Seeks extension of payment deadlines.
The Chennai-based Ashok Leyland, India's second-largest commercial vehicle maker, has asked its suppliers to consider revising component prices since their input cost has come down drastically following a sharp fall in commodity prices.
The company, which had to suspend manufacturing operations recently at almost all its plants to correct spiraling inventory levels, has been engaged in constant dialogue with its parts suppliers in an effort to get payment relief from them. However, the company today said that it has raised finance for making payments to all small and medium enterprises (SMEs) and parts suppliers. At the same time, the commercial vehicle maker also urged the vendors to extend their payment deadlines.
A company official said, "We are renegotiating on the price front with our vendors as input prices have softened of late. We have apprised our vendors of the situation and they have agreed to provide full cooperation."
Meanwhile, the company has decided to go slow on production at its Pantnagar facility. Ashok Leyland is targeting a lower initial capacity at that plant with reduced investments in the initial phase. The company refused to give out exact details of the investment pattern.
The company may have to resort to further production cuts as demand for commercial vehicles has dried up primarily due to lack of finance options. Many private and public sector banks have either pulled back or applied stricter norms for financing commercial vehicles due to the high level of risk involved in such loans.
Recently, default on such loans has increased dramatically. Many truck owners have been reportedly forced to surrender their vehicles for non-payment of dues.
