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| INDUSTRY A blessing for ailing auto industry UK Govt says ready to guarantee loans for Tatas' JLR business UK Govt-JLR talks back on track INTERVIEWS/FEATURES CARS, SUVs, MUVs COMMERCIAL VEHICLES CONSTRUCTION & AGRI MACHINERY | ALLIED INDUSTRIES LUBRICANTS & ALTERNATIVE FUELS Oil sector looks to free pricing of petrol, diesel Oil rises towards $57/bbl after near 4 pc fall INTERNATIONAL NEWS Job losses as GM, Chrysler close dealerships Volkswagen calls off next talks with Porsche Going great guns: Even at 50, Mini has an ageless charm ECONOMY & FINANCE
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| AUTO SECTOR WANTS EXCISE RATIONALISATION PTI See this story in: The Times of India (Web & Print Edition), The Pioneer (Web & Print Edition), The Statesman (Web Edition), mint (Web & Print Edition), Deccan Chronicle (Web Edition), Daily News & Analysis (Web Edition) (May 18)
http://www.dailypioneer.com/176878/Auto-industry-wants-rationalised-excise-structure.html http://www.thestatesman.net/page.news.php?clid=12&theme=&usrsess=1&id=254915 http://www.livemint.com/2009/05/17161939/Auto-industry-wants-new-govt-t.html http://www.deccanchronicle.com/business/auto-sector-more-tax-relief-739 http://www.dnaindia.com/report.asp?newsid=1256748 A BLESSING FOR AILING AUTO INDUSTRY Yogima Seth The Financial Express (Web & Print Edition) (May 18) New Delhi: The Congress-led UPAs second term at the Centre might come as a blessing to the ailing auto industry, feel experts and analysts. In its last tenure, UPA government had initiated some efforts to help boost demand in the sector. Now with the same government getting another five years in office, it is expected that they will deliver on their promise of investment in infrastructure and flexible labour laws. This will eventually boost demand for commercial vehicles and reduce the problem of labour unrest that had in the past restricted the growth of the sector, says Abdul Majeed, analyst and partner, PriceWaterhouse. According to Vishnu Mathur, executive director, Automotive Component Manufacturers Association (Acma), it is stable government policies and a strong economic agenda that will help revive the auto component sector in India. Government had undertaken some fiscal and monetary measures, major being reduction in excise duty and interest rates, in two stimulus packages announced in December 2008 and January this year. Despite this, the commercial vehicles continue to post around 40% dip in sales which means that the auto component players supplying to commercial vehicles have still not seen an end to recession and therefore the sector needs concrete economic agenda from this government if it wants Indian auto component sector to remain competitive vis--vis other countries, he says. As per estimates by Acma, the domestic auto component industry would have grown by 0-2% in 2008-09 from $14.4 billion turnover in 2007-08, Exports, however, are estimated to register a decline of 1-2% from $3.6 billion revenue in 2007-08. According to the Society of Indian Automobile Manufacturers (Siam), Centre should rationalise tax structure, give incentives for conversion to cleaner technologies and alternative fuel like CNG and LPG and make provisions for income tax rebate on auto loans. While basic excise duty, special excise duty, automobile cess, NCCD, and education cess should be merged into a single rate of excise duty, secondary and higher education cess of 1% should be merged in the existing education cess of 2%. Moreover, the excise duty on LPG/ CNG, hybrid and other alternative fuel vehicles should be reduced and a deduction similar to housing loan should be granted for the car loans as this will lead to a growth in the passenger car segment and will generate higher revenue to the government in terms of excise duty and sales tax, it says. 2008-09 at 12,19,473 units as compared to 12,03,733 units in 2007-08 as against earlier projections of 10-12% growth because of high interest rates and severe liquidity crunch in the second half of 2008. According to a Mumbai-based analyst, the government might do away with additional levy of Rs 15,000 on cars above 1500cc and Rs 20,000 on cars above 2000cc, considering that the ministry of heavy industries has already made a proposal for the same http://www.financialexpress.com/news/a-blessing-for-ailing-auto-industry/461391/2 UK GOVT SAYS READY TO GUARANTEE LOANS FOR TATAS' JLR BUSINESS PTI See this story in: The Economic Times (Web & Print Edition), The Financial Express (Web & Print Edition), Business Standard (Web & Print Edition), The Times of India (Web & Print Edition), The Indian Express (Web & Print Edition), The Pioneer (Web & Print Edition), The Statesman (Web Edition), Deccan Herald (Web Edition), mint (Web & Print Edition) (May 18)
"The government wants to see JLR safely through difficult trading times and provide stability for the company and its employees. We regard JLR as a visible company with good long-term prospects," the BERR spokesperson said. http://www.financialexpress.com/news/uk-to-guarantee-loans-for-jlr/461308/ http://www.business-standard.com/india/news/uk-ready-to-guarantee-jlr-loans/358420/ http://www.indianexpress.com/news/uk-ready-to-guarantee-loans-for-tatas-jlr-business/461161/ http://www.dailypioneer.com/176889/Ready-to-guarantee-loans-for-Tatas-JLR-biz-UK-Govt.html http://www.thestatesman.net/page.news.php?clid=12&theme=&usrsess=1&id=254922 http://www.deccanherald.com/content/3061/tatas-jlr-gets-uk-govt.html http://www.livemint.com/2009/05/17201631/UK-govt-says-ready-to-guarante.html UK GOVT-JLR TALKS BACK ON TRACK Agencies See this story in: The Economic Times (Web Edition) (May 18)
The British government, which has appointed financial advisors to assist Tata Motors, is prepared to guarantee loans from the European Investment Bank (EIB) on the right terms, the official said. The EIB has already given its approval to a 340 million loan several weeks ago, but cannot dispense the cash until the British government agrees to repay it if JLR goes bankrupt. | |
| INTERVIEWS/FEATURES Go To Top Ram Prasad Sahu Business Standard, Smart Investor (May 18)
With the launch of the Ritz, Maruti Suzuki hopes to replicate the success of the Swift hatchback and fortify its presence in the A2, or the compact car segment. Though the prices are introductory, indicating that they are likely to be increased at a later date, they show the aggression of India's largest car maker. At Rs 3.99 lakh to Rs 4.99 lakh, Ritz is priced around the Hyundai i10 even though it has slightly larger dimensions and better interior room. Maruti already has 58 per cent market share in the A2 segment with models such as the Alto, Wagon-R, Zen, Swift and the A-Star. These models helped the company to sell about 800,000 units and achieve a volume growth of 3.6 per cent y-o-y in FY 2008-09. Ritz is expected to stretch the lead further. Analysts expect Maruti to improve its performance in the current financial year through higher exports of A-star, stronger sales of Swift and a pick-up in sales in the rural market. While the grim macroeconomic situation continues to weigh on the prospects of Maruti and other auto makers, the small car king has been able to escape the downturn effects largely due to the surge in sales to government employees and the rural sector. These two user segments contributed nearly a quarter (200,000 units) of the sales volume for FY 2008-09. The share of government employees in total sales trebled from 5 per cent in FY08 to about 15 per cent in FY09. The management believes that the Pay Commission recommendations are yet to be implemented in positive number of government departments, so the impact will continue for another year. In the rural market, the company has more than doubled its share of sales from 3.5 per cent to 8 per cent in FY08-09. With a near-normal monsoon expected this year and the company planning to expand its 681-strong dealer network into smaller towns, the rural segment is likely to boost its sales volumes in FY09-10. Higher borrowing costs and stricter lending norms had adversely affected demand last year in India and car sales fell in six of the 12 months during the financial year ended March 31. But, various steps taken by the government to boost lending in a slowing economy as well as the introduction of new vehicles by auto makers such as Maruti led to a third straight increase in monthly car sales in April. Europe beckons The auto major will be depending on A-Star, which clocked sales of 19,000 units in FY 08-09 to help it achieve its export target of 120,000 units in FY 09-10. While Nissan is expected to pick up 30,000 units, the rest will be sold in the key markets of Germany, France, the UK, Italy and Belgium. Costly inputs Despite improving realisations due to a higher proportion of top-end models, margins dropped significantly because of a higher import content of these models, an appreciating yen, royalty payments and forex hedging losses. The management has indicated that it is looking at localisation of parts imported by vendors to bring down its exposure to forex fluctuations . The company will also benefit from the dip in raw material costs in the June quarter of FY09-10. For example, as much as 95 per cent of the components for Ritz will be sourced locally. Though the company has maintained that increasing exports will help it counter some of the costly yen imports, it will still have to contend with the high cost of imports of its vendors. Import costs constitute 22 per cent of sales, with vendors' share at about 10 per cent. Analysts, however, estimate that margins should improve by about 200 basis points to 9 per cent in FY10 on easing raw material costs, indigenisation and corrective measures on the forex front. Tackling competition The i10 alone accounts for half of Hyundai's domestic sales of 23,000 units a month. The steady increase in sales of Chevrolet's Spark at the lower end and Aveo U-VA at the upper end, is making the competitive landscape tougher for Maruti. The 200,000 bookings for the Nano could also be a threat to the Maruti 800, which is the only sub-Rs 2 lakh car in the Indian market and contributes about 6 per cent to Maruti's volumes. If Maruti is able to upgrade the car to meet the BS-4 norms which will come into effect by April 2010, the top end of the Nano could well eat into the basic 800 version, which costs about Rs 1.9 lakh. Expensive scrip While consumer sentiment on discretionary spends such as cars continues to be a concern, resumption of funding by public sector banks, lower cost of ownership (lower interest rates and fuel costs) and sales to the rural sector and government employees are positives for the company. Apart from its dominant position, easing commodity prices and higher sales from new models make the prospects for the Maruti stock look good, going ahead. However, at Rs 837, the stock is trading at a slightly expensive 16 times its FY09-10 earnings estimate of Rs 53, given that it has historically traded at 14.2 times its one-year forward earnings. http://www.business-standard.com/india/news/ritz-glitz/358361/ | |
| CARS, SUVs, MUVs Go To Top S. Hamsini Amritha The Hindu Business Line (Web & Print Edition) (May 17) With a 14 per cent return over the past year, the Maruti Suzuki stock has outperformed the BSE Auto index (17 per cent decline) and has turned out to be one of the best defensive picks. At Rs 848, the stock discounts its four quarter earnings by 19 times. Strong performance has pushed its valuation to a premium over the entire auto pack (about 17 times), limiting possible upside over the medium term. However, shareholders of the company can remain invested for its strong earnings visibility. With value-for-money offerings in the sedan segment and price increases to offset input costs, the companys top-line for 2008-09 registered a growth of 13 per cent, beating the automobile slowdown. However, net profits have disappointed, declining by 30 per cent due to higher material costs, a change in depreciation policy and forex losses. With sustained sales growth in April 2009, planned launches and good export prospects, the company appears well-placed to deliver continued sales growth this year. Easing margin pressures, as commodity price declines filter in, suggest that the company is on track to deliver better earnings performance. Strong product portfolio Marutis key advantage lies in its focus on the passenger vehicle segment, which has weathered the slowdown better than commercial vehicles. Products at almost every price point Alto, WagonR, Zen Estilo, Swift and A-Star make the company a market leader in the hatchbacks (A2) segment. Intense competition and tight credit availability that prevailed for most of last year muted its sales growth in this space to 2.4 per cent. But with credit crunch easing out, this segment has shown better growth since the beginning of 2009 (10 per cent increase in sales between December 2008 and April 2009). Maruti has enlarged its market share in this segment to 59 per cent this year as against 53 per cent last year. Swift and the recently launched A-Star have helped these gains. The launch of Ritz this week may strengthen Marutis position in the hatchback market, as it occupies a price point between Swift and A-Star. While the hatchback segment witnessed a slowdown last year, it is the sedan or the A3 segment that has delivered surprising growth for Maruti. Driven by launches of SX4 and Swift DZire (the sedan version of Swift), this segment has grown by 53.9 per cent. The sedans have been less vulnerable to the credit crunch, given that a higher proportion of purchases is funded by cash. The Sixth Pay Commission revision has also aided cash purchases in this segment. Concerns however remain on Marutis entry-level models such as Maruti 800 and Alto. Preferred by the urban middle-class, these cars may face challenges in 11 cities, including Delhi, Mumbai Kolkata and Chennai, after a change in emission norms to Bharat Stage IV mandated by October 2009. The company may have to either re-engineer these versions or phase them out in these cities to meet the new norms. As of now, there is not much clarity about what it plans to do in this regard. The Tatas Rs 1 lakh car, the Nano, has also been perceived as a threat to Marutis entry level models. About 50 per cent of the bookings for the Nano are estimated to be for its high-end variants which are relatively close to Maruti 800 and Alto in terms of performance. With the on-road price differential (in Delhi) of about Rs 35,000-Rs 50,000 between Marutis entry-level models and Nanos high-end version, competition from this source cannot be ruled out. Mighty export ground Domestic sales apart, exports too are seen as a key growth driver for Maruti over the next couple of years. Engineered to suit European standards, A-Star has lifted Marutis exports by 32 per cent for FY09. Exports accounted for 10 per cent of the companys sales volumes in the last fiscal. Maruti has a contract with Nissan to manufacture 50,000 of A-Star under the Pixo label in Europe and a tie-up with Suzuki to ship 10,000 units of the car to Latin America, Algeria, Australia and some African nations. Favourable incentives offered by the European countries, for fuel-efficient small cars to replace the older ones, give ample room for the company to expand its export volumes. Maruti has reached 38 per cent of its export target (two lakh units by fiscal year 2010-11) so far. The launch of Ritz (another model that may suit European requirements), could also hold potential. Financial scorecard The year 2008-09 ended with a sales growth of 13 per cent, while total volumes grew by 3.6 per cent. Excise duty cuts aided sales margins. High-cost pressures from some raw materials such as steel, aluminium alloys and rubber, and a change in product mix in favour of diesel variants (particularly in Swift and DZire), resulted in the operating profits declining by 48 per cent on a year-on-year basis. The net profits shrank by 30 per cent. Forex losses incurred in FY-09 may be viewed as a one-off profits dampener since they were on account of import contracts for raw materials. The company has been slow to benefit from softened commodity prices since it has entered into long-term agreements for raw materials. The effect of lower input costs will trickle in by the first quarter of this fiscal. With initiatives to localise vendors, operating profits are expected to grow by 20-30 per cent in 2010-11. On a sequential basis, the company has seen 33 per cent increase in sales volume and a 19 per cent increase in net profits for the March 2009 quarter. http://www.thehindubusinessline.com/iw/2009/05/17/stories/2009051750431100.htm The Hindu, Metro Plus
The bell sounds and a new bout begins. This time the new contender is the Skoda Superb. It looks nothing like the Accord, which could be a good thing for buyers who want something different. It comes loaded with features that rivals don't even offer as options - this at a price that makes every car in its class seem grossly overpriced. But is that good enough to make it a winner? If only it was that easy to beat a Honda. More so the Accord, which has a terrific feel-good factor about it and a better sales and service network. Let's see if the new challenger can dethrone the king of its class. From the driver's seat The new Accord has gone in for more of an upmarket look. The current design has a nice, flowing silhouette that will please most. It is comparatively wider than the Superb which automatically means more interior space. Step inside the cabin and the generous volume is immediately apparent. The front and rear seats get a good amount of legroom and headroom but the seats are placed a little low. The driver's seat comes with the option of electric adjust. You also get height-adjustable belts and a fully adjustable steering wheel, which means finding an ideal driving position is quite easy. We sorely missed audio controls on the steering wheel. The attractive beige-and-black cabin feels luxurious. The neatly laid-out dashboard gets a multiinformation screen, which provides stereo and air-con temperature details, among other things. However, the centre console is a mass of buttons which are not intuitive to use. General quality of plastics is good but there is scope for improvement. Driving around in the city is easy enough once you get used to the Accord's generous proportions but you'll still feel its girth in tight city traffic. The Superb is no longer boring to look at, unlike the previous model. Though it is marginally shorter than the Accord, the Skoda is generous when it comes to legroom at the rear. Passengers won't complain about sitting here, even on long journeys. Just like the exteriors, the Superb's cabin lives up to the car's name. The combination of soft-feel plastics finished in beige and black, along with healthy doses of leather and high quality chrome exude a luxurious feel. Everything from the meaty steering wheel to the little buttons ooze quality and are a delight to use, and feel as if they could last for years. Tall passengers will appreciate the front seats which get an all-electric adjustment and the driver's seat gets seat memory settings. The seats, while not as soft as the Accord's, are still quite comfortable. You also get audio controls on the steering wheel which are very convenient to use. Operating the stereo is similar to using an iPhone. Performance and refinement The Acoord's 396-litre boot is just about adequate but seems woefully meagre when compared to the Superb's warehouse- sized 565 litres of space, which could swallow a baby elephant. The Accord though redeems itself ever so slightly with split-folding rear seats which add to the practicality. The Accord is powered by a 2.4-litre unit that belts out 177bhp and 22.2kgm of pulling power (torque). It comes coupled with a five-speed auto transmission that is a tad lethargic and feels like it is sapping a lot of the engine's power. That said, Honda motors are known for their refinement and this i-Vtec is no different. At idle, you won't be able to tell if the engine is running. It feels silky smooth all the way up to its 6800rpm redline. In town, it responds well enough at slow speeds, but the real action is towards the top end of the powerband. Once past 4000rpm, the engine steps up the pace and power is available all the way till the top. Thanks to this, the Accord is a quick car. Zero to 100kph comes up in 11.76 seconds, which is slower than the manual Accord's 9.19 seconds, but quick nonetheless. Top speed is pegged at 223kph. The Superb is now powered by a 1.8-litre direct-injection petrol unit that puts out 160bhp and 25.5kgm of torque. Being turbocharged, the motor feels a bit lethargic at low engine revs when in high gear. The seven-speed DSG gearbox helps mask this to a great extent though once past the 2500rpm mark, the turbo comes on, the engine pulls strongly and revs crisply up to its limit. Zero to 100kph at 9.10 seconds is slightly quicker than the Accord and the top speed is 220kph. In terms of overall refinement, both the engines are match well and it's hard to choose one over the other. Ride and handling The Accord has a soft suspension set-up. As a result, the ride at low speeds is exemplary. Bumps are taken care of easily and very little gets transmitted into the cabin. But as the speeds pick up, the Accord has a tendency to bob with undulations. Straightline stability is commendable but it lacks that solid feeling that you get in the Superb. Handling too takes a hit. The light steering is direct but there is considerable body roll and overall grip levels could have been better. The Accord does well when driven in a relaxed manner but those looking at attacking corners will be disappointed. The Superb has European road manners. The suspension is stiffer than the Accord's, so some bumps at low speeds do creep into the cabin. At higher speeds, the car tackles most bumps without breaking into a sweat. Straightline stability is good and the car feels rocksolid at high speeds. The stiff suspension also aids handling; body roll is well under control and the steering provides ample feedback. The Superb will follow steering inputs gamely and is generally the more fun to drive of the two. Buying and owning The Honda Accord automatic retails for Rs. 21.25 lakh. You get a good amount of features which includes climate control, electric mirrors, alloy wheels, ABS and six airbags. But the Superb is more value for money as it gives you more features than the Accord at a lower price. In addition to the Accord's features, you also get touch-screen interface, steering- mounted controls, sun blinders, traction control, auto down and up funtion for all four power windows, traction control and eight airbags. Even on the fuel efficiency front, the Skoda Superb has the edge. It gives about 8.3kpl in the city, which is more than the Accord's 6.9kpl. However, spare part costs are higher on the Skoda, so servicing the Skoda will be much more expensive. Plus Skoda's workshops lack the finesse and faster turnaround time that comes effortlessly to Honda dealerships. The Superb comes with a standard warranty of two years for unlimited kilometres. The Accord has a standard warranty of two years or 40,000 kilometres, which you can extend upto four years or 80,000 kilometres. Verdict After much deliberation, we adjudge the Skoda Superb as the winner. The Superb's quality, comfort and refinement levels are so good that it actually feels like a car from a more expensive class. But the Accord loses with the least margin. It offers a classy experience with its well-appointed cabin and refined engine. What lets it down though is its disappointing high-speed manners, a high sticker price and its lowerthan- the-Superb's fuel economy. That said, we wouldn't blame you if you still wanted one. http://www.hindu.com/mp/2009/05/18/stories/2009051850040300.htm The Hindu, Metro Plus The drive was flagged off from Fords manufacturing facility in Chennai on April 22. A Ford Ikon with the new 1.4-litre DuraTorq, common-rail TDCi engine under its hood, is the chosen vehicle for this pan-India drive. The car is a standard Ikon diesel, without any modifications. The car is undergoing service checks at stopovers at Fords authorised service centres en-route. The team is monitoring and logging every parameter of the cars performance including fuel consumption, tyre wear, and consumables such as engine oil and brake fluid establish its true-world fuel efficiency and cost of ownership after 20,000 km. The Ikon Cross Country Drive will end on June 6 in Chennai. http://www.hindu.com/mp/2009/05/18/stories/2009051850110300.htm | |
| COMMERCIAL VEHICLES Go To Top The Indian Express (Web & Print Edition) (May 18) New Delhi: If the automobile industry had a slogan it would be, Invest in infrastructure development-led growth. For the commercial vehicle (CV) industry, this is the only cure for its ills and there are many who feel another fiscal stimulus would be most inopportune at this time. R Seshasayee, Managing Director, Ashok Leyland, said, We are not looking for further fiscal sops. We need public expenditure in both social and physical infrastructure. The best thing given the current fiscal deficit would be to drive investment and therefore growth rather than simply hand out stimuli to the economy. His expectations from the new government therefore lean towards a greater emphasis on public transportation and pushing investment and construction in the mining sector as a start. A key factor that determines medium and heavy vehicle sales is manufacturing growth, which declined 2.3 per cent in April compared with the same period last year. In addition, despite the overall production being down by only 18.67 per cent in April 2009, it was down by 29 per cent in March and 40 per cent in February 2008. http://www.indianexpress.com/news/CV-industry-asks-govt-for-infrastructure-led-growth/461352 | |
| CONSTRUCTION & AGRI MACHINERY Go To Top | |
| 2/3 WHEELERS Go To Top | |
| COMPONENTS Go To Top | |
| ALLIED INDUSTRY Go To Top | |
| FINANCE & INSURANCE Go To Top Business Standard (May 18) Chennai: Chennai-based commercial vehicle financier Shriram Transport Finance Company Ltd is planning to set up a subsidiary for equipment finance. The proposed capital for the new company is around Rs 150 crore. R Sridhar, managing director, Shriram Transports Finance Limited, told Business Standard that the new company would commence operations in the next three months and operate at group companys offices across 470 locations in the country. The company would cater to small and medium contractors in the construction industry before diversifying into other segments. Meanwhile, the companys board of directors has approved to raise funds by way of a public issue of secured, redeemable non-convertible debentures not exceeding Rs 1,000 crore in one or more tranches, pursuant to the provisions of the Sebi Regulations, 2008, it informed the Bombay Stock Exchange. Part of the Chennai-based Shriram group, Shriram Tansport Finance reported a 35.67 per cent growth in the net profit in the quarter ended March 31, 2009, at Rs 153.8 crore as compared with Rs 111.8 crore during the same quarter last year. | |
| LUBRICANTS & ALTERNATIVE FUELS Go To Top The Telegraph (May 18)
The company has applied for approvals from various authorities, Emami group director Aditya V. Agarwal said on the sidelines of an event organised by the Association of Corporate Advisers & Executives (ACAE) in Calcutta. It will take about a month to roll out the first phase of the mobile dispensing units in the city after we get the approvals, Agarwal said. Emami initially plans to launch two to three units and depending on the feedback, the number will go up. Mobile bio-diesel units is the first of its kind in the country, Agarwal said. The mobile units will have tankers with meters and dispensers. They can go and supply biofuel directly to the end users, he said. Emami, one of the major bio-diesel makers in the country, has been finding it difficult to get buyers for the alternative fuel. The ACAE conference Corporate management need for a fresh look discussed the implications and actions needed to be taken for corporate management and auditors, in the aftermath of the Satyam scam. Apart from Agarwal, Justice Pinaki Chandra Ghose, chartered accountants, auditors, and representatives from different industries were present at the annual conference. http://www.telegraphindia.com/1090518/jsp/business/story_10984091.jsp OIL SECTOR LOOKS TO FREE PRICING OF PETROL, DIESEL The Hindu Business Line (May 18)
One segment which will keep its fingers crossed about the future is the oil sector and, in particular, the public sector companies. Thanks to a pricing policy that is still in favour of subsidies and just refuses to acknowledge the need for a free market, these jewels of Indias crown, aptly christened navaratnas, have had a rough deal over the years. Last fiscal was possibly the most trying in recent times as global crude prices spun out of control and compensation from the government (for losses incurred on sale of subsidised fuels) took a little too long in coming. As a result, the three refiners IndianOil, Hindustan Petroleum Corporation and Bharat Petroleum Corporation are tipped to report their worst results in recent times (for 2008-09) while the same is true for their upstream counterpart, the Oil and Natural Gas Corporation. Delayed response Last year, the problem was aggravated by the fact that the Centre just did not seem to recognise the gravity of the situation and could not react quickly. We knew that there were pressures (on the Government) from coalition partners to avoid increasing prices of petrol and diesel but while this debate was going on, the refiners were borrowing mindlessly just to stay afloat, an oil industry official said. The price hike finally happened but it really was a case of too little, too late. The companies have paid a huge price for the delay in terms of interest costs, inventory/forex losses, etc., running into thousands of crores of rupees. The irony is that the major shareholder, the Government, did precious little to ensure that the companies stayed healthy, he added. The core of the problem lies in the administered pricing mechanism (APM) where refining and marketing companies such as IOC, HPCL and BPCL sell petrol, diesel, cooking gas and kerosene at a subsidy, record the losses in their books and then get these compensated in the form of oil bonds. These bonds then end up getting sold at a loss because of a low coupon rate as has been the case lately. Similarly, a cash-rich company like ONGC is compelled to sell its crude and products at a discount to the refiners as part of the subsidy formula. At a time when its global exploration and production counterparts are making pots of money, ONGC has its back to the wall. Price deregulation Way back in 1997, an expert committee on the hydrocarbons sector had recommended total price deregulation but successive governments just could not implement this. For one, it was not easy to get a consensus in a coalition structure; the other problem was that free pricing was not the easiest of options when world crude and product prices were on an upward spiral. Now, with a more cohesive government in place, the oil sector hopes that petrol and diesel prices will be deregulated in the coming months, especially when world price levels are falling. This could then be followed by transferring the subsidies on kerosene and cooking gas to the Union Budget instead of burdening the oil companies account books. The Government is our custodian but must also keep in mind that there are minority shareholders who are affected because of these pricing policies. They buy oil company shares as blue chip investments and would not like to see their values erode this way, sources said. http://www.thehindubusinessline.com/2009/05/18/stories/2009051851540300.htm OIL RISES TOWARDS $57/BBL AFTER NEAR 4 PC FALL Agencies See this story in: The Economic Times (May 18)
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| INTERNATIONAL NEWS Go To Top Reuters See this story in: The Economic Times (May 18)
JOB LOSSES AS GM, CHRYSLER CLOSE DEALERSHIPS Agencies See this story in: The Economic Times (May 18)
http://economictimes.indiatimes.com/News/International-Business/ http://www.livemint.com/2009/05/16114253/GM-Chrysler-dealership-closin.html mint (May 18)
Letters to the affected dealers said the company doesn't expect to continue doing business with them beyond October 2010. In a conference call with reporters, General Motors sales chief Mark LaNeve acknowledged that carrying out the plan would be difficult outside of bankruptcy-court protection. State franchise laws make it onerous and expensive for manufacturers to force dealers out of business, but franchise contracts can be nullified in bankruptcy court. Chrysler LLC is taking advantage of bankruptcy to close 789 of its 3,200 dealerships by voiding their contracts, the company announced Thursday. "Without a legal [bankruptcy] filling, these [dealer cuts] would be hard to enforce," Mr. LaNeve said. Dealers "may want to take legal action. We're not looking to get into a legal battle." He added that "the legal parameters around what you can do and can't do would change" in bankruptcy. GM has said it hopes to avoid a Chapter 11 filing. But earlier this week, Chief Executive Frederick "Fritz" Henderson said a bankruptcy filing by the giant auto maker is "probable." The 1,100 GM dealerships to be cut represent the first wave of a wider downsizing of the company's network. In total, the company plans to eliminate about 2,400 of its 5,969 stores. Among them are 470 dealerships that sell Saturns, Saabs and Hummers. GM plans to sell or shut down those brands. Mr. LaNeve said dealers whose brands are being eliminated in many cases will have a chance to sell GM lines that survive. GM reported losses of nearly $90 billion in the last four years and has required $15.4 billion in government loans to keep operating. The White House's auto task force has given the company until June 1 to reach cost-cutting agreements with workers and bondholders and being trimming dealers or face a bankruptcy filing. GM is close to a deal with the United Auto Workers union, but bondholders have resisted its offer to swap $27 billion in debt for a 10% stake in the reorganized company. The letters that went to the 1,100 GM dealerships don't mention the possibility of a bankruptcy filing. They simply state that GM doesn't believe it can have "a productive relationship" with the selected dealers and doesn't expect their "contractual relationship to continue past October, 2010," according to one termination letter reviewed by Dow Jones Newswires. GM declined to disclose which dealers were sent the letters. Years of declining sales have left both GM and Chrysler with many more dealerships than they need. As a result, their dealers often compete with each other for customers, hurting their profits. Most of the GM dealers selected are "hurting, losing money and in danger of going out of business anyway," Mr. LaNeve told reporters. "It's a move that people could argue should have been taken years ago." GM said the 1,100 dealerships to be cut represent 18% of its network but produced just 7% of its sales last year. Nearly 500 of them sell fewer than 35 new GM vehicles a year, Mr. LaNeve said. The National Automobile Dealers Association said the affected dealerships employ about 63,000 salespeople, mechanics and other personnel. 'Sense of Sadness' "We view GM's action with a profound sense of sadness and disappointment," the trade group said, adding that, "NADA fully expects GM to honor all its obligations to the affected dealers, whether or not they decide to wind down their operations." AutoNation Inc., a large dealership chain, was informed that contracts for six of its 41 GM stores won't be renewed. The company's chief executive, Michael J. Jackson, said the six outposts weren't generating any operating profit. Overall, the GM stores to be closed have a combined inventory of 65,000 cars and trucks. GM plans to buy back some of the dealers' remaining inventory, parts and equipment. In addition the auto maker plans to shut down production for much of the summer to trim its backlog of unsold vehicles. GM expects additional dealership reductions will come as dealers, struggling with the worst sales environment in decades, go out of business on their own. Fewer but Healthier? The company believes that having fewer, healthier dealers will help it better compete with foreign-based rivals such as Toyota Motor Corp. and Honda Motor Co., which tend to have newer, better financed stores in more attractive locations. By limiting the number of retailers, those companies ensure that each has a better shot at being profitable. GM's move to cut its U.S. retail network comes as its dealers in Europe look to secure a minority stake in the auto maker's German-based Opel unit with a $680 million investment. That investment would come as part of a plan by Fiat SpA of Italy to merge its car operations with Opel's and those of Chrysler. http://online.wsj.com/article/SB124238650972623589.html VOLKSWAGEN CALLS OFF NEXT TALKS WITH PORSCHE Agencies See this story in: The Economic Times (May 18)
GOING GREAT GUNS: EVEN AT 50, MINI HAS AN AGELESS CHARM Saleha Mohsin The Economic Times (May 18) The beloved Mini has turned 50. Launched by the now-defunct British Motor Corporation in 1959, this quirky little car has gone through several owners and various iterations from the early Austin Seven and Morris Mini-Minor to vans, station wagons, and convertibles. Immortalised after its starring role in the 1969 film The Italian Job, the Mini has long been a cult favourite. The size and shape of the vehicle have given it an iconic following, combined with the fact that its not perceived to be a mainstream vehicle, says Jeff Schuster, executive director of forecasting for JD Power & Associates (MHP). A British legend that fell on hard times for decades, the car has become an international success since German auto giant BMW took over the brand in 1994. BMW relaunched the car in Europe in 2001, a year before bringing it to the US, keeping the classic design of the original but increasing the size and improving the technology. The car is now sold in 62 countries at an average price of $20,000. The revival of the carwhose name was changed in 2001 to Miniwas one of the best relaunches ever in brand history, says Christopher Wnsche, managing director in the Munich office of branding consultancy Interbrand. BMW brought together the myth and the history of the brand and built a cutting-edge, technologically leading car, which was boosted by the reliability of German engineering, he says. Just six years after the Mini was rolled out in the US, the market is now the brands biggest, accounting for 23% of 232,425 sold worldwide in 2008. That compares favourably with other high-profile revivals of classic cars. Italian automaker Fiat, whose diminutive 500 (Cinquecento) first came out in 1957 and appeared in countless Italian films, relaunched the car to great acclaim last year. The new $15,000 version sold about 185,000 units in 2008 an impressive start, but less than the Mini. The reintroduction of the beloved 70-year-old Volkswagen Beetle in 1998 was met with rave reviews and a big jump in sales, but enthusiasm didnt last: VW sold only about 55,000 of the new bugs. BusinessWeek | |
| ECONOMY & FINANCE Go To Top PTI See this story in: The Hindu Business Line London: Outlining the agenda for the new UPA-led government in India, noted NRI entrepreneur Mr Srichand P Hinduja has suggested a series of measures, including short and long-term, to provide investment opportunities of at least $1 trillion to sustain a n economic growth of minimum 9 per cent despite the global slowdown. Congratulating the Prime Minister, Mr Manmohan Singh on the resounding victory of the Congress-led UPA alliance in the Lok Sabha polls, Mr Hinduja, Chairman of the Hinduja Group, said it was an encouraging mandate for its hard work to meet the daily ne eds of the aam-aadmi. The people of India have overwhelmingly recognised the sincerity and hard work of the Congress Party led by Ms Sonia Gandhi and Prime Minister Mr Manmohan Singh's government in meeting the daily needs of the 'aam-aadmi','' Mr S P Hinduja and Mr G P Hind uja, Chairman and President respectively of the Hinduja Group, said in a statement here. In an article in the well-known American business magazine 'Forbes', published ahead of the Lok Sabha elections, Mr S P Hinduja made some suggestions for the new Indian government in the national economic and political interest. He pointed out that though the world was plagued by the sudden global slowdown, he was confident that there was an abundance of opportunities for the next government in India. http://www.thehindubusinessline.com/blnus/14171310.htm
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