Automobile Sector Decline Tarnishes Hind Motors Figures

Hindustan Motors Ltd is the flagship of GP-CK Birla Group of companies. It has three major divisions namely Auto Division, Earthmoving Equipment Division and Power Products Division. Reflecting the sluggish demand witnessed by the automobile sector, Hindustan Motors failed to show an encouraging performance in 1996-97.

Hindustan Motor saw a 23 per cent decline in net profit in 1996-97, despite a 3.6 per cent growth in net sales and a 7.2 per cent rise in value of production.

Though operating profit increased slightly by 2.5 per cent, sharp increases in interest charges (up 13.3 per cent), depreciation provision (up 15.0 per cent), and unprecedented increases in MAT provision were the main causes for the decline of the bottomline of the company. Consequently, the companys earnings per share dropped from Rs 4.75 to Rs 3.66 and the company kept the dividend rate (10 per cent) same as that previous year.

 

In the first half of the current year, though the commercial vehicles segment of automobile sector registered over 20 per cent decline in sales, the passenger car showed a 10 per cent increase in sales.

It is, perhaps, due to this that Hindustan Motors showed a marginal improvement in the overall performance in the first half of current year compared to previous corresponding period (see Table).

During the year 1996-97, the operation of the companys Auto Division at Hind Motor was disrupted to some extent due to unlawful stoppage of work from time to time by convoy drivers for about 71 days.

These convoy drivers, who are not on the rolls of the company, are engaged by various contractors who have been entrusted with the job of transportation of the companys vehicles from its factory to various dealer points. According to the company, this stoppage of work affected the profitability of the company to some extent.

Production of Ambassador cars in the Auto Division stood at 24,294 as against 24,084 in the preceding year. Overall production of vehicles stood at 29,039 as compared to 30818 in 1995-96. Production at the Earthmoving Equipment Division at Tiruvallur and Pondicherry showed a marginal improvement during the current year. The overall unit production was 609 as compared to 571 units in the previous year.

On the other hand the Power Products Division of the company at Hosur achieved the distinction of producing more than 1000 numbers of transmissions.

Production was 1,027 numbers as against 917 numbers in the previous year. A new product developed by this division, viz.. automatic transmission for buses, has been tested and field trial with a major original equipment manufacturer is planned during the current year.

The inventory of the company increased by 9.9 per cent from Rs 210.65 crore in 1995-96 to Rs 231.46 crore in 1996-97. Total exports of all the above divisions during the year stood at Rs 27.52 crore showing a growth of 44.69 per cent over the previous years Rs 19.02 crore.

The companys joint venture with General Motors Corporation, USA, General Motors India Ltd., commenced commercial production of Opel Astra cars during the year 1996-97. During the year, 7,435 Opel Astra cars were produced. In the first half of the current year, General Motors sales rose to 5,469 cars compared to 1,311 cars in the previous corresponding period.

The company has undertaken a project for manufacture of the Lancer car in collaboration with Mitsubishi Motors Corporation of Japan. It has also launched a project at the existing Indore plant for the manufacture of a Rural Transport Vehicle in collaboration with Oka Motor Company of Australia, specialised manufacturers of rugged vehicles. Hindustan Motors also entered into agreements with a considerable number of vendors for supply of components for the companys Lancer MG41 model.

The Auto Marketing Division of the company was awarded ISO9001 certification during the year 1996-97. This is in addition to ISO9001 certifications obtained earlier by other divisions, viz. Earthmoving Equipment, Power Products at Indore as well as the Forge Plant at the Auto Division. Manufacturing System Engineering programmes have been completed at EED and PPD and are now under implementation at Auto and Indore Divisions.