Post on 05-Apr-2018
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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.html7/31/2019 Turnaroung - HM
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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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