The Price Is Right

The U.S. dollar may be plummeting fast, but Anand G. Mahindra is moving faster. As CEO of India's $6 billion Mahindra Group (which introduced the Jeep to India and now leads the nation's SUV market), he intends to use the weak dollar to buy manufacturing plants in "bargain basement" America. On a recent trip to New York—to invest in an Indian film festival—the 52-year-old Harvard Business School grad expounded on the global economy, and his own ambitious expansion plans, with NEWSWEEK's Vibhuti Patel:

PATEL: India has a booming economy, a strong rupee and a vibrant domestic market. Will '08 be as strong?
MAHINDRA: Right now, what worries me is not India but where the global economy is going. It's said that India and China will decouple and their growth will continue apace unabated. I don't believe that … We're in a euphoric state with our 8 to 9 percent growth, but if the U.S. economy goes into a funk with the subprime crisis, how can we remain isolated? China is more dependent on the West because of its export growth; we're domestic focused, but if the U.S. market plunges, the rupee will appreciate. That's one of the greatest threats to the Indian economy.

The rupee's strength worries you?
It has appreciated prematurely. We're still a poor country posturing with an affluent currency: we needed to have time to build up exports, to build up competitiveness and not have it cut away in advance simply because funds are flowing in. In the old days, currencies went up as a result of a growth in exports. Reserves went up, and so the currency going up was an indication of strength in global trade. Today currency goes up because money comes in on the hope of future investment. We've gone through this phase of capitalizing on an inexpensive currency—we've got an affluent currency prematurely.

How does this affect your acquisitions?
Acquisitions become easier … For an Indian businessman, the biggest opportunity is to buy manufacturing assets in America, which is not a manufacturing country: its manufacturing is not competitive, its plants are shutting down, its manufacturing is going abroad. But funnily enough, the U.S. dollar plummeting makes the U.S. competitive again. With the low currency, U.S. manufacturing assets are bound to have huge export opportunities again. For India to go global is not to export—until the currency turns around—but to go look for assets. There's going to be a tsunami of investment in American manufacturing assets.

Are you considering Detroit?
Detroit is not necessarily the best place, but it could have a renaissance. Who knows? But America is a free market: different states woo you with tax packages. When we invested in Georgia, we got amazing tax breaks.

Where do you see the SUV market going with today's gas problems?
The market is wide open for Indian SUVs, which are smaller and more compact, and for diesel SUVs. Diesel is a green fuel—modern clean diesels perform better on highways than hybrids—if it's not a V-8 engine. We use four-cylinder engines, which consume less fuel. We're the first automotive company in Asia outside Japan to have a hybrid to market in the U.S. SUVs are popular because they offer a return to family values and the outdoors. What we're creating is guilt-free SUVs.

Any other expansions in the works?
We're the largest time-share operators in India. Club Mahindra, part of our realestate division—with 22 resorts worldwide—will list as an IPO in '08. With the currency factor and the rising affluence and leisure time in India, it is the fastest-growing company in our group. Indian tourism is No. 2 in the world after China. With Indians' affinity for America, it's time to look for hospitality assets here. America is today's land of opportunity.

Despite the gloom and doom here?
Yes! With its currency problems, with its economy going south, America is suddenly a bargain basement for manufacturing. With foreign involvement of Indian companies, this could lead to a renewal of investment in America's maligned manufacturing assets and hence to an investment tsunami. It's a good way for Indians to go global: I'm looking at the subprime crisis as an Indian businessman.

You have companies in China, too?
China is the best thing that happened to India. Now we can say to our politicians, "Look, this is our competition, this is what they're doing. Why aren't we?" It's something to whip up our competitiveness. China is the benchmark; it becomes the touchstone for everything. For a country that invented yoga, the science of stretching, we just didn't stretch ourselves.

You're a third-generation Mahindra. What's the family business formula for success?
We assiduously keep out of the limelight. People don't even know we're a family business. I'm the first family member to come back in as CEO (in '97). For 30 years, we had professional managers. Professionalism, reliability and ethics are what define us. Hopefully, in the last five years, financial performance has also been added.