LOW COST, HIGH QUALITY
Al-Ghazi Tractors Ltd.
In stark contrast to the fortunes of its home nation Pakistan, which is facing a real struggle to overcome the political, social and economic turmoil that afflicts it, Al-Ghazi Tractors Ltd has never had it so good. With ambitions to capitalise on its success by expanding and diversifying the business in 2013, the company looks set to continue this trend. Parvez Ali, Managing Director of Al-Ghazi Tractors spoke to Endeavour magazine to tell us more.
Pakistan based Al-Ghazi Tractors Ltd, with its head office located in the thriving port city of Karachi and its manufacturing plant based at Dera Ghazi Khan some 700km away in the heart of the country, has an enviable status as one of the largest and most profitable tractor manufacturers in the world today, and its claims ‘of being an icon of engineering dynamics’ which is able to produce the world’s lowest cost tractors without compromising on quality, are by no means empty. Following its inception in 1983 as a joint collaboration between the Pakistani government and private-sector investors, and its full privatisation in 1991 – the first ever full privatisation of a company in Pakistan – Al-Ghazi Tractors Ltd has endured something of a tumultuous journey to get to where it is today. The company has circumvented various obstacles, ranging from government interference – which resulted in the nationalisation of the company and the following mismanagement which came close to destroying it - the more recent implementation of the draconian ‘General Sales Tax’ of 16% on all tractor sales in the country, to the general challenges of operating in a country which is mired in a real economic crisis. However in the face of such political and economic uncertainty, Al-Ghazi Tractors has done much more than merely endure; it has thrived, and it is not a coincidence that tractor production and delivery increased by 38.8% in 2012 compared to 2011 figures. As a subsidiary company of the Al-Futtaim group in Dubai, and with Fiat/ Case New Holland (CNH) holding a stake in the business, Al-Ghazi Tractors
Endeavour Magazine • March 2013 •
Al-Ghazi Tractors Ltd.
Ltd is well placed to benefit from the expertise and many decades of automotive experience these groups can offer, which perfectly compliments its own. “After a year of the company being placed under the sole control of national government between 1990 and 1991, it was effectively ruined by terrible mismanagement and bad practice. Equity had more or less dropped to zero in this time. Since full privatisation however, Al-Ghazi Tractors has witnessed a great turnaround in fortunes and the business has continued to make huge profits and grow rapidly since this time. We are now the 8th most profitable company in the world and the 19th largest tractor manufacturer globally. Our profit margin is 18% which is excellent when you consider that the average global profit margin is 4%. And importantly we have no debt as we haven’t borrowed a penny from the banks so Al-Ghazi Tractors is in very good health and we are bucking global economic trends in a very challenging climate. We have gone from being a basketcase company to a showcase company.” In a country that is characterised by uncertainty and is in many respects still fraught with mismanagement, Al-Ghazi Tractors has bucked this trend by achieving consistent corporate excellence. And it is through the company’s strategy of a relentless focus on quality, efficiency and continual improvement that the AGTL manufacturing
plant is able to continue driving down cost while improving quality. This perhaps illustrates why Al-Ghazi Tractors was the first company in Pakistan to earn the ISO-9000 certification, with yearly audits now registering the company for ISO-9001:2008. AGTL manufactures four types of tractors which fall under the 55, 65, 75 and 85hp categories, all bearing the Case New Holland brand as an indicator of quality. Robust and sturdy in design, through them Al-Ghazi Tractors has an unsurprising huge market share domestically within Pakistan where as many as 82 dealerships exist in every corner of the country. AGTL tractors are a household name in the farming community in Pakistan. Al-Ghazi Tractors believes that this success is in a large part due to its staff, who are very much seen as the engine of growth of the company. Parvez said: “Our employees are probably our most important asset and I hand on heart would say to anyone coming to Pakistan that we have the best workforce in the world. It is because of the managers and the people who do the work on the production lines with their knowledge and creativity that we are where we are today. We are a team of many talents.” Following the completion of a fully fledged training centre at the factory in 1994, a rigorous management development program is in place at the facility. Through this, Al-Ghazi Tractors can ensure that not only does the company continue providing effective leadership for the benefit of the company,
but also that its policy of clear communication and good industrial relations between the workers and management continues. As well as providing management training programs, training schemes also exist for the manufacturing plants workers, something that Parvez feels is crucial for AlGhazi’s continued drive towards ever greater efficiency and productivity. “The simulated training programs for our staff which take place at our training centre as well as the many workshops across Pakistan are very important. By combining this training with getting staff on the production line promptly, we can ensure that our manufacturing staff, technicians and engineers get the right combination of training and on-thejob experience so that they learn the processes effectively.” With the rupee still in free fall and the volatile political, social and economic conditions in Pakistan expected to continue throughout 2013, it is anticipated that the government will recognise agriculture as the key imperative and will develop an enabling environment to help its farmers. Al-Ghazi Tractors is harnessing new initiatives in preparation for such action and has developed new farm machines and implements which are vital for the mechanised farming activities which would help grow food for the nearly 88% of the Pakistani population who are categorised as food insecure according to the National Nutrition Survey 2011. “The real problem here in Pakistan is that we are undergoing a serious economic crisis. In 2011 the government imposed a 16% tax on all tractors in the country which has affected farmers hugely during a time when they were already struggling. There have been widespread protests across the country against this measure and the government had relented temporarily and reduced this sales tax to 5%, but over time the tax will rise year-onyear back up to 16% again. Ministers are under real pressure to keep taxes low in response to lobbying. Times are very tough at the moment for Pakistani farmers.” Following the availability of funds from the US Aid Program, work on HEIS (High efficiency irrigation systems) has been re-kindled and though there is much work to be done in terms of developing these systems, Al-Ghazi is already receiving interest and orders from Pakistanis who know and trust the company. AGTL is also venturing into the production of other farm machine and equipment implements such as cultivators, rotivators and generators which will be produced at the Dera Ghazi Khan facility. Parvez told how the final goal for 2013 is to further increase production capability on AGTL’s tractor assembly line. “We are in the process of putting in place a programme which will allow us to increase tractor manufacturing to 30,000+ units per year. It is an ambitious plan but through a mixture of installing new, high-tech assembly lines combined with the implementation of new high efficiency processes, we are confident that we can achieve this. This in addition to our planned diversification programs will help strengthen Al-Ghazi Tractors for the benefit of all of Pakistan.”
Al-Ghazi Tractors Ltd. www.alghazitractors.com 0092 21 356 60881 Written by Djamil Benmehidi