India's Mahindra & Mahindra may have done the unthinkable.

The company has broken the unspoken rule that says automakers must design, engineer and test their own
vehicles while spending hundreds oI millions oI dollars in the process. Along the way they can divvy up
contracts to suppliers who will build the components Ior them.
Mahindra, instead, tried something suppliers had been suggesting Ior years. The company built a brand-
new vehicle with virtually 100 percent supplier involvement Irom concept to reality Ior $120 million,
including improvements to the plant. The new Mahindra Scorpio SUV had all oI its major systems
designed directly by suppliers with the only input Irom Mahindra being perIormance speciIications and
program cost.
"We were at a crossroad as to which direction we as a company wanted to take Iar our Iuture in terms oI
our products," Goenka says. "The Indian auto industry was changing with many multi-nationals coming
in,"
Those global companies were coming to India in search oI local partners. Many had talks with Mahindra,
but in the end the auto-maker decided to move Iorward alone.
"AIter a lot oI soul searching we decided we did not want to become an Indian subsidiary oI a large multi-
national," he says. "We wanted to grow ourselves into a global player Ior sport-utility vehicles in the low
and medium segments."
Having decided the company wanted to remain independent and become a global player, Mahindra then
had to decide what to do about products. It was clear current products were based on ancient technology
that could not see the company through to the new millennium in India and certainly not globally.
"We had two options. At that time we did not have the expertise to do a brand new product. But to
develop that expertise was an option," Goenka says.
"The second was to go to one oI the boutiques in Europe and let them do the product development. This
option was very expensive and thereIore we thought the only way we could manage it was to do a new
product on our own and that's what we decided to do."
Still, Mahindra had very little experience at product development at that time. They had never done a
major IaceliIt, let alone a new product.
"It was a very high risk decision but a decision that we took all the same," Goenka says,
AIter perIorming market research, styling and Ieatures Ior the new Scorpio started taking shape. The
company was also starting to realize they didn't have the expertise to develop the vehicle and there wasn't
enough time to hire new people and train them to do the product,
"That's when we decided the only way we could do that was to leverage the strength oI the suppliers who
were available in India in global product development," Goenka says.
At this time, circa 1996-1997, Tier One suppliers were realizing that the supply contract volumes that
brought them to India weren't materializing. Their large, newly built Iacilities were not being used to
capacity.
"They had capacity they wanted to utilize and we were able to tap into that need oI theirs and sign up with
major suppliers to do system development Ior us," Goenka says.
As the process was deIined, the company went looking Ior suppliers to help.
Working with the Iormer Lucas Engineering (now Computer Sciences Corp.) and its Integrated Design
and ManuIacturing (IDAM) process. Mahindra developed its Mahindra Product Development System
(MPDS) that streamlined the development oI the new Scorpio.
But they had to be top notch, says Alan Durante, president oI Mohindra's auto sector."When we decided
on seating, we looked at the best" Durante says.
What would suppliers have responsibility Ior on the new Scorpio?
Mahindra, its 120 people and outside engineering consultants were responsible Ior the initial styling, body
engineering, chassis and Irame design and the vehicle integration.
Everything else was turned over to suppliers.
"Mahindra wanted to have world class product Irom suppliers that knew how to compete with the best
technology and quality on a global basis," says Tim Manganello, president and chieI operating oIIicer Ior
BorgWarner, which supplied the transIer case and other content on the Scorpio.
"By dealing with companies like BorgWarner, it allowed them to leapIrog up the learning curve and oIIer
a product that is competitive in the world market Ior both technology and quality without having to repeat
a lot oI the development mistakes that we have learned over the years the hard way."
For interior supplier Lear, it was the Iirst time the company was involved in a product Irom clay model to
100 percent manuIacturing.
"We've done a lot oI complete interiors but we didn't always make everything," says Randall Carron,
Lear's senior vice president, Asian OEM division. "We were the integrator or we were doing the design.
That was the Iirst time that we were also going to make everything."
To keep costs down, many Scorpio suppliers used existing components or components already in
development. While much oI what drivers see is new, some oI the subcomponents are carryover products
Irom something that was already engineered and tooled.
"With Mahindra, they are much more reliant on their suppliers so thereIore you have much more
independence on your design capabilities and your development expertise," Manganello says. "You can
utilize a lot oI your past experiences and your current designs that allow you, at a supplier company, to
develop a product without a lot oI changes and without a lot oI uniqueness."
Costs were also kept low because Mahindra stuck to their original parameters Ior the project and didn't
change speciIications or content.
"Usually over a three year period competitors come in with diIIerent products and automakers want to
add Ieatures," Carron says. "The Ieatures (on the Scorpio) changed very little. They set a standard at the
beginning and really didn't change Irom that."
Mahindra stayed hands-oII in the project and allowed suppliers to use their expertise, even iI it meant
using unproven processes.
"We showed processes Ior manuIacturing door panels that were very cheap," says Carron. "Most oI our
customers -- because it's unique -- they're not quite ready Ior it. Whereas these guys said, 'That's Iine. You
can make the door panel that way as long as it does this Ior me in the end.'"
While time was never an issue to Mahindra, suppliers say the project moved Iaster because Mahindra
wasn't constantly changing speciIications and instructing them what to do on their system.
"Time wasn't a driver," says Carron. "We needed to make sure we have a good vehicle that meets our
cost. Did we spend less time engineering it then we normally do? Absolutely."
Suppliers also say the program cost them less in investment because they didn't have to constantly change
the program. Additionally. Mahindra gave many oI the suppliers existing Mahindra business so they
would not have to wait until the new Scorpio entered production to make money.
"The way we paid Ior this, over the Iour years oI development, they gave us all their existing seat
business that had been outsourced to Iive smaller people," says Carron. "We took a lot oI the cost out oI
the system and used that money to actually Iund this as we went along."
Could this type of program work for the U.S., Europe or 1apan?
The general consensus is yes.
Manganello says suppliers could work Iaster iI OEMs gave them more autonomy like they had in the
project.
"You have to have good communications with the customer and other suppliers, but in programs where
you have that, the program can be moved along at a Iairly rapid pace," he says.
Carron says they could work Iaster, but more importantly, a situation like this gives them "the ability to
meet cost targets and to not overspend in the tooling and the capital."
Carron Ieels automakers should try this approach Iirst in emerging markets where localization is key and
vehicle branding is less important.
"II the organization has success there, our experience is that it would be easier to translate that back to
North America or Europe in the next program," Carron says." It would be great to start there, have a big
success and then translate it back to the next program. That's one way to get it done."




ppendix 1

How Mahindra developed a new SUV for $120 million

Dies $25 million
Press shop $20 million
Venders Ior tooling and rare
cases engineering $20 million
Body shop $11 million
Prototyping and testing $10 million
Model variants $10 million
Assembly line improvement
and testing $8 million
Personnel overhead $6 million
Consultants $5 million
Plant inIrastructure and utilities $5 million

Total spent on developing
the Scorpio $120 million


ppendix 2
HVC
Germany's Behr Group came to India Ior a large project that didn't turn out to have as much volume as
initially planned.
"They had huge capacity and were looking Ior business," Goenka says. "We came at the right time."
Behr did all the engineering, prototyping and validation on the Scorpio's HVAC system in Germany and
then moved the system to its Iacility in India.
In the HVAC system we have German engineering at Indian cost," he says.
Exterior plastic
Ford Motor Co. drew Visteon Corp. to India, but the company ended up being one oI Mahindra's largest
and most important suppliers.
Visteon supplied the complete exterior plastic system including Iront and rear bumpers, all the cladding.
the wheel arches, the mud guard, the Iront grill and any other plastic on the outside oI the vehicle.
Complete engineering was done by Visteon in the U.S., with the Iinal product sent to India Ior
production.


Suspension, steering and tires
The suspension systems Mahindra could buy in Europe and the U.S. were very expensive in terms oI
piece cost so the company decided to go east rather than west Ior its suspension, which was supplied by
Korea's Samlip Industrial Co. Ltd.
"In this case we almost pushed the supplier beyond his existing engineering capacity," Goenka says.
"Samlip had never designed a complete suspension system, We gave them the complete business Ior the
suspension."
Samlip hired consultants in Korea and worked with tire supplier Bridgestone and steering supplier Koyo
(Japan) to develop a suspension that would suit the sport-utility.
"We gave them a benchmark vehicle and the task oI being better or equal to that vehicle and to the target
cost oI the system," Goenka says,
Diesel engine
Diesel is the preIerred Iuel Ior sport-utilities in India so Mahindra knew it needed a top-notch diesel
engine. The company went to leading engine consultant AVL Ior help with its diesel powerplant. AVL
developed the 2.6L direct injection diesel engine in Austria with the help oI top suppliers like Bosch and
Delphi, who would eventually supply components to the engine.
"The whole engine development was done with the help oI AVL where our engineers learned a lot but
obviously didn't have the expertise to do it themselves," Goenka says.
AIter the initial design, the entire thing was moved back to India where Mahindra did the detail design
and put the engine into production.
Body shop
Korea's Wooshin set up Mahindra's body shop with new Iixtures, new welding guns and almost all new
transIormers.
They had not done any major projects but they were very cost eIIective," Goenka says. "We took
somewhat oI a risk going to them at that time. It paid oII handsomely."
The total cost Ior the body shop was $11 million, with a capacity oI 45,000 bodies a year.