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Ambys ride off into the sunset as funds and orders dry up

Sunday, 25 May 2014 - 6:20am IST | Place: UttarparaWest Bengal | Agency: dna

  • Pooja Dodd, a lawyer, still prefers to drive the Ambassador

Is it the end of the road for the iconic Ambassador car? The cranky, fuel-guzzling four-wheeler that once defined nation's personal travel, ferrying babus and netas and then turning into a favourite low-maintenance taxi, has stopped rolling out of the Hindustan Motors (HM) factory in Uttarpara near Kolkata from Saturday.

And from what it appears from the company's communication to the 2,300-odd workers made on Saturday morning while announcing an indefinite suspension of operations, which was seen by dna, only a miracle can make the fuddy-duddy Amby roll out of the plant again.

The CK Birla group doesn't believe it can get a strategic investor into the company, thereby effectively killing the only chance of reviving the fortunes of the Uttarpara plant any time soon. "HM has been actively engaged in scouting for tie-ups with potential investors or strategic partners by introducing new models in the market and by infusing capital in the company in an effort to revive operations... However, looking into the current trends and market scenario of the automotive market in India, investors and strategic partners are not showing much interest at this moment," the 6-page letter, pasted on the plant's gate announcing the suspension order and signed by chief executive officer Moloy Chowdhury, said.

The running of the plant has turned impossible with steadily falling demand, vendors stopping supply of components due to unpaid bills and shrinking orders, banks refusing to extend any working capital loans due to past defaults and even sales tax department initiating criminal proceedings for not paying taxes, the letter said while grimly detailing the challenges faced by HM, most of which were being disclosed for the first time.

"The company has been suffering from huge cash losses for the past several years and is unable to sustain its own any further. Since 1998, HM has been making regular cash losses at Uttarpara plant. These losses have been funded year after year mainly from the sale of company assets located outside the state and belonging to various other divisions through monetisation of investments, capital infusion by promoters and other means. Presently, there are no further assets left in HM that can be monetised to fund cash losses.

Approvals are yet to be received by HM to hive off its forge and foundry units located in the Uttarpara plant which continue to make a cash loss of around Rs1.5 crore. Banks have stopped extending any more funds due to the fact that in the last financial year the plant was unable to make payments to the banks for the letter of credits of their due dates. The sales tax department has issued criminal proceedings for recovery of dues. The electricity board on three occasions resorted to disconnection of power supply during the last six months, resulting in disruption of operations at the plant. The land revenue department has also issued notices for initiating attachment proceedings on the Uttarpara plant which has currently been stayed by Calcutta high court. Some of the suppliers have also filed a winding up petition," the letter said.

Even if HM gets funds from outside investors, chances of reviving operations look bleak in the face of poor demand. "The plant is currently manufacturing about 150 vehicles per month whereas to break even a minimum of 1,500 need to be manufactured and sold per month," it said.

"Production of Ambassadors has dropped from a high of 500 in March 2013 to just 58 in April, and in recent time there has been long stretches of no production days," said a worker camping at the factory gate since morning.

The current suspension of work caps a series of developments starting with the decision to abandon a project to relaunch the Ambassador with a fuel-efficient and modern engine and contemporary looks. With this, managing director Manoj Jha, brought in to execute the project, resigned in January 2012.

HM then went in for the low-cost alternative of giving minor tweaks to the existing platform and bringing in variants like pick-ups, which suffered rejection at the market place.
The woes of HM and its Uttarpara plant become apparent with chairman CK Birla stepping down in December. In the meantime, HM transferred its Chennai plant that churns out the Mitsubishi cars and SUVs like Pajero to a subsidiary with an objective to delink the two businesses and offering each to separate set of financial partners.

This month, managing director Uttam Bose along with chief finance officer Yogesh Goenka resigned and were apparently transferred to take charge of Chennai operations.

While the bankers, suppliers and the government have lost hope and each are taking their own steps to stop further drainage of their resources, it's the workers, who had apparently remained hopeful, coming every day to work till Friday even through they haven't been paid since December. "We are hopeful of a positive outcome that the tripartite meeting between the workers, the management and the state government that is slated to begin on Monday," labour leader Uttam Chakraborty said.
But with little worthwhile effort from the company in the past to either pump in any significant capital and seriously pursue any effort to reengineer and reposition the car from another era, the workers' hope too will hit the speed-breaker.

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