JOHN PHILIP S. ORBETA President & COO

Ayala Automotive Holdings Corp.

John Philip S. Orbeta wears many hats at Ayala Corporation. From the security services of the leading conglomerate to the staffing of its 45,000 organic personnel complement to heading the company’s aviation unit and the latest – the automotive business.

Orbeta just goes about nonchalantly doing his job without any fuzz. Work does not wear him out because he is surrounded by the best people and working with one of the best employers in town.

MANY HATS

Orbeta joined Ayala in 2005 after a successful career with Watson Wyatt, Inc., a consultancy firm where he spent the first seven years doing consulting.

On the fifth year, he became managing director for the Philippines and moved on to become managing director of Wyatt Asia before becoming head of global consulting business handling about 900 global companies.

“I lived on a suitcase for eight years at Wyatt from 1997 to 2005,” recalls Orbeta.

As member of the Wyatt management committee, Orbeta had to be in the US every month, once every two months in Europe and in between he would travel to Asia, Japan, New Zealand, and other countries. Those trips earned him 300,000 miles a year. While he enjoyed the work, he had to leave because he was already tired of travelling and spending 60 percent of his time out of the country and away from family.

That is why when an opportunity at Ayala came up, he grabbed it.

“What is nice with Ayala is they give you opportunities and responsibilities depending on what you can do,” says Orbeta.

At first, he became head of the security facilities of the company. He is the managing director/head of Ayala Corporation – Corporate Resources Group.

Apart from HR work, he also handles IT, corporate communications, and the Ayala Young Leaders. He handles the company’s aviation unit, which is for the in-house use of Ayala. Three years ago, the automotive business was also added to his list of responsibilities.

Despite these various tasks, he remains on top and in sync with all of these because “My philosophy is to look for people who are smarter than me to head these units.”

AUTOMOTIVE MANUFACTURING

As President and COO of the Ayala Automotive Holdings Corp., Orbeta is the most visible face for the conglomerate’s automotive business.

At present, the conglomerate has interests in three automotive brands in the country. It has stake in Honda Cars Philippines, Inc. and Isuzu Philippines Corp. It is also the exclusive distributor of Volkswagen vehicles in the country.

Headlining the company’s automotive business is Volkswagen Philippines. Orbeta made news last year as the German automotive firm mulled an investment in ASEAN.

At that time, Volkswagen did not include the Philippines among the countries in ASEAN it shortlisted as possible investment location. But Orbeta tried to put his weight around, convincing Volkswagen big bosses to consider also the Philippines.

Indeed, the Philippines came into the picture for Volkswagen and the prospect appeared exciting. However, the Philippine government came up with a new motor vehicle program that would make it difficult for a starter automotive company to comply.

Orbeta reiterates that Volkwagen cannot join the current Comprehensive Automotive Resurgence Strategy (CARS) Program of the Board of Investments unless there is a change in the whole policy framework.

“If they really want to develop the automotive manufacturing sector then they should look at other countries, what are the new technology, and with that encourage manufacturing in this sector,” says Orbeta.

In the case of Ayala, it is already in the manufacture of automotive electronics through its subsidiary Institute of the Motor Industry (IMI), which has several operations abroad.

Orbeta explained that since IMI, its electronics manufacturing arm, already produces about 75 percent of the automotive technology they might as well pursue that direction in automotive manufacturing.

Already, Ayala has created the AC Industrials to consolidate efforts in its foray into the automotive manufacturing sector.

Initially, Ayala will start with the production of motorcycles in partnership with KTM AG of Austria.

KTM AG is currently the world’s fourth biggest motorcycle producer and Europe’s largest with an annual production volume of 180,000 units.

The conglomerate will begin manufacturing KTM motorcycles toward the end of the year as part of its distribution and manufacturing agreement with KTM, which it announced last year.

The deal with KTM involves an initial investment of at least R500 million to kick off production of an estimated 20,000 units.

The motorcycles will be assembled and manufactured in IMI’s facility in Laguna and about 70 percent of the output will be exported to China. The rest will be sold in the country.

PARTNERS Orbeta also cited their choice of partners. For motorcycle, they chose KTM because it has the leading edge technology that can manufacture motorcycles. It has the capability to build and compete in the export market.

Ayala’s partnership with Austriabased motorcycle company puts the company in the right direction in achieving its goal of making the country a manufacturing hub.

“Once we’ve started opening ourselves, it opened wider footprints with foreign partners offering to partner with us,” says Orbeta.

These offers from original equipment manufacturers from Europe emerged after Ayala made clear of its intention to become a serious player in the automotive business in this country.

Already, IMI has forged strategic partnerships with global players to further strengthen its capability. For instance, it has partnered with a leading manufacturer of monitors to complement its camera production as new cars will no longer need side mirrors, but just cameras.

The conglomerate will partner with OEMs for scale and trust.

“Many OEMs have approached us, even Chinese and Italians,” he adds.

It maybe unlikely for Ayala to partner with Japanese OEMs because they have already invested billions in full scale production plants in other ASEAN countries, particularly Thailand,

The main criteria by OEMs is market growth which currently makes the Philippines a perfect fit. A partnership with Ayala ensures greater success.

CAR OF THE FUTURE But the Ayala Group is not just going to enter into the automotive business that will take up the existing technology. It has its own lofty ambitions. It is vying to produce the “car of the future.”

According to Orbeta, the company will go into the new wave of motor vehicles stressing the Philippines already lost its opportunity to be part in the production of current models. “We are already behind that era of welding and stamping to produce cars, what we are looking at are new energy vehicles, could be electric vehicles,” says Orbeta.

Its electronics arm, IMI, is now producing automotive digital technology like sensors and cameras that would support its bid to build the planned car of the future.

IMI’s capability, including the production of cameras and sensors, has prepared them to enter in the automotive sector.

“So it is only a matter of time to do the car,” says Orbeta.

“But we are not building a car that is using the current technology, rather we are building a car of the future,” reiterates Orbeta.

The current car technology still requires welding and stamping will become an obsolete technology, the car of the future requires no more of these.

“Our view is that we are already in this technology, so we should look at the automobile of the future and how to position ourselves in that particular area,” says Orbeta. “We are already behind in the existing technology, so we would rather look at electric vehicles or new energy vehicles, automated vehicles, as we are already making some of their parts,” he adds.

“I think what is exciting is when you go all out to the upstream part of value chain there are corresponding downstream activities like distributorship and parts manufacturing which are equally big,” he adds.

TARIFF LINE If this could be part of the long preparation, then Ayala is doing its homework. Already EU cars, including Volkswagen Philippines, are petitioning the government to include the automotive line in the bilateral negotiations for a free trade agreement with EU to pave the way for a level playing field with imported cars from Japan and Korea, which are now enjoying zero duty.

According to Orbeta, European car firms have recently submitted their unified position to the Department of Trade and Industry (DTI), the lead government agency in the FTA negotiations.

The position paper, which was submitted to DTI last week of August, was signed by the four European car distributors Automobile Central Enterprise Inc. (Volkswagen), Asian Carmakers Corp. (BMW), Auto Nation Group (Mercedes Benz), and Eurobrands Distributors, Inc. (Peugeot).

“Since the tariff tate on our cars is at a high of 30 percent, the basis for excise tax is also high. That is why the price of European-made cars also ballooned,” explains Orbeta. Excise tax is based on the value of the imported item.

Orbeta said that European car companies or distributors of European cars have asked the DTI to look into the tariff rates under the proposed Philippine-EU FTA for remedies.

European cars are still considered aspirational brand for most Filipinos.

“If government can lower the rates just like the Japanese and Korean cars, then all of a sudden the price of Euro cars will also become affordable. We would like to ask them to level the playing field,” says Orbeta. The EU negotiating panel is also asking for the same treatment because automotives are its biggest exports. Both parties are still in the preliminary stages of the PH-FTA negotiations.

The four EU car firms’ position paper was separate from that of the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI), which was submitted in October last year yet and intentionally excluded the automotive line. The four European firms are members of CAMPI, but which is mostly composed by Japanese car companies. Most of them have already their own assembly operations in the country while the European car companies are pure importers.

As a courtesy, the EU car group had also informed their colleagues in CAMPI of their position paper asking for the inclusion of the automotive tariff lines in the PH-EU FTA negotiations.

EU car distributors believe that once they enjoy the same preferential tariff rates, their prices will substantially go down making them more competitive with the other car brands in the country.

The four EU car distributors sold 1,444 units in the January-July period this year out of the total CAMPI sales of 197,448 units. While EU car brands account for a measly one percent of total market only, Orbeta says there is demand for these cars, the only hurdle is the price point. Volkswagen sales ended flat largely due to the price point issue. The FTA will help facilitate lowering their prices.

“Imagine if we have parity import tariff, our cars will suddenly become 30 percent cheaper,” gushes Orbeta.

“Volkswagen used to be produced in the Philippines in the ’60s to ’70s even before Toyota came. That is why we have the Beetle and Sakbayan, the first Asian utility vehicle. Before the Motor Vehicle Development Program came, we already have the Volkswagen assembled here,” he adds.

GROWTH ENGINE

According to Orbeta, the AC Industrials will be the growth engine of Ayala in the next five years.

“We feel we have lots of potentials, we are at the cusp of motorization with the advent of digital electronics,” says Orbeta noting one can even produce an automotive body part out of 3-D printing.

“We are all hoping we can catch up. Once we’ve produced motorcycles, then we have established the competence to build cars,” he adds.

The small cars will continue its trend in the local market but there is also an equally good demand for sports utility vehicles in a market that is also driven by easier financing being offered by banks.

He hopes the new measures being proposed to solve traffic are not meant to curtail growth in car sales noting that even Transportation Secretary Arthur Tugade agreed that the monstrous vehicular traffic in the metro really calls for discipline among motorists.

JOYS

Work can be stressful at times, but Orbeta said that what is so good being with the Ayala organization is their professionalism.

“They (Zobels) ask my opinion and they talk to me,” says Orbeta.

When he first joined Ayala and was given the job to handle HR although he was not an HR person, he was told he qualified to handle the post because his previous job with a global function covering over 900 workers already qualified him to become HR head. Then he talked to the big boss, Jaime Augusto Zobel de Ayala (JAZA) about creating a shared services unit, and the HR Mall, Inc. was born to handle the group’s growing organic manpower team of 45,000 direct workers.

“Including the construction workers which are indirectly employed in the various construction projects, the group is easily employing as many as 95,000 workers. We don’t have ‘endo’ because construction workers continue to have jobs in our various projects, they cannot stay idle,” says Orbeta, who finished AB Economics at Ateneo de Manila University.

“From the very beginning, the company’s rule is to hire the best people because success depends on having the right leader,” adds Orbeta.

Most of the Filipino professionals who are coming back from their stints abroad, especially those in the mid-career would love to go Ayala and even those who left Ayala with no bad record are welcomed to come back.

Other than that, Ayala also recruits fresh graduates directly from the schools. An accounting graduate can shop for an accounting position within the organization given its huge network. They, too, hire from the provinces.

“We are not the highest payers among companies, but we take good care of our people, and they stay longer,” says Orbeta adding that while the mandatory retirement is 60, a retiree can still find other opportunities within the company.

“People render long hours because they take pride in their work, we don’t mind making mistakes as long as we learn and our people have malasakit abd treat the company as their own,” he adds.

He maybe strict, but Orbeta does not reprimand nor shout at any one. Instead, Orbeta supports his people. He calls somebody’s attention if something goes awry, but not in front of others.

He wants to be informed but refrain from being intrusive. He empowers his people so they will have pride in their work.

Most of all, he believes that work should be fun. If work is no longer fun, he said, it will easily catch on others. If an employee is already bored he or she can look for other opportunities within the organization.

They work five days a week but they have events on weekends. On these days, employees still report for work the following day, Monday, without grumbling. Orbeta himself goes to work at 8 in the morning ahead of JAZA, who arrives 30 minutes after. On his free time, the former volleyball player in college prefers to stay at home during his free time with his children and wife Yvette.

His constant challenge to his people is to do things differently so they can serve others better.

Wondering what makes Ayala a most admired company and an employer of choice in the country? It is the great organization and the people, who like Orbeta, believe that their role is to always make it better for company customers and other members of the organization.