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» Williams Controls CEO Discusses F1Q2011 Results - Earnings Call Transcript
I will now turn the call over to our CEO, Pat Cavanagh, for his comments on the quarter.Pat Cavanagh Thank you, Dennis. Good morning, everyone and welcome to our fiscal 2012 first quarter investor conference call. This morning we released our financial results for our fiscal first quarter that ended December 31st, 2011. I'm in the Williams Controls office in Sauerlach, Germany this afternoon, which is just south of Munich, while Dennis is in our Portland office. First of all, to start out today, I'd like to thank our staff in the European office for safely getting me down to Austria and back in a blinding snowstorm through the Alps to visit one of our new off-road customers. I flew into Munich from India on Sunday morning after spending a week visiting customers in our plant in Pune, India. I continue to be really excited about the opportunities for Williams in India. While our Indian operation has been a drag on earnings for the last few quarters, I'm confident that we are going to look back at the decision to establish operations in India as one of the best strategic moves the Company has made. Establishing operations in India ahead of any of our competition, combined with the launch of our new LCV light commercial vehicle pedal in India, has established Williams as the unquestioned leader in this market. We have a significant share of the light, medium, and heavy commercial vehicle market in India for electronic pedals. It's not to say that we won't face tough competition down the road as our competitors decide to locate in India, but having established a world-class manufacturing facility, combined with in-country component sourcing, and customer engineering support ahead of our competition has established us as a formidable competitor in this market. During my visit to India, I met with the director of strategic sourcing for a large manufacturer of trucks at our plant in Pune. He told me that at the present time, 19 metro areas in India have moved to BS4 emission regulation standards. In most cases, this standard drives the use of electronic engines and pedals. That means that any new vehicles registered in those metro areas will have electronic engines and pedals. As a practical matter, if a truck owner can register his vehicle outside those areas for now, he probably will, but buses typically don't have a choice.
Over the next 24 months, he expects that we'll see all of India transition to BS4 standards with several manufacturers actually transitioning early. To give you a sense of the size of the market, recent reports are projecting the April 2011 to March 2012, which is the Indian fiscal year, the volumes will be around 746,000 light, medium, and heavy commercial vehicles being sold, and over 400,000 of those will be light commercial vehicles. This is compared to 676,000 light, medium, and heavy commercial vehicles in the comparable period last year.While the size of the market is significant, it's going to be a competitive market. Many international truck OEMs are rushing to establish a presence in capacity in India such as Daimler India, Isuzu, MAN, Volvo Eicher, Mahindra Navistar, Foton, and others. Today, the majority of our competition for electric pedals in India mainly consists of our Asian and European competitors' products shipped in from outside of India. But our customers must localize their supply base inside of India to be competitive because of the high duties, logistics costs, shipping, and low Indian labor rates. This gives our operation in India a very distinct advantage over our competition and it's also an opportunity for future business outside of India with OEMs that we're currently not doing business with now. In our fiscal first quarter in India, our plant shipped over 11,000 pedals with over 5,500 shipped in December. In our fiscal second quarter, which ends in March, we are expecting to ship over 40,000 units to our key customers from our plant in India. We expect to see these volumes continue to grow throughout the year in India. Read the rest of this transcript for free on seekingalpha.com