turnaroung - hm

7/31/2019 Turnaroung - HM

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HINDUSTAN MOTORS

TURN AROUND STORY


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Hindustan Motors manufactures Utility Vehicles, PassengerCars, Earthmoving Equipment and other power products

The company was the largest car manufacturer in India

before the rise of Maruti Udyog (MUL).

First to start car production in india in 1942 Landmaster production in 1954. Ambassador in 1957.

Tie-ups with General Motors Corporation of USA, VauxhallMotors, UK, Marion, Power Shovel Co, USA led to newproducts being launched.

In 1963 commenced the production of the AmbassadorMark Later versions and more forays in related vehiclesegments followed.

One of the original three car manufacturers in India,founded in 1942, it was a leader in car sales until the1980s,

Hindustan has a joint venture with Mitsubishi, producing

versions of the Lancer and Pajero, but is best known forits own models.

Overview


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Ambassador - MitsubishiPajero

Mitsubishi Montero - Mitsubishi Lancer MitsubishiCedia

Tiruvallur (Chennai) Mitsubishi Lancer cars in technical collaboration withMitsubishi Motors, Japan

Uttarpara (Kolkata) Passenger Cars:Ambassadors, Contessa, & Multiutility

Vehicles -Trekker, Porter & Pushpak.

Pithampur (Indore) "RTV" brand of multiutility vehicles in technical

Overview

Quick Flash

Plants:

Founder B.M. Birla

Country IndiaYear of Establishment 1942

Business Group CK Birla Group

Website www.hindmotor.com
http://www.surfindia.com/automobile/ambassador.htmlhttp://www.surfindia.com/automobile/mitsubishi-pajero.htmlhttp://www.surfindia.com/automobile/mitsubishi-pajero.htmlhttp://www.surfindia.com/automobile/mitsubishi-montero.htmlhttp://www.surfindia.com/automobile/mitsubishi-lancer.htmlhttp://www.surfindia.com/automobile/mitsubishi-cedia.htmlhttp://www.surfindia.com/automobile/mitsubishi-cedia.htmlhttp://www.surfindia.com/automobile/mitsubishi-cedia.htmlhttp://www.surfindia.com/automobile/mitsubishi-cedia.htmlhttp://www.surfindia.com/automobile/mitsubishi-lancer.htmlhttp://www.surfindia.com/automobile/mitsubishi-montero.htmlhttp://www.surfindia.com/automobile/mitsubishi-pajero.htmlhttp://www.surfindia.com/automobile/mitsubishi-pajero.htmlhttp://www.surfindia.com/automobile/ambassador.html


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Evolution of Automobile Industry 80s.00s

Initial Years

Manufacturing was licensed

License Raj

High Customs duty on import

Steep excise duties &sales tax

2 Major players:

Premier Automobiles Ltd

& Hindustan Motors

1980s

Entry of MUL, better product,

with government support

Sellers Market

Long Waiting Periods

Early to mid 90s

Sellers market and long

waiting periods

Decrease in customs &excise

Auto finance boom- more

players

foreign banks & nonbanking companies, better

schemes.

Mid 90s Early 2000s

Buyers market

Easy Auto finance

Manufactures diversifying

into related activities:

finance lease, fleet

management, insurance

and used car market

But HM diversified very

lately compared to all

other companies


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The Old Amby had to be taken to workshop after deliveryfor re-welding and other modifications for the basicdriving situation.

During early 80s delivery of Amby usually takes a span of6 months to 1 year for delivery.

In 1981 with the entry of MUL, the scenario changeddrastically,

MULs small fuel efficient and well designed car, Maruti800, became a huge success.

By the late 1980s MUL became the market leader, leavingHindustan Motors way behind in the market share.

HM premium segment market share were being eaten updrastically by MUL and Honda.

Mostly due to advertising and effective marketingstrategies of the competitors

MULs Entry 1981


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The Key PlayersCar Segment by year 2k

Commercialvehicles

TATA Motors, Ashok Leyland, Swaraj Mazda,Mahindra &Mahindra ,Force motors, Eicher Motors

Passengervehicle

TATA Motors, Maruti Udyog, Honda Motors, Toyata,Skoda, Mahindra & Mahindra, Hindustan Motors

Passenger vehicle

By the year passing, HMs market share went low and

was considered as others in the segment


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Trends in the automobile sector2k

Production of automobiles

4.85.3

6.37.2

8.5

0

2

4

6

8

10

2000-01 2001-02 2002-03 2003-04 2004-05

m

illionnumbers

Domestic Sales of automobiles

4.65.2

5.96.8

7.9

0

2

4

6

8

10

2000-01 2001-02 2002-03 2003-04 2004-05

millionnumbers

Exports of automobiles

0.17 0.18

0.31

0.48

0.63

0

0.1

0.2

0.3

0.40.5

0.6

0.7

2000-01 2001-02 2002-03 2003-04 2004-05

millionnumbers

Domestic Sales have been growingstrongly

Exports have nearly tripled in theyears

HM was unable to hold position inmarket due to their drop in marketingstrategies


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E i t A l i


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Threat of Substitute: HM was focused only to onesegment till 1997

Within the company also lead to downfall of the companyand ultimately leading to less market share. Eg. Internal Problems, Union problems etc

Most of the manufacturing divisions are closed, the land &machineries have been sold or shifted

Surprisingly HM never gave any dividends to itsshareholders.

HM strategy failed : Sufficient attention is not paid to thepeople development dimension.

HR problems that arise when executing strategies were ofthe causes below: -

Failure to match individual goals and organizationalgoals.

Failure to match individuals aptitudes with

implementation tasks. Inadequate top management support for

Environment Analysis


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T d Eff t


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HM decided to tap new segments to ease the competitivepressures from other giants

HM collaborated with Oka Motor Co. to develop targetingat rural markets.

Launched Trekker (Rural Transport Vehicle)1995 in 3northern states.

1998, Trekker sales dropped by two thirds of its initialvolumes to around 800 a year.

1999, HM launched the redesigned Trekker and anupgraded version of the amby.

All restructuring and efforts could not sustain in marketfor a longer time, there was high decline in sales.

HM invested around INR 750 million to modernize theassembly line, building new body and paint shops andeven purchased new equipment.

Cost Cutting Measures: Company also embarked on a costcutting exercise and announced a Voluntary Retirement

Turnaround Efforts

T d Eff t II


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HM decided to look beyond its existing portfolio to comeout of its problems.

New Business ventures: HM entred into Collabration with Mitshubishi Motors,

Japan in 1998 for manufacture of parts & transmission. HM tie-ups with General Motors Corporation of USA,

Vauxhall Motors, UK, Marion Power Shovel Co, USA led tonew products being launched.

HM entered into an agreement with Mahindra andMahindra for developing petrol engine for M&M vehicles.

Change in Distribution Networks:1999, HM unveiled a new distribution system, whereindealers where divided into three tiers Red tier catered to the metros for lancers Blue tier catered to the semi urban areas for Contessas

and Ambassadors Green tier to rural markets for Trekkers.

Exporting Era: 2001, HM also decided to explore the overseas markets

for its products Cutting down the diversification / Cost benefit Analysis/

Measures Effective Utilization of Internet resources.

HM had invested Rs 2.5 million in the software Customers could choose the car color, the interior, accessories

Turnaround Efforts - II

T d Eff t


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2001,Click Business.

2001 February, HM sold its earthmoving equipment toCaterpillar Inc. (CAT) for Rs 3.3 Billion.

After the deal HM was able to bring down its high interestdebts

It helped reduce gross loss to Rs 152.2 million from Rs255.5 million in the corresponding quarter of 1999-00.

After the launch of the service, Lancers market share had

gone up by 4%. Export has been steadily increasing, mainly in the British

and Japanese markets

Over a period of time, sales from auto components couldbe as high as 30-40%

HM also managed to secure an export order for 300 petrol

engines from a UK based company

Turnaround Effect

1998 1999 2000 2001

Sales value (Rs in Mn)

Commercial Vehicles 7,376.20 8,005.1 12,768.4 12,358.9

F t Pl


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Hindustan Motors planned to launch Mitsubishi's small-carmodel iCar in India by the end of 2009.

Indian passenger vehicle market is forecast to nearly

double to 2m units in annual sales by 2010. GM and Hindustan Motors are toying with the idea of

introducing CNG as a fuel option in order to boost sales.

Mitsubishi source components through partner HindustanMotors will prove beneficial for Mitsubishi

With this HM possibly would be able to use some of its idlecapacity and shore up its bottom line.

Opportunities:

Efficiency through management principles

Exports

Acquisitions for strengthening its distribution tie-ups.

Entry into other related diversification categories Can bring out more sophisticated cars with high

technology standards

Threats:

Emergence of strong players in the market

Lack of employee motivation

Lack of design for cars (mainly new age look for cars)

Future Plan


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