world's second largest after China.

The advertisement was a proud boast that the bikes produced by Hero Honda, a joint venture between the Hero group and Japan's Honda Motor Co, could get 80 km out of a litre of petrol.

Munjal, whose company reported this week a 31 per cent leap in first-quarter net profit to Rs 788.1 million ($16.7 million), attributes part of Hero Honda's success to a decision to use a four-stroke technology that made the firm a fuel-economy leader.

The 78-year-old workaholic who rarely takes a Sunday off, decided on the technology after a friend told him its engineering was complex and advised him not to use it.

"If it's difficult, I must do something difficult," he said in a recent interview. "The normal things everybody will do."

Now all Indian two-wheeler makers are rushing to introduce the low-emission technology in the face of tough pollution norms.

Munjal says he has often been ahead of the pack. In fact, he says he was practising the Japanese car industry's much vaunted "just in time" tight stock control years before it became widely popular.

LEAN AND MEAN

He believes it was his lean, mean production style that led Japan's Honda Motor, the world's largest two-wheel vehicle maker, to pick his firm, Hero Cycles, the world's biggest bicycle maker, as its partner 16 years ago.

"What clicked was our philosophies which are the same -- mass production at the most economical value," he told Reuters. He said the other factor that made the partnership successful was Honda's strong technology.

Now, Hero Honda Motors, the company they founded with each holding a 26 per cent stake, is India's No 1 motorcycle maker and the Japanese giant's largest joint venture globally.

In the year to March, the Delhi-based Hero Honda sold 1.03 million bikes, 35.2 per cent more than the previous year, that helped it post a profit of 2.47 billion rupees ($52.5 million) and put it way ahead of competitors, the Indian units of Kawasaki, Yamaha, Suzuki and Indian local firm LML.

Munjal and his three brothers had a humble start. They began making bicycle parts in Ludhiana in northern Punjab in 1944 and graduated to assembling bicycles in 1956, pitting themselves against multinationals Raleigh, Hercules and Atlas.

Now they have a $900-million-plus sales empire that embraces the 26-per cent stake in Hero Honda, Hero Cycles and a dozen-odd other companies making mostly two-wheelers and auto parts.

FAMILY STILL WORKS TOGETHER

Unlike other family enterprises that have split up in acrimony, the three surviving brothers are still working at the group -- the eldest being 82. Munjal has also relied on a loyal dealership network to build business and says the group's plants have never lost a day's work due to labour unrest.

"It has been a clean and dynamic management," Satish Jain, analyst at broking firm ASK Raymond James in Bombay.

Munjal is keeping mum about any possible plans to retire but his son Pawan Kant, a director at Hero Honda, is seen as a likely successor. The eldest of his three sons died in 1991.

Moving into motorised vehicles in 1978 was a natural step after Hero Cycles consolidated its position as India's largest cycle maker. It found a collaborator in the mid-80s in Honda and Hero Honda was born.

It began by launching a 100cc motorcycle, the CD-100, a utility city bike. It has since raced ahead of the competition with the "Splendor" motorcycle that marries fuel-economy with good looks. Some 700,000 Splendors were sold last year, making it the world's single largest-selling model. Splendor accounts for nearly 70 per cent of Hero Honda's sales.

A swing in consumer preference to motorcyles from scooters for fuel saving and better resale value has also boosted sales.

Munjal sees a bright future despite Honda's launch of a fully owned subsidiary in India that will be able to make motorcycles after 2004. This has led to talk of a clash of interests but he rejects suchspeculation, saying the firms can co-exist happily.

Tell us what you think of this report