WHEN: Today, Monday, November 20, 2017
WHERE: CNBC's "Squawk on the Street" – Live from Auburn Hills, Michigan
Following is the unofficial transcript of a FIRST ON CNBC interview with Mahindra Group Chairman Anand Mahindra and CNBC's Michelle Caruso-Cabrera on CNBC's "Squawk on the Street" (M-F 9AM-11AM) today, Monday, November 20th. Following is a link to video from the interview on CNBC.com: https://www.cnbc.com/video/2017/11/20/mahindra-group-chairman-why-were-expanding-in-the-us.html?play=1.
All references must be sourced to CNBC.
CARL QUINTANILLA: WELCOME BACK TO "SQUAWK ON THE STREET." LET'S GET OVER TO MICHELLE CARUSO-CABRERA. THIS MORNING SHE'S IN AUBURN HILLS, MICHIGAN AT THE NEW MAHINDRA FACTORY SITTING DOWN WITH THE COMPANY'S CHAIRMAN, ANAND MAHINDRA. HI MICHELLE.
MICHELLE CARUSO-CABRERA: HEY, YEAH, THANKS VERY MUCH, CARL. THEY HAVE UP TO 275 PEOPLE WORKING AT THIS NEW FACILITY WITHIN THE NEXT COUPLE OF MONTHS, AND THEY WANT TO HAVE 400 PEOPLE WORKING HERE BY 2020. JOINING US NOW IS ANAND MAHINDRA. TELL US WHY. GOOD TO HAVE YOU HERE.
ANAND MAHINDRA: DETROIT IS FRANKLY THE BIRTHPLACE OF THE MODERN INDUSTRIAL MANUFACTURING REVOLUTION, SO WE THOUGHT WE'D GET A TINY PIECE OF IT. IN A WAY, IT'S COMING FULL CIRCLE. YOU KNOW, ONE OF OUR BUSINESSES, THE AUTOMOTIVE BUSINESS IN INDIA, STARTED BY IMPORTING THE WILLYS JEEP INTO INDIA. AND NOW I'M BACK HERE STARTING AN AUTOMOTIVE FACTORY IN DETROIT. LIFE HAS COME FULL CIRCLE I THINK.
CARUSO-CABRERA: I THINK A LOT OF PEOPLE WILL BE WATCHING AND SAYING "OH, THIS IS AN INDIAN COMPANY – ARE YOU GOING TO BRING INDIANS HERE UNDER H 1 B VISAS? OR ARE THOSE 400 PEOPLE, ARE THEY GONNA BE MOSTLY AMERICANS, OR--?"
MAHINDRA: THE PEOPLE WE HAVE HERE, THE 275 YOU TALKED ABOUT, ARE ALMOST 95%, 99% AMERICAN. THEY ARE AMERICAN CITIZENS OR GREEN CARD HOLDERS. WE CAME HERE, MICHELLE, TO TAP THE LOCAL TALENT. WE CAME HERE TO TAP THE ENGINEERING EXPERIENCE THAT IS – THAT DETROIT IS STEEPED IN. WHY ON EARTH WOULD WE BRING PEOPLE FROM INDIA WHEN WE ARE HERE TO OFFSHORE AND TO OUTSOURCE ENGINEERING TALENT FROM THE U.S.?
CARUSO-CABRERA: EXPLAIN TO US THE ECONOMICS. BECAUSE YES, THERE'S A LOT OF ENGINEERING TALENT HERE, BUT LABOR IS CHEAPER IN INDIA. SO WHY DO THIS HERE?
MAHINDRA: YOU KNOW, THERE IS NO BUSINESS IN THE WORLD, I DON'T CARE WHAT IT IS, WHETHER IT'S I.T. OR MANUFACTURING, THAT DOES NOT HAVE WHAT I MAY REFER TO AS A BLENDED RESOURCE BASE. YOU HAVE HIGH-END WORK, YOU HAVE ENGINEERING WORK, YOU HAVE SOME LOCAL KNOWLEDGE YOU REQUIRE. THEN YOU HAVE SOME VERY LOW COST WORK TO BE DONE. SO WHICHEVER VALUE CHAIN YOU'RE IN AND WHATEVER BUSINESS YOU'RE IN, YOU'RE GOING TO HAVE PEOPLE FROM ALL AROUND THE WORLD. YOU'RE GOING TO HAVE PEOPLE WHO ARE GOING TO BE PEOPLE FROM A LOW COST SOURCE, BUT YOU'RE GOING TO HAVE TO HAVE PEOPLE OF VERY HIGH END TALENT, WHICH ARE PEOPLE WHO ALSO UNDERSTAND THE CONSUMER. WE'RE GOING TO BE SELLING OUR PRODUCT TO THE AMERICAN CONSUMER. WE WANT TO HAVE AMERICANS WHO UNDERSTAND AMERICAN CONSUMERS.
CARUSO-CABRERA: OFF ROAD UTILITY VEHICLES. WHY THESE IN PARTICULAR?
MAHINDRA: WELL, YOU KNOW, WE STARTED OUT AS MAKERS OF THE UTILITY VEHICLE IN INDIA, OF THE ORIGINAL WILLYS JEEP. THAT'S IN OUR DNA. SO, WE UNDERSTAND OFF-ROADING. WE ARE, AS YOU KNOW, A MAJOR PLAYER IN THE TRACTOR BUSINESS. THE LAST TIME WE MET, WE TALKED ABOUT THAT. WE'RE THE NUMBER THREE TRACTOR MAKER IN THE SMALL TRACTOR SEGMENT HERE. AND THEN WE HAVE JUST STARTED MAKING A UTILITY VEHICLE FROM OUR TRACTOR COMPANY CALLED THE RETRIEVER, WHICH I THINK YOU SAW OUTSIDE. AND NOW WHAT WE'RE GOING TO PRODUCE IS GOING TO BE SOMETHING THAT TAKES YOU A STEP BEYOND. SOMETHING THAT IS INDUSTRIAL STRENGTH. AN ALL-STEEL BODY, REALLY DURABLE, THAT LEVERAGES THE DNA OF MAHINDRA. I THINK IT'S THE RIGHT TIME AND THE RIGHT PLACE FOR THAT MARKET. SO IT'S THE LOGICAL NEXT STEP TO ESTABLISH THE MAHINDRA BRAND IN THE U.S.
CARUSO-CABRERA: YOU'RE DOING THIS AT A TIME WHERE THERE'S A LOT OF POLICY UNCERTAINTY IN THE UNITED STATES AROUND A NUMBER OF ISSUES THAT I THINK YOUR COMPANY IN PARTICULAR MIGHT DEAL WITH. FOR EXAMPLE, TRACTORS, AS YOU MENTIONED, YOU HAVE LARGE MARKET SHARE THERE. YOU HAVE FACILITIES IN MEXICO, YOU HAVE FACILITIES IN CANADA. OUR COLLEAGUE LARRY KUDLOW TELLS US HE'S WORRIED THAT THE WHITE HOUSE WILL LEAVE NAFTA. WHAT WOULD THAT DO TO YOU AND HOW WORRIED ARE YOU ABOUT THAT?
MAHINDRA: OUR MAJOR BASE IS THE U.S. IT'S MAHINDRA NORTH AMERICA WHICH IS REALLY SPREADING TO CANADA AND MEXICO. SO WE ARE ESSENTIALLY STILL A MASTER DISTRIBUTOR TO THOSE PLACES. SO WE ARE IN NO PLACE RIGHT NOW WHERE WE ARE GOING TO BE IN ANY DIFFICULTY OVER CHANGES. BUT IF YOU ASK ME MY PERSONAL IMPRESSION, I THINK YOUR PRESIDENT IS A CONSUMMATE NEGOTIATOR. HE'S FIRED AN OPENING SHOT, BUT I THINK HE'S JUST AS AWARE OF HOW INTEGRATED NAFTA IS. NAFTA MAY NEED SOME TWEAKS. IT'S A 20-YEAR-OLD AGREEMENT. BUT I'M NOT SO SURE, I DON'T NECESSARILY SHARE ANYONE'S PESSIMISM THAT AMERICA MIGHT BAIL OUT ENTIRELY.
CARUSO-CABRERA: YOU'RE NOT WORRIED ABOUT SUPPLY CHAIN DISRUPTION IF THEY DO?
MAHINDRA: NO, NOT AT ALL. DISRUPTION OF THE SUPPLY CHAIN, NO, NOT AT ALL. WHAT THE COST IMPACTS WILL BE, MAY BE A DIFFERENT MATTER. BUT AS I SAID, AGAIN, I'M AN OPTIMIST ABOUT NAFTA MERELY BEING UPDATED, BUT I DON'T THINK IT'S GOING TO BE A SITUATION WHERE NAFTA IS GOING TO EXPLODE.
CARUSO-CABRERA: MAHINDRA IS A HUGE ORGANIZATION WITH LOTS OF DIFFERENT BUSINESSES. YOU HAVE TECH MAHINDRA, WHICH USES A LOT OF H1B VISAS. THEY'VE MADE THE BUREAUCRATIC PROCEDURE MUCH MORE DIFFICULT AND NOW THERE'S A HOUSE VOTE ON FRIDAY SAYING THE MINIMUM WAGE FOR THE VISA RECIPIENT MAY HAVE TO GO FROM $60,000 TO $90,000, A 50% INCREASE FOR THOSE DOING THE MATH. WHAT WOULD IT MEAN FOR TECH MAHINDRA AND YOUR COMPANY?
MAHINDRA: TO BE VERY HONEST, MICHELLE, WHAT IT MEANS IS THAT IT'S GOING TO MAKE OFFSHORING MORE ATTRACTIVE. THE U.S. COMPANIES THAT MAY HAVE BEEN WANTING US TO HIRE H1B VISA PEOPLE HERE ARE SIMPLY GOING TO FIND WAYS TO OFFSHORE IT. WITH DIGITIZATION, WITH PLATFORMS BEING MAJOR DELIVERY MECHANISMS, OFFSHORING HAS BECOME EVEN SIMPLER. SO IN FACT, IT COULD ACTUALLY MAKE YOUR PROFITS IMPROVE FOR AN INDIAN COMPANY. I THINK AMERICA HAS TO THINK VERY HARD, THOUGH, ABOUT THE BALANCE OF WHAT PRESSURE THEY BRING TO BEAR ON AMERICAN COMPANIES AND MAKE THEM UNCOMPETITIVE BY RAISING THE RATES TOO HIGH. IN ANY CASE, FRANKLY, TECH MAHINDRA WAS TRADING UP. INDIAN I.T. COMPANIES WHICH WERE REALLY AT THE LOW END OF THE VALUE CHAIN WERE MOVING UP, WERE EMPLOYING MORE PEOPLE. WE HAVE 2,500 PEOPLE AT TECH MAHINDRA HIRED HERE, WHO ARE AMERICAN CITIZENS OR H1B VISAS, SORRY, NOT H1B, BUT GREEN CARD HOLDERS OR AMERICAN CITIZENS. SO IN ANY CASE WE WERE RATCHETING UP THE CONTOUR. IN FARGO, IN RURAL FARGO, WE HAVE 2,000 PEOPLE WE'VE HIRED. SO THAT WAS HAPPENING WELL BEFORE THIS CURRENT ADMINISTRATION.
CARUSO-CABRERA: YOU TALKED ABOUT U.S. COMPANIES BEING MORE COMPETITIVE. THEY'RE DEBATING TAX REFORM IN CONGRESS RIGHT NOW. WOULD A LOWER U.S. CORPORATE TAX RATE MAKE THE U.S. MORE COMPETITIVE AND BY HOW MUCH?
MAHINDRA: I MEAN, THAT'S A RHETORICAL QUESTION. OF COURSE, IT WOULD, BECAUSE THAT'S ONE OF THE REASONS AMERICA HAS BECOME AN EVEN GREATER MAGNET FOR INVESTMENT. THE EASE OF DOING BUSINESS IS ALREADY AN ATTRACTION HERE. THE LARGE MARKET IS ALREADY AN ATTRACTION. ON TOP OF THAT, YOU'RE GOING TO GET LOWER TAXES, YOU'RE GOING TO GET A HUGE AMOUNT OF INVESTMENT TRAVELING TO THE U.S.
CARUSO-CABRERA: THERES A RACE CAR THAT WE'RE GOING TO SHOW PEOPLE LATER. TELL ME ABOUT WHEN YOU MIGHT DECIDE TO GO INTO AUTO MANUFACTURING HERE IN THE UNITED STATES? THERE WAS SOMETHING YOU TRIED A COUPLE YEARS AGO, GOT SLOWED DOWN FOR A NUMBER OF REASONS. DO YOU STILL DREAM ABOUT THAT?
MAHINDRA: ABSOLUTELY. AND DREAMS NEVER DIE, MICHELLE. YOU KNOW THAT. BUT – AND I WOULD BE LYING IF I SAID THAT DREAM IS DEAD. I THINK WHAT WE ARE DOING IS WE ARE PROGRESSING SLOWLY. WE'RE WALKING UP THE LADDER, TRACTORS, UTILITY VEHICLES – NOW MORE SOPHISTICATED UTILITY VEHICLE. AND YOU KNOW, WE HAVE A KOREAN COMPANY THAT WE OWN CALLED SSANGYONG, WHICH IS THE THIRD AUTOMAKER IN KOREA. NOT MANY AMERICANS KNOW OF IT. BUT THANKS TO HYUNDAI AND KIA, MOST AMERICANS HAVE ACCEPTED KOREAN AUTOS. THERE'S NO REASON WHY SSANGYONG MAY NOT LAUNCH A VEHICLE HERE AS WELL.
CARUSO-CABRERA: SPEAKING WITH OUR AUTO REPORTER, SAID A LOT OF DISCUSSION IS ABOUT WHETHER OR NOT AN INDIAN CAR COULD EVENTUALLY CLOSE THE QUALITY GAP OR THE PERCEIVED QUALITY GAP ENOUGH FOR AMERICANS TO REALLY WANT TO BUY THEM. I ASSUME YOU'RE CONFIDENT THAT CAN HAPPEN AT SOME POINT?
MAHINDRA: LOOK JAPAN DID IT. KOREA DID IT. THERE'S NO REASON WHY AN INDIAN COMPANY COULDN'T DO IT. THE QUESTION IS, AS MAHINDRA AND OWNERS OF SSANGYONG MOTORS, WE CAN LEAP FROG. WE CAN SIMPLY BRING THE KOREANS IN, BECAUSE AS WE SAID, THE KOREANS HAVE CLOSED THAT GAP, THE PERCEPTION GAP.
CARUSO-CABRERA: YOU'RE COMPETING FOR THE U.S. POSTAL SERVICE, FOR NEW TRUCKS. YOU HAVE ONE COMPARATIVE ADVANTAGE. YOU ALREADY HAVE THE WHEELS ON THE RIGHT SIDE OF THE AUTOMOBILE. WHEN DO YOU EXPECT TO HEAR ABOUT THAT CONTRACT, WHICH WOULD BE SEVERAL BILLION DOLLARS WORTH?
MAHINDRA: I THINK WE HAVE BEEN EMBARGOED FROM SAYING MUCH ABOUT IT, SO I HAVE TO BE VERY CAUTIOUS. ALL I CAN TELL YOU IS WE HAVE BEEN SHORT LISTED AMONGST THE TOP FIVE. WE'RE VERY EXCITED, THE TEAM HERE IS SUPER EXCITED. THE PROTOTYPE IS HERE, I CAN'T SHOW IT TO YOU, BUT IT LOOKS TERRIFIC. AND AS I SAID, IT'S A RIGHT-HAND DRIVE VEHICLE. THEY NORMALLY USE DIESEL. WHO KNOWS HOW TO MAKE RIGHT-HAND DRIVE DIESEL VEHICLES? MAHINDRA.
CARUSO-CABRERA: MR. MAHINDRA, THANKS SO MUCH FOR JOINING US ON CNBC.
MAHINDRA: THANK YOU FOR COMING OUT HERE, MICHELLE.
CARUSO-CABRERA: MY PLEASURE. IT'S A BEAUTIFUL NEW FACTORY. LOOK FORWARD TO SEEING IT. CARL, BACK TO YOU.
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