End of the road for Ambassador?

 

Kolkata, May 24, 2014, DHNS: The iconic Ambassador car manufacturer Hindustan Motors (HM) has suspended work at its Uttarpara plant in Hooghly district of West Bengal, leading to speculations that it may not reopen.

 

A notice, which informs that the “temporary suspension” of work will come into effect from 6 am on May 24, was put up on Friday evening.

 

But the fact that the facility was in trouble from the last few years has led to widespread speculation about a perman­e­nt closure but the management has remained tight-lipped.

 

Around 2,500 employees and the workers may go on a prolonged agitati­on. “The suspension of work will stop bleeding the company. Things will improve once a strategic investor comes in,” a senior official said, adding that the employees will not be paid during the suspension.

 

The cash-strapped Uttarpara plant, set up by the Birlas in 1948 to give a boost to the indigenous automobile industry, was bifurcated a few years ago from the company’s Chennai facility, which was brought under Hindustan Motors Finance Corporation Ltd.

 

The drop in the sales of ambassador cars added to Uttarpara plant’s woes. According to sources, it suffered a loss of Rs 80 crore in 2012-13 financial year and Rs 40 crore till December 2013.

 

After being evasive about the plant’s situation over the years, the HM management finally stated in the suspension notice how the plant is dogged by a variety of problems.

 

“Very low productivity, growing indiscipline, critical shortage of funds, lack of demand for its core product, the Ambassador (car), and large accumulation of liabilities... Given the present circumstances, it has no alternative but to declare a suspension of work at its Uttarpara plant till further notice. (This) will enable the company in restricting mounting liabilities and restructure its organisation and finances and bring in a situation conducive to reopening of the plant,” it stated.

 

With the passage of time, the Ambassador was relegated to the taxi market, which in recent times was confined only to replacement of 15-year-old vehicles. As the state government allowed other cars as taxis, the plant was further hit.

 

While it is still unclear whether the state government would intervene, sources said Chief Minster Mamata Banerjee has instructed Finance Minister Amit Mitra, who also holds the industry portfolio, to look into the matter.

 

HM sources said the facility’s tooling is such that it can only manufacture the Ambassador, which is modelled on the Morris Oxford car of the 1950s. Ambassador enjoyed a monopoly till Maruti came into the picture in the mid-1980s, creating the small-car segment and taking over the market, until the country opened its doors to foreign car makers.

 

While it became clear a few years ago that the Uttarpara plant has no future in its present avatar, HM management passed up every opportunity to modernise the plant and it eventually became a white elephant.