KTM turnaround: Bajaj Auto mulls shifting more production to India, job cuts

New Delhi, Nov 7 (PTI) Bajaj Auto, which is set to take majority control of KTM AG, is looking at various options, including moving more production to India and job cuts as part of plans to reduce costs at the financially troubled Austrian bike maker, a senior company official said on Friday.

The Pune-based two and three-wheeler maker is expected to get required regulatory approvals and gain majority control over KTM AG by mid-November, Bajaj Auto Executive Director Rakesh Sharma told reporters in a Q2 earnings call.

"We have made an application for taking majority control over KTM AG, and we have submitted our application. There are some nine approvals which are needed from various commissions in Europe, and eight of them have been secured," he said.

He further said, "The ninth one should also be through, hopefully by mid-November, which is when the turnaround can start, to be very actively led and directed by us." Responding to a query on whether it made sense for KTM to continue manufacturing operations within Europe, Sharma said, "We will look at all options for reduction of cost, provided that quality is not compromised...That is a very, very important piece of the turnaround." When asked if the plan includes moving more manufacturing of KTMs to India, Sharma said, "Of course, it includes that because we've had a very good experience, both KTM and us, in manufacturing some of the lower cc (engine capacity) bikes, and that is certainly very much on the table and will be evaluated and progressed." On the possibility of shutting down the KTM plant in Europe, he said, "We have not gone down that direction...it's not that we are going there with an agenda of shutting down a plant. We are going there with an agenda of reducing product cost." Sharma also asserted that it may not be feasible to produce some of KTM's high-end bikes in India, as developing the vendor ecosystem takes time.

When asked if any job cuts are planned at KTM, he said, "Yes, plans are being developed, but we will get into the driver's seat only (at the) end of this month. We are waiting for the regulatory approval before we can start to take any actions." In May this year, Bajaj Auto announced its intention to acquire a majority stake in KTM through its wholly owned subsidiary Bajaj Auto International Holdings BV, which has arranged a debt funding package of 800 million euros (about Rs 7,765 crore), to shift gears from hitherto being a dormant minority investor to a majority owner in the global KTM company.

Bajaj had started its partnership with KTM in 2007 with a 14.5 per cent stake in the Austrian firm and later on increased it to effectively 37.5 per cent in Pierer Mobility AG (PMAG), the holding company of KTM AG.

Sharma noted that Bajaj Auto's turnaround plan for KTM is based on three legs -- financial liquidity and support; putting a proper people structure and cost reduction.

The financial liquidity and financial support have already been put in motion, and they got funded, he said.

On putting a proper people structure, Sharma said, "...a lot of the old management had to go, and is going...So a new breed of management is getting into position..." He further said cost reduction includes "both overheads as well as direct costs of manufacturing," which include components, but acknowledged that it takes more time as the components will have to be developed in India or elsewhere.

Amid the issues faced by KTM, Sharma said sales of the brand have been improving and also Bajaj's exports to KTM.

"Our exports to KTM also have been good (at) almost 20,000 units in quarter two. KTM exports would account for about 5 to 6 per cent of our exports in a normal year. It had slipped down to 1 per cent and now it's climbing back," he noted. PTI RKL SHW