'For small cars, India is the centre of the universe'

it small cars, medium sized cars or large ones. We have always been very competitive. In the US, we chose to focus on larger vehicles, SUVs and trucks. That is what the customers wanted here. Fuel prices here are low, geographical area is big and people have different hobbies.

But the reason we did not so much focus on cars in the US was that our cost structure here was not competitive. It was just not profitable to make cars in the US. So, we focused elsewhere on world class cars. We went to our Union partners and said if we reduce our cost structures we can even make cars in the US and provide jobs.

We now have a path breaking agreement with United Auto Workers, which has brought down the labour cost from $75 (around Rs 3,600) per hour to less than $50 (Rs 2,400). Our legacy costs have been capped. Couple of months ago, we announced that we are converting a truck plant to a car plant right here in the US.

Your sense of timing appears perfect. You raised money before the financial markets went kaput and sold Land Rover and Jaguar just weeks before global markets collapsed. Coming from Boeing, I have been through these big cycles worldwide be it bird flu, SARS or the economic crisis in Asia and how that disrupted economic development and travel. When I saw this slowdown, the feeling inside me was I have been there and have experienced it.

In such circumstances, the most important thing is to move decisively to reduce your capability to the real demand. If you don't, you just start burning cash and you are out of business. The second thing is during the toughest of the times when you are restructuring to the low demand you accelerate your investment in new products. That's how Boeing's 767/777/787 came about. When the cycle turns around and the economy revives, you are there with the best products in the world.

Ford's plan is very similar. We wanted to restructure and that costs money. We also wanted to accelerate new product development. We went to the market, pledged our assets and borrowed $23.5 billion (Rs 1, 12,800 crore). We are making our investments and the products are coming on line. We have already paid back $10.1 billion (Rs 48,480 crore) of the debt.

Do you think Ford will have enough cash to ride out this downturn and not touch the $9 billion (Rs 43,200 crore) federal line of credit? Absolutely. We have told the US government that we will not need any bridge loans from them. After we borrowed money in 2006, we have made a lot of improvements on productivity and quality so we even have a cushion in case the world slows down further. We are in good shape.

The world is gravitating towards small cars... The US is very unique in that it likes bigger vehicles. Most areas around the world do not have the mass and the openness, the low fuel prices and interest rates that the US has had. But the future of the automobile is going to be in the small cars worldwide with higher quality and more features.

It is not going to be small is cheap but small is beautiful and high quality. If you look at the entire world, 60 per cent of all the vehicles globally will be relatively of a smaller size, about 25 per cent will be medium size and 15 per cent will be large cars. We will be world class in every segment and market.

Ford is investing over $2 billion (Rs 9,600 crore) in emerging markets such as India, China, South Africa and Thailand... To me, it is very clear that if Ford is to be an industry leader, we absolutely need to serve all the major markets around the world. Going forward, a third of the global market will be Americas, about a third will be Europe, Africa and Russia and a third will be Asia-Pacific led by India and China. It makes sense to start with India and China and use all your global resources so that you can bring the very best values to the customers in these markets.

Finally, a small car for India... That is the biggest challenge and biggest opportunity. As I said, if the whole world is going to be 60 per cent small cars, the solution for India making a wonderful high quality small car and making it efficiently will be the foundation for rest of the world. For small cars, India is the centre of the universe.

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Ford and Hyundai entered India in 1996. The Korean car major has already made India its global small car hub. Do you think Ford has been slow off the block? We had to deal with areas that needed attention. As the US slowed down, we did not have all the vehicles that we needed here. We also needed to get profitable and this is where we made our big investment. You will see an accelerated development of the Indian business. We are investing $500 million (Rs 2,400 crore) in India to launch a small car, double our capacity from one lakh to two lakh units,