HINDUSTAN MOTORS – TURN AROUND STORY

 Hindustan has a joint venture with Mitsubishi. Power Shovel Co. Marion.  Ambassador in 1957. it was a leader in car sales until the 1980s. . founded in 1942. producing versions of the Lancer and Pajero. but is best known for its own models.  One of the original three car manufacturers in India.  First to start car production in india in 1942  Landmaster production in 1954. Earthmoving Equipment and other power products  The company was the largest car manufacturer in India before the rise of Maruti Udyog (MUL). Vauxhall Motors.  In 1963 commenced the production of the Ambassador Mark Later versions and more forays in related vehicle segments followed. UK. Passenger Cars.  Tie-ups with General Motors Corporation of USA.Overview  Hindustan Motors manufactures Utility Vehicles. USA led to new products being launched.

Pithampur (Indore) – "RTV" brand of multiutility vehicles in technical • • . & Multiutility Vehicles -Trekker.Overview Quick Flash F ounder Country Year of Establishment Business Group W ebsite B. Contessa. Japan Uttarpara (Kolkata) – Passenger Cars:Ambassadors.com Segment & Brands of Hindustan Motors – Ambassador – Mitsubishi Montero – Mitsubishi Cedia Mitsubishi Pajero Mitsubishi Lancer Plants: • Tiruvallur (Chennai) – Mitsubishi Lancer cars in technical collaboration with Mitsubishi Motors. Birla India 1942 CK Birla Group www. Porter & Pushpak.hindmotor.M.

better product. better schemes. insurance and used car market •But HM diversified very lately compared to all other companies . Mid 90s – Early 2000s •Buyers market •Easy Auto finance •Manufactures diversifying into related activities: finance lease. fleet management.Evolution of Automobile Industry… 80s….more players •foreign banks & non banking companies. with government support •Seller’s Market •Long Waiting Periods Early to mid 90s •Seller’s market and long waiting periods •Decrease in customs & excise •Auto finance boom.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.

• There was no executive order that the government departments have to buy only ambassador cars. • Ambassador was very popular in the taxi segments as well. • HM derived a major part of its sales from senior politicians. Government of India. • Ambassador was the vehicle of choice. • Till the early 1980s. Still all were buying as a prestige to own it.The 80’s • Until the 1980’s. bank managers and defense personnel. . only 2 care available in Indian Market – Ambassador and Premier Automobiles Ltd’s (PAL) Padmini. top civilians. and the official car for almost every Indian Prime Minister after independence. accounting up to 65% of ambassador sales in 2001. Ambassador commanded more than 70% of the market share.

leaving Hindustan Motors way behind in the market share. In 1981 with the entry of MUL. HM premium segment market share were being eaten up drastically by MUL and Honda. Maruti 800. the scenario changed drastically. MUL’s small fuel efficient and well designed car. By the late 1980’s MUL became the market leader. Mostly due to advertising and effective marketing strategies of the competitors • • • • • • .MUL’s Entry ……1981 • The Old Amby had to be taken to workshop after delivery for re-welding and other modifications for the basic driving situation. became a huge success. During early 80’s delivery of Amby usually takes a span of 6 months to 1 year for delivery.

Eicher Motors TATA Motors.The Key Players…Car Segment by year 2k Passenger vehicle • By the year passing. Ashok Leyland.Force motors. HM’s market share went low and was considered as ‘others’ in the segment TATA Motors. Toyata. Honda Motors.Mahindra & Mahindra . Skoda. Hindustan Motors Commercial vehicles Passenger vehicle . Swaraj Mazda. Mahindra & Mahindra. Maruti Udyog.

2 0.6 0.9 2000-01 2001-02 2002-03 2003-04 2004-05 Exports of automobiles 0.7 0.Trends in the automobile sector…2k Production of automobiles 10 million numbers 8 6 4 2 0 2000-01 2001-02 2002-03 2003-04 2004-05 4.2 8.48 0.1 0 0.4 0.5 0.2 5.31 0.8 5.9 6.17 0.18 • • Exports have nearly tripled in the years HM was unable to hold position in market due to their drop in marketing strategies million numbers • Domestic Sales have been growing strongly 2000-01 2001-02 2002-03 2003-04 2004-05 .3 0.8 7.3 6.63 0.5 million numbers 10 8 6 4 2 0 Domestic Sales of automobiles 4.3 7.6 5.

.

Union problems etc Most of the manufacturing divisions are closed. – Eg. the land & machineries have been sold or shifted Surprisingly HM never gave any dividends to its shareholders. Internal Problems. HM strategy failed : Sufficient attention is not paid to the people development dimension. – Failure to match individuals aptitudes with implementation tasks. HR problems that arise when executing strategies were of the causes below: – Failure to match individual goals and organizational goals.Environment Analysis • • Threat of Substitute: HM was focused only to one segment till 1997 Within the company also lead to downfall of the company and ultimately leading to less market share. – Inadequate top management support for • • • • .

– Reduce the workforce in its production plant at Uttarpara • • • Company started implementing the recommendations) . Daimler Benz.Steps towards Turnaround • • Indian economy opened up for foreign players. Honda……entered India through joint ventures (JV) and partnerships with Indian firms. Hyundai. many multinational automobile companies entered the country. Companies including Daewoo. HM was the worst affected due to inflow of competitors. Company also appointed consultants McKinsey & Co. for a restructuring plan to turn around its business Mckinsey & Co. Forced to react due to its poor performance of its vehicles. GM. findings: – Asked HM to focus on the marketing of components – Refurbish the Ambassador model and upgrade other vehicles – Speed up the delivery process and improve productivity through re-engineering on the floor shop.

building new body and paint shops and even purchased new equipment. there was high decline in sales. 1998. to develop targeting at rural markets. 1999.Turnaround Efforts • • • • • • • HM decided to tap new segments to ease the competitive pressures from other giants HM collaborated with Oka Motor Co. Cost Cutting Measures: Company also embarked on a cost cutting exercise and announced a Voluntary Retirement • . Launched Trekker (Rural Transport Vehicle)1995 in 3 northern states. All restructuring and efforts could not sustain in market for a longer time. HM invested around INR 750 million to modernize the assembly line. Trekker sales dropped by two thirds of its initial volumes to around 800 a year. HM launched the redesigned Trekker and an upgraded version of the amby.

wherein dealers 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.Turnaround Efforts . – HM tie-ups with General Motors Corporation of USA. Marion Power Shovel Co. – HM had invested Rs 2. HM unveiled a new distribution system. 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. New Business ventures: – HM entred into Collabration with ‘Mitshubishi Motors’. – HM entered into an agreement with Mahindra and Mahindra for developing petrol engine for M&M vehicles. the interior. accessories .II • • HM decided to look beyond its existing portfolio to come out of its problems. Vauxhall Motors. UK. Japan in 1998 for manufacture of parts & transmission. • Change in Distribution Networks: 1999. USA led to new products being launched.5 million in the software – Customers could choose the car color.

9 . • • • • After the launch of the service.4 12.5 million in the corresponding quarter of 1999-00. 2001 February.Click Business….20 8.2 million from Rs 255. – After the deal HM was able to bring down its high interest debts – It helped reduce gross loss to Rs 152. (CAT) for Rs 3.768. Lancer’s market share had gone up by 4%.358. Export has been steadily increasing.005. sales from auto components could be as high as 30-40% HM also managed to secure an export order for 300 petrol engines from a UK based company 1998 1999 2000 2001 Sales value (Rs in Mn) Commercial Vehicles 7. HM sold its earthmoving equipment to Caterpillar Inc.3 Billion.Turnaround Effect • • 2001. mainly in the British and Japanese markets Over a period of time.376.1 12.

Opportunities: – – – – – Efficiency through management principles Exports Acquisitions for strengthening its distribution tie-ups. Mitsubishi source components through partner Hindustan Motors will prove beneficial for Mitsubishi With this HM possibly would be able to use some of its idle capacity and shore up its bottom line. 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) . 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.Future Plan • • • • • • Hindustan Motors planned to launch Mitsubishi's small-car model iCar in India by the end of 2009.