As part of its revival plan, loss-making Hindustan Motors plans to make new models of Mitsubishi Motors at its Chennai plant and rationalise its workforce. The company, maker of the iconic Ambassador cars, was considering branching out into auto component business including supply of castings, forgings and stampings to other manufacturers.
While company officials were not available for comment, the directors’ report stated that the accumulated loss of the company as on March 31, 2010, was Rs 132.27 crore. This had resulted in an erosion of more than 50 per cent of the company's peak networth during the immediately preceding four financial years, the report said.
The company said that beginning with the third quarter of 2008-09, in the wake of global economic problems, volumes declined and the plant started incurring losses. “The problem was compounded further by adverse movement in foreign exchange rates from 2008 onwards affecting the sales and profitability.”
To address the issue, the company initiated dialogue with its foreign collaborator for counter measures and was able to persuade the collaborator to reduce kit prices. The gains of such reduction, due to inherent lead time in shipments, became available to the company only in March 2010 and that the plant turned profitable once again.
The company plans to go for new Mitsubishi models. It currently manufactures and markets Mitsubishi vehicles namely Lancer, Cedia, Pajero, Outlander and Montero.
The company's Uttarpara plant, which manufactures Ambassador cars and small goods carrying mini truck called 'Winner,' has been experiencing steady decline in volumes. “The car is predominantly sold to taxi operators, institutional and commercial segment, and the sales have been declining due to competition from mid-size car and utility vehicles,” the report said.
More From This Section
In the year 2009-10, sales of Ambassadors in the taxi segment improved due to large-scale fleet replacement in Kolkata city. “While the plant had registered significant increases in volume, the profitability did not improve commensurately because most of the increased volume came from relatively lower margin variant of yellow taxis.”
Among other measures, the company plans to modernise its manufacturing faculties to improve efficiency and reduce costs, reduce the input and other overheads by value engineering, rationalisation of work force, increase the distribution network and other cost reduction measures.