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Letňany truck Factory to Increase Production. The Trucks Will Contain New Parts from India.
Avia Ashok Leyland Motors will be back in all the markets that the letnany truck manufacturer had to leave in recent years. . At the same time, it strives to penetrate completely new territories, such as Australia. According to Tomáš Navrátil, the Director General, the Company plans to sell at least 1,150 trucks (or ideally 1,400 trucks) this year. In the past, Mr. Navrátil managed several businesses, among others Škoda Ostrov, a bus manufacturing company, before entering Avia in April. By the end of the year, AVIA should reach the operational profit. In the recent years, the production usually stayed at 500 to 600 numbers, and the Company had to avert the danger of bankruptcy.
"The Indian Owner funds us for the time being," describes Navrátil. "We get funding for strategy capital costs such as re-development of our sales and service network." The Company has entered in seven new contracts with dealers in the Czech Republic, and plans to sell 490 vehicles here. It returns to Slovakia, where it obtained eleven dealers. They will take the first 50 vehicles in July and the number will raise over one hundred by the end of the year. There are 300 Avia vehicles to be sold in UK and Ireland this year. In July, the car factory is to enter the market in Spain, where it plans to sell 90 vehicles with a new design and 185 HP Cummins motor. Another orders are about to come from Hungary. In addition, the Indian Owner mediated a demand for 100 Avia vehicles for Australian customers. In future, the similar procedure is to be applied at New Zealand, and Central/Eastern Asia, which are the countries with a strong trade representation of the Indians. "Ashok Leyland is a manufacturer of vehicles with weight from 15 to 50 tonnes. Avia produces vehicles with weight from 7.5 to 12 tonnes, which completes the offer very well, “Director noted.
Avia should also assert in Russia and other former Soviet states as Ashok Leyland is absent there and the group executives rely on Czech historical experience and contacts. Avia had already operated in Russia before; it exported disassembled vehicles there and would like to follow these transactions. There have also been discussions with potent partners in Turkey as Turkey would become the country of the final completion. Recently, the car factory obtained a representative in Iran and sent him vehicles for testing.
"The Indian capital, the Indian know-how in the field of technology and software, the possibility of buying parts for Indian prices, all associated with a really competitive product: that is a very good chance for us to assert in the market," Navrátil assumes.
PARTS FROM ASIA. Nevertheless, the revival of trade is just one of the re-generation elements. The co-operation with the Indians should bring an extreme reduction of material costs per vehicle. Within 2 years, the costs should drop to 77 % compared to the current status. "There is a plan scheduled by months. It specifies materials, which will be progressively replaced by imports from India,” Director describes. To decrease costs, also the discussions with existing suppliers can be helpful as Avia will be a more interesting partner owing to the growing production. It wants to sell 3,700 vehicles the next year. The amount should grow up to 4,800 in 2009 and even 6,000 the year after.It should include the existing Avia vehicles with the Cummins engine (meeting the EURO 4 Standard, which is in force within the European Union) as well as Avia chassis with the Ashok Leyland unit (according to EURO II, these vehicles are being tested in India with estimated sales in development countries). The vehicles designed for Europe should be fully comparable with DAF and/or Iveco brands. "We are not very far from the DAF vehicles as we use fully identical motors and gear units," Navrátil presumes.
However, Avia has had many brave but never realized plans during the past 17 years. Until 1990, it produced about 15,000 vehicles a year. In the beginning of 90´s, the West European investors showed an interest in it, but it undergone the voucher privatization instead. Then the South Korean Daewoo came, wishing to eject thousands of lorries.They bought machines and paid for the development of a new vehicle, but then they got into their own troubles at home and went bankrupt. The Letňany factory survived up to 2005, buoyed mainly by sales of property. Then the entire area was bought by Odien Group that performed the key restructuring and sold the part of Avia where the trucks have been produced to Ashok Leyland, the Indian car manufacturer.
FIGHTING THE SCEPTICISM. The unrealized plans resulted in frustration. However, Navrátil tries to convince the personnel that everything changed from now. The Indian owners regard Avia as the first-class brand and wish to invest in its development.
"Daewoo implemented a drill and discipline. Principally, we are glad that some procedures remained in the people," Navrátil contemplates. On the other side, the Korean and Czech cultures did not come together very well. The Indian and Czech nature are closer to each other. There is also another difference: each Ashok Leyland’s specialist speaks English, while there were really few Koreans to manage that. The car factory is currently managed by Czech executives; since July there will be also two Indian people, one of them in the Purchase Department, while other in the development. Their main tasks will be to speed up the processes leading to cost reduction, which means mainly use of cheaper Asian parts.
THE DEVELOPMENT WITH INDIANS. "Ashok Leyland has a highly well-equipped development centre with total of 1,200 people. It is the second major car manufacturing group in India; outside the civil trucks they manufacture also buses and army vehicles," Navrátil adds more arguments. According to him, the main difference compared to Daewoo lies in the fact that the Indian group has healthy finances. For Indians trying to enter Europe by means of a Czech company, Avia represents a premium brand. If the factory was bought by some West European car company, they would consider the Czech brand as a second-class and who knows if they would preserve it.
"I am obsessed by the need to fulfil everything we plan," Navrátil claims. "We planned to sell 57 vehicles in May; we sold 59. In June, there were another 66 including twenty vehicles designated for engine redesign (electric drive) for UK.In July, a more powerful Diesel engine will be available. By the end of the year, we will make 220 vehicles a month and commonly sell 12 tonne vehicle, which is exactly the one that is still exempted from toll in the Czech Republic. Next year, six-cylinder cars will appear in our offer. Thus, Avia will enter the segment where it has never been. If we consider activities of Ashok Leyland in India, it is highly probable that we will offer the whole range of trucks inclusive the heavy trucks under the Avia brand within three years."
THEY WILL IMPORT THE WORKERS. Only 280 employees remained in the factory. Still, their numbers will grow, but not as quickly as the numbers of the Avia cars produced. Machining and a lot of assembly work will be transferred to the suppliers, so the number of standard hours per one vehicle will decrease in Avia. Currently it makes 68, and it will soon drop to a half. "It is necessary to use the existing state-of-the-art equipment, which is the first-class cataphoresis and welding line. That is the production that will remain here. Otherwise, the main focus will be the brand and the markets," Navrátil remarks. "I say it again; the Indians perceive Avia as a premium brand. That is what they bought. They did not buy a factory, which would ensure all production levels; that is exactly what Avia has not been able for a long time, and our workforce is too expensive to do that. They bought a brand that is a symbol of quality, reliability and tradition: there are twenty thousand Avia cars still driving around Europe." Despite this, the Company Executives plan to employ 60 new workers in September. As there are not so many in Prague, Avia negotiates with agencies to import them probably from the East.
WILL THERE BE ALSO BUSES? Buses have been discussed very frequently since the time the Indians announced they had entered Avia. All in all, Avia Furgon was quite successful. In the design offices, a concept of a mini-bus already exists. "What will decide is what every other businessman must perform: market analysis, trend analysis for the last three years, estimates how such market would develop, what share we could gain, what the final price or margin would be, etc. A detailed analysis of selected markets should be available in August," Navrátil explained. The background details are being prepared by Cambel company, UK, which has been focused on such activities for about 25 years. In case of Ukraine and Russia, Avia uses other sources. The parent company in India manufactures buses that are much bigger so the idea that such buses could be marketed in Europe under the Avia brand one day is not impossible.
Avia will introduce a key new vehicle from its own production in the business year 2009/2010; the car will have a completely new cabin and design.