Snapshot: Volvo's Iraq operations
By: Oscar Wendel
Ever since early 2012, when I was first introduced to Stefan Soenchen, country manager for Volvo Trucks in Iraq, and Hamid Kazemi, Director – Retail Development, Volvo Group Trucks, I have followed the progress of the service centres and truck-assembly plants being constructed in Baghdad and Basra.
The Baghdad site was on land covered with palm trees and in Basra, 9000m2 of land had to be raised by two metres.
Anyone with insight into doing business in Iraq would have been a little sceptical about the ambitious goal of building two of the biggest and advanced service centres in the Gulf in a little over a year, under the difficult conditions. Yet, in May, the invitation to the inauguration of the service centres arrived as planned.
On the last day of my tour to Baghdad and Basra, I sat down with Soenchen and asked him to talk me through his journey to re-establish Volvo in Iraq, and to tell me what it takes to deliver where few others have in this dangerous and high-risk, but potentially high-reward, market.
I made my first trip to Iraq in May 2011 to investigate the different distribution networks of applicants. After a couple of road trips across the country, I saw ZamZam’s full and excellent distribution network for cars, with dealerships for Renault and Chevrolet. In July 2011, we signed an exclusive distributor contract. The commitment to a service network was stipulated in the contract. This made it possible to start on the very first day to establish the service centres. Both these centres were built in 14 months. I have been involved in projects in Europe and around the world, and I do not know of a case where something similar was built faster. In Europe, the processes for approvals take so long. Not that it is easy in Iraq, and most materials need to be imported, but the cooperation with Iran and the UAE was very good.
You need to be always available in the market. It is not enough to have a partner and support them with an office somewhere else in the region. We have to be available at all times in Iraq. So the solution was to set up an office inside the Swedish Embassy. This solved a lot of problems, as it immediately provided an excellent business platform, infrastructure and full security.
When moving around with the security set-up, the risk is minimised to a completely acceptable level. As foreign businessmen, we are not targets. The conflicts are between internal groups. It is unlike other dangerous countries where the foreigners are the targets. When you compare the situation to 2005, it has improved significantly.
The Baghdad centre is the second-largest in the Middle East. What I am most proud of is that they have both been specified to operate to European standards. All equipment is from Europe. But now comes the big task of building the platform to be able to deliver to what it is intended to do. This requires continuous development, with retail competence, implementing the right interfaces with the requisite computer programmes, establishing the processes for handling customers and having constant support from Volvo. It will take a few months, with the right recruitment and training, to reach these standards. About 50 people will be employed for these two centres. The environment, with the weather, heat and dust, is challenging even for Volvo trucks. The first step is to have an excellent service for breakdowns, with technical teams being able to reach trucks that have broken down.
It will become an issue to increase the uptime and productivity of trucks to become competitive. That requires a sophisticated organisation, and they will learn how to reduce the number of trucks and operating costs by, say, 25%, by adopting better logistics and planning. This goes throughout the value chain.
The assembly plant is built for a capacity of 5000 trucks. And when it is up and running, it will be amongst the most modern truck assembly plants in the Middle East.
Our business partner, ZamZam, has funded, and owns, the new facilities, which will be built and operated by SCAI, an organisation that falls under the Ministry of Industry. This arrangement better enables sales of trucks to the government, which represents the vast majority of new truck sales in the Iraq market.