ET Q&A - Make in India is Great, Make it Happen in India is Even Greater
JOE KAESER CEO, SIEMENS
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Siemens chief executive says the softer capabilities in India are huge and if we combine that with the automation that Siemens has, the combination would be hard to beat
Siemens Chief Executive Joe Kaeser is betting big on India with plans to invest another ¤1 billion and expand its workforce. In an interview with ET's Satish John and Himangshu Watts, Kaeser explained his strategy in India and other plans.Edited excerpts:The board of Siemens AG is here. What is the significance of the event?
We had the whole Siemens managing board come to India, visit India and listen to our (local) leadership team on the opportunities and the things we could do to help push the country to the next level. We do that every year. One of the things is that India was the partner for the Hanover fair in Germany, the world's largest Industrial fair which is important. The PM announced in the event on `Make in India' and the priorities he's been setting for affordable, sustainable and reliable energy to healthcare to infrastructure and industrial automation. That's what our company is about. We believe there is a massive opportunity for the country and for us as a company and if we can bring those two things together then it would be good for everyone.
You are meeting the prime minister for the fourth time in two years?
I've met the prime minister three times now. The first time was immediately after he took office in Delhi. Then we met at the Hanover fair where he was visiting the Siemens exhibition, then we met him at Berlin at the Siemens education center, where he looked at how Siemens does vocational and industrial training.
Has the business environment in India changed to your satisfaction since the first time you met him?
What I still see and what I am really impressed about is his determination and his will to bring his country and his people to where they deserve to be. A better life and a better society and a better living and become an industrial power in the world. It is very exciting if he can make a meaningful contribution. In Egypt under President Abdel Fattah el-Sisi, Siemens got its biggest-ever order (close to ¤8 billion) in quick time, but in India big orders take ages. President el-Sisi of Egypt took over in a very complicated environment. He needed to give a new direction. It is quite a difficult job. In Egypt, he (el-Sisi) needs to establish a lot of basics such as energy supply, which in India is well established.
Despite all the challenges and the opportunities we've in India, there is still a well-established constitutional process. The energy agenda in India is okay. It can be much better but there is electricity available in India. So, it all depends on the circumstances, I wouldn't say this is faster or that is slower. There are reports that suggest that Alstom may win the large railway tender for locomotives.Does that change things for Siemens?
First of all, we are in the middle of the whole process. We'll see how it goes. So there's nothing more to talk about at this time. We are not dependent on one single order. We have always made it very clear that India is a very attractive country. We've been here for more than 100 years.Our founder himself has laid the first telecommunication cable from Kolkata to London which was a fascinating innovation at that time.
So in the meantime, even in the last 10 years, we have invested close to ¤2 billion in India. We have 16,000 people in India, and out of that more than 4,000 engineers are in R&D. We expect to bring at least a billion euros in the next few years into manufacturing engineering and building India as a competence centre for mobility and infrastructure.So, we are here for a grander scheme of the market and not a single order.
That's why it is important and our decision to build our activities in India. The prime minister talked about make in India. Siemens has 22 factories in India and we are going to build more.We'll invest a billion euros in the next few years to come. This investment will be in engineering and manufacturing.
It is exactly around the agenda of the Indian government. That is, efficient energy, energy management like transmission, distribution, smart grids to manage the grid and of course renewables.So, the less gas the country uses for its energy needs, the more gas you can use for fertilisers, which is also important to feed the people.
The softer capabilities in India are so huge. The best software companies in the world are the Indian companies like the Tatas, Infosys and others. If we come together and combine softer capabilities in India with the automation that Siemens has strengths in, the combination would be hard to beat in the world.
So that's why it is attractive. We believe we can have an edge here because we already have more than 20 factories and others are still debating whether they still want to invest in a second one or not. Do you think India can improve your profit margins, which has been your target but your rivals have been doing a bit better? Well look. Our business also has to be economically viable. Firstly, we believe there is good opportunity and there's long-term aspects. If you typically invest a billion euros, you must generate at least a billion euros as annual revenues as a rule of thumb. Of course, economic return from our investments has to definitely come along. Many CEOs are worried about China? What's your take on China? After many years of growth, China has been forced into reforms. There are structural challenges that they need to reform. Steel industry, mining industry and cement industry have all of a sudden been confronted with a need to reform and they haven't had for many many years. So they are not used to this. There is a need to be done before China moves to the next level. Having said that China with a new normal of 7% GDP growth, may be even 5 or 8% (GDP growth) is still twice as much of the whole world. Therefore, one needs to look at it in a relative way. Europe will be extremely happy if they have 5-6%.
I think, over time, in the life cycle of industry there needs to be restructuring. In China it had to happen and it will go through it and emerge as a different economy. India has a benefit that it has a demographics pyramid which is the benchmark of all countries in the world, so there is no need to restructure but a need to build. So there is a different environment. So it always depends there is no one size that fits all in this world.
You mentioned about India's software . strengths. How will you draw from it, will you build, will you do M&A?
We have 4,000 engineers and 75% of them are software engineers. We've a good foundation already. Ideal situation would be to partner up or team up with a software company, we cannot rule out that there could be an M&A, but bringing the skills together of a manufacturing and engineering company and software skills for systems integration would be a very rewarding capital efficient way to grow the business without jumping into big acquisitions. We'll see how it goes.Today, we talked about India. Not about Siemens as a legal entity but about Siemens India as a legal entity globally. I was very impressed with the managing director and also with the management team. They have great ideas and are very dedicated and we'll provide the resources to make this a big success in the next four to five years. Modi said at the Hanover fair he always thought of Siemens as an Indian company.So there was this talk that you'll retain Siemens as a listed entity in India?
Look, we have no plans to delist. Formal aspects is one thing, but growing the business in a comprehensive way by getting all the resources of global Siemens to focus on success is the other view. As a global company, we have abundant resources in both capable people and capacity and also competency to make a success in India. But first customer and business matters and then we will sort it out in a formal way.
In your Vision 2020, where is India placed?
There is a reason why the managing board is here.visit India four to five times a year. Next six weeks I'll be here three times. Next visit will be with Chancellor Merkel, beginning October and then there will be strategic review where I will be participating to see how the formal Siemens India's global plan will evolve and formulate a strategy. We need to ensure that the global approach and the limited approach are tied together in a meaningful way.
Make in India is great. But make it happen in India is even greater. Make it happen in India is more than manufacturing. It's about training, about education, about societal development and automation and engineering and precision power being brought into the country.
We'll continue to invest in India. We spent more than ¤2 billion in the last 10 years and we'll spend ¤1 billion in the next few years to significantly participate in make in India and make it happen in India.
Would you shift any of the global functions to India?
I would not rule it out. If you look at the country's agenda which is independent of the current government saying infrastructure has to be optimised and mobility has to be a major challenge and opportunity.
For full interview, log on to http:www.economictimes.com
We had the whole Siemens managing board come to India, visit India and listen to our (local) leadership team on the opportunities and the things we could do to help push the country to the next level. We do that every year. One of the things is that India was the partner for the Hanover fair in Germany, the world's largest Industrial fair which is important. The PM announced in the event on `Make in India' and the priorities he's been setting for affordable, sustainable and reliable energy to healthcare to infrastructure and industrial automation. That's what our company is about. We believe there is a massive opportunity for the country and for us as a company and if we can bring those two things together then it would be good for everyone.
You are meeting the prime minister for the fourth time in two years?
I've met the prime minister three times now. The first time was immediately after he took office in Delhi. Then we met at the Hanover fair where he was visiting the Siemens exhibition, then we met him at Berlin at the Siemens education center, where he looked at how Siemens does vocational and industrial training.
Has the business environment in India changed to your satisfaction since the first time you met him?
What I still see and what I am really impressed about is his determination and his will to bring his country and his people to where they deserve to be. A better life and a better society and a better living and become an industrial power in the world. It is very exciting if he can make a meaningful contribution. In Egypt under President Abdel Fattah el-Sisi, Siemens got its biggest-ever order (close to ¤8 billion) in quick time, but in India big orders take ages. President el-Sisi of Egypt took over in a very complicated environment. He needed to give a new direction. It is quite a difficult job. In Egypt, he (el-Sisi) needs to establish a lot of basics such as energy supply, which in India is well established.
Despite all the challenges and the opportunities we've in India, there is still a well-established constitutional process. The energy agenda in India is okay. It can be much better but there is electricity available in India. So, it all depends on the circumstances, I wouldn't say this is faster or that is slower. There are reports that suggest that Alstom may win the large railway tender for locomotives.Does that change things for Siemens?
First of all, we are in the middle of the whole process. We'll see how it goes. So there's nothing more to talk about at this time. We are not dependent on one single order. We have always made it very clear that India is a very attractive country. We've been here for more than 100 years.Our founder himself has laid the first telecommunication cable from Kolkata to London which was a fascinating innovation at that time.
So in the meantime, even in the last 10 years, we have invested close to ¤2 billion in India. We have 16,000 people in India, and out of that more than 4,000 engineers are in R&D. We expect to bring at least a billion euros in the next few years into manufacturing engineering and building India as a competence centre for mobility and infrastructure.So, we are here for a grander scheme of the market and not a single order.
That's why it is important and our decision to build our activities in India. The prime minister talked about make in India. Siemens has 22 factories in India and we are going to build more.We'll invest a billion euros in the next few years to come. This investment will be in engineering and manufacturing.
It is exactly around the agenda of the Indian government. That is, efficient energy, energy management like transmission, distribution, smart grids to manage the grid and of course renewables.So, the less gas the country uses for its energy needs, the more gas you can use for fertilisers, which is also important to feed the people.
The softer capabilities in India are so huge. The best software companies in the world are the Indian companies like the Tatas, Infosys and others. If we come together and combine softer capabilities in India with the automation that Siemens has strengths in, the combination would be hard to beat in the world.
So that's why it is attractive. We believe we can have an edge here because we already have more than 20 factories and others are still debating whether they still want to invest in a second one or not. Do you think India can improve your profit margins, which has been your target but your rivals have been doing a bit better? Well look. Our business also has to be economically viable. Firstly, we believe there is good opportunity and there's long-term aspects. If you typically invest a billion euros, you must generate at least a billion euros as annual revenues as a rule of thumb. Of course, economic return from our investments has to definitely come along. Many CEOs are worried about China? What's your take on China? After many years of growth, China has been forced into reforms. There are structural challenges that they need to reform. Steel industry, mining industry and cement industry have all of a sudden been confronted with a need to reform and they haven't had for many many years. So they are not used to this. There is a need to be done before China moves to the next level. Having said that China with a new normal of 7% GDP growth, may be even 5 or 8% (GDP growth) is still twice as much of the whole world. Therefore, one needs to look at it in a relative way. Europe will be extremely happy if they have 5-6%.
I think, over time, in the life cycle of industry there needs to be restructuring. In China it had to happen and it will go through it and emerge as a different economy. India has a benefit that it has a demographics pyramid which is the benchmark of all countries in the world, so there is no need to restructure but a need to build. So there is a different environment. So it always depends there is no one size that fits all in this world.
You mentioned about India's software . strengths. How will you draw from it, will you build, will you do M&A?
We have 4,000 engineers and 75% of them are software engineers. We've a good foundation already. Ideal situation would be to partner up or team up with a software company, we cannot rule out that there could be an M&A, but bringing the skills together of a manufacturing and engineering company and software skills for systems integration would be a very rewarding capital efficient way to grow the business without jumping into big acquisitions. We'll see how it goes.Today, we talked about India. Not about Siemens as a legal entity but about Siemens India as a legal entity globally. I was very impressed with the managing director and also with the management team. They have great ideas and are very dedicated and we'll provide the resources to make this a big success in the next four to five years. Modi said at the Hanover fair he always thought of Siemens as an Indian company.So there was this talk that you'll retain Siemens as a listed entity in India?
Look, we have no plans to delist. Formal aspects is one thing, but growing the business in a comprehensive way by getting all the resources of global Siemens to focus on success is the other view. As a global company, we have abundant resources in both capable people and capacity and also competency to make a success in India. But first customer and business matters and then we will sort it out in a formal way.
In your Vision 2020, where is India placed?
There is a reason why the managing board is here.visit India four to five times a year. Next six weeks I'll be here three times. Next visit will be with Chancellor Merkel, beginning October and then there will be strategic review where I will be participating to see how the formal Siemens India's global plan will evolve and formulate a strategy. We need to ensure that the global approach and the limited approach are tied together in a meaningful way.
Make in India is great. But make it happen in India is even greater. Make it happen in India is more than manufacturing. It's about training, about education, about societal development and automation and engineering and precision power being brought into the country.
We'll continue to invest in India. We spent more than ¤2 billion in the last 10 years and we'll spend ¤1 billion in the next few years to significantly participate in make in India and make it happen in India.
Would you shift any of the global functions to India?
I would not rule it out. If you look at the country's agenda which is independent of the current government saying infrastructure has to be optimised and mobility has to be a major challenge and opportunity.
For full interview, log on to http:www.economictimes.com
