Early last year, Chris Villavarayan was appointed president, Meritor Americas, responsible for the company’s North and South America Truck, Defense and Specialty Businesses.
Villavarayan most recently served as vice president, Global Manufacturing and Supply Chain Management for Meritor. Previously, he was managing director for Meritor India where he lived for two and a half years. During that time, he led Meritor Heavy Vehicle Systems (India) Ltd., a joint venture with the Kalyani Group in Mysore, India. Prior to that, Villavarayan was general manager, Operations Planning and Strategy at Meritor.
We caught up with Villavarayan by phone while he was at the American Trucking Associations' Technology & Maintenance Council annual meeting in Nashville, Tenn., last month.
HDT: You introduced several new products at TMC. What would you say your most exciting one was?
Villavarayan: I think it's the Meritor Tire Inflation System, our product we're launching in late 2016 or early 2017. With MTIS you have better fuel economy but also a very large play on downtime. It takes the driver out of the equation by having an automated tire inflation system as opposed to something that just does monitoring. This will essentially ensure the tires are always inflated to the right pressure so you take out the possibility of having to worry about downtime.
We've had [automatic tire inflation] on the trailer axle for so long, and it's been going great, we looked at it and said why not look at this on the tractor side. On a tractor, you can look at the front axle and say that would be no different than trailer axle. It's the rear axle that really takes the work. The engineering teams have found a great way to pressurize the tandem set.
For our 14X, our bread and butter axle in North America, we're launching some new axles for downsped applications. For that whole downspeeding application we have that whole package to integrate to the engine and the transmission.
And beyond that we showcased the 17x axle, which is our bread and butter axle in Europe. The 17x is the laser-welded axle from Europe. We removed a lot of bolts; it's much lighter weight. We will be seeing that here this fall.
We also announced a new trailer axle, the MTec6. Our current version is 5 inches in diameter, but we're coming in with a 6-inch thin-wall and reduced about 40 pounds of weight. It's a great product because it is a broader diameter, an inch wider, so you get better torsional benefit and less bending at the wheel end, so less tire wear.
HDT: When you got your engineering degree, did you think you'd someday end up in a position like this? Was top leadership your goal?
Villavarayan: (Laughs) Actually I'm the wrong type of engineer – I'm a civil engineer. I graduated out of McMaster University in Canada a very long time ago. I think I spent about two years on the civil side, then I had opportunity to work for an automotive company, a partnership between Honda and two Japanese robotics companies. I did that for a couple years and joined Meritor in 2000.
A lot of my time with Meritor, it was in operations… I started working through levels of plant management, then took over a specific initiative called Manufacturing Performance Plus to look at our network in 2007, looking at our manufacturing footprint globally and looking at ways to optimize that… We optimized the footprint, reduced the number of facilities, decided what manufacturing we considered core and non-core, and a large piece driven in to lean and optimizing our facilities and supply chain. From there I spent some time in Europe running European facilities, then I went on to India to take on a business role running our joint venture.
HDT: What was it like in India compared to North America?
Villavarayan: It was a great time to go, the market was just picking up. It was just an incredible opportunity to go there at a time of incredible growth. It moved very, very fast.
HDT: What has it been like shifting your focus to North and South America?
Villavarayan: After I came back from India, for a year and a half I ran global operations, so we had all our facilities reporting into me. What we did [last year] was we went to more of a P&L structure. I took North and South America and Joe Plomin who had the sales side, took Europe and Asia. So a part of the role is essentially what I've been doing before; the sales side was part that was new.
The similarity with India is the focus on the growth of the product. The best part of being here today is talking about all the new products we're launching. That's the similarity to being in India; through that period we were just launching a lot. It moves fast; your product cycle feels faster.
HDT: How does that reorganization benefit the company and the end user?
Villavarayan: I think the reason we changed the focus is ... so we can move faster.
If you look at M2016, our three-year plan to make sure as a company we hit a 10% EBITDA target, there are four pillars. The first one is operations, the second is business and sales growth, the third is materials and supply chain, and the fourth one is our people.
All of that kind of ties in with having one person look at it from a P&L perspective and be able to be coordinated and drive that better – let's call it faster and better alignment. We have gone nine quarters of being well on the path to hitting M2016.
HDT: What would you say the biggest challenges have been in your first year?
Villavarayan: (Laughs) I think it's just been a very good experience.
In terms of challenges, because I have North and South America, I think a bit of a challenge has been the market in South America. We've seen a 30 to 40% reduction in production volume, the opposite of North America. You also have a very strong devaluation in the currency, which impacts the revenue assumption and also impacts stuff we bring in and take out. There are localization rules in place, so there has to be a certain level of local content, and as we aim to hit that target one of the things we struggle with obviously is the cost of that keeps escalating, because the inflation in Brazil is very significant.
On the North American side, I wouldn’t say there has been too much of a challenge; it's just been incredibly exciting. Just before I came into the role, we closed a four-year agreement with Daimler and a seven-year agreement with Volvo, and we have a new seven-year agreement with Paccar. We are already standard with Navistar, so as we look at the position we have, with four major players, and others in the market, like Hino, we've just made good progress as a company. From a capacity and operations standpoint we've gone through quite an uptick -- I think a 30 to 40% increase in production volume year over year -- and unlike previous [boom] years, we've haven't seen the hiccups.
HDT: The trucking equipment business seems to becoming more and more global. What should truck buyers and maintenance managers know about this trend? How does it affect us here in the U.S.?
Villavarayan: In Europe the demand seems to be somewhat sluggish. In Asia, China is not ramping up to the levels we expected, but India is a nugget where we are finally seeing volumes coming back up. The last quarter was very good for them.
In terms of global trends that affect North America, I'm going to ask Joe Plomin to answer.
Plomin: When you look at global trends from product standpoint, look at one, technology, and two, legislation. Europe tends to have a tendency to lead the world from a technology standpoint. Having said that, there's a uniqueness of the European market that makes it not necessarily applicable across the globe.
Secondly you look at legislation, and when you look at emissions, the U.S. and Europe are really neck and neck, and they're also leading the market relative to safety. What you see in the developing countries now as technology becomes more cost effective, more mature, you see more of it making its way into Brazil, China, Asia, Russia. I think what you see is technology leadership coming out of U.S. and Europe, but adaptation and modifications to suit market needs in each of the different regions, whether it's cost driven or application and duty cycle driven. For instance, if you think of the U.S. market, the average linehaul speed is faster than elsewhere in the world, so it drives a different type of truck.
Within Meritor we have a global product strategy team that looks at what platforms make sense to take global and what platforms are really unique, regionally driven products – and we have a mix of both.
Villavarayan: The 17x is something we're bringing from Europe to here. The 13x is something being developed in India that we're looking to launch as a medium-duty axle here in the future. There's a lot of alignment between Europe and South America, this is somewhere we're also striving for commonality.
HDT: Last year Eaton and Meritor settled a long-running lawsuit over transmission technology, from when the ZF Meritor joint venture brought the FreedomLine to the states. Seems like the FreedomLine, an automated manual, may have been a bit ahead of its time. What do you think of the rapid acceptance of AMTs in the U.S. market over the past few years? Any chance Meritor might look into getting back into that business?
Villavarayan: No. What we are doing is working with companies, whether it be Eaton or with Volvo and Daimler, on ensuring that our products combined with theirs can provide a high level of integration and continue to improve the efficiency of the overall end customer.
HDT: We've heard that in some cases, more fuel-efficient, 'downsped' drivetrains aren't being spec'ed correctly and there are problems with the higher torque damaging components.
Villavarayan: You're correct. [The answer is] training on the fleet side, and alignment and integration with the OE side. We make sure we have good alignment between the transmission, the driveline and the axle. We work with [companies], whether it be Eaton or the vertically integrated players like Volvo or Daimler, to make sure we have a product that doesn’t destroy any of the three, and meet the market trend for downsped drivetrains.
HDT: What are your focus and priorities going forward?
Villavarayan: A lot of it is driven by the focus on growth. Next year as we look at North America, the market will continue to grow, so we have to continue to focus on delivering our customer requirements as we go through this very, very high market. I think the last time we were at these levels were '04-'06. So the focus is to ensure that we don't disappoint our customers and that we continue to grow with our customers.
And we've talked about the many new products we have to get up and running in the next 12 months. And finally it's the operations to support the market. And if we get all those done then we're going to be well on our path the targets in M2016.