HM to utilise idle capacity at Chennai plant

The beleaguered auto-maker Hindustan Motors is planning to engage other players to utilise the idle capacity at its Chennai plant where all Mitsubishi cars are assembled.

“We are in talks with some other players. We will let you know when things are finalised,” Uttam Bose, managing director of Hindustan Motors, said on the sidelines of the company's annual general meeting here in response to a query.

The plant in which HM manufactures Cedia, Outlander, Pajero and Montero in technical collaboration with Japanese automaker Mitsubishi. has an installed capacity of 24,000 units per year. According to Bose, only 60 per cent of the capacity is being used currently.

Although, the auto maker had earlier initiated talks with overseas firms for contract manufacturing at its Chennai plant earlier in early 2010 to utilise idle capacity, the plan did not materialise at that time. The company also later said, it would use the capacity by launching new variants and ramping up volumes.

The C K Birla group company is now understood to have renewed the idea as Chennai plant's operations are still suffering from lower volumes. “The lower volume is caused mainly by high interest rates and fuel prices and adverse foreign exchange rates, which reduced margin,” CK Birla, chairman of the company, said during the AGM.

On the other hand, sales of the iconic ambassador is also dwindling as it doesn’t have a BS-IV-compliant diesel engine which was made mandatory in 13 major cities with effect from April, 2010. Although, the company claimed to have attained the same same by last year itself, it is yet to get this. “We are hopeful of getting the BS IV engine by next fiscal,” Bose said.

Last year, the company’s sales halved to 5,139 vehicles, from 10,097 a year ago. About 2500 ambassadors were sold last year, while in the current fiscal so far the company has managed to sell about 400 ambassadors.

The much talked about new variant of Ambassador, which was expected to hit the market this year, is yet to be launched. According to Bose, HM is still “working” on the project.

Q1 result:
Hindustan Motors has posted a net loss of Rs 35.49 crore for the quarter ended June 30, 2012 as against a net profit of 16.01 crore in the corresponding period of previous fiscal.

During the period, the company registered a a 22.68 per cent drop in net sales at 102.7 crore as against 132.83 crore in corresponding period of previous financial year.