| INDIAN AUTOMOBILE INDUSTRY | |
| INDUSTRY Hindustan Motors, others asked to refund sale price of car Relief for Hyundai CARS, SUVs, MUVs Cheaper loans rev up car sales in July Slowdown fails to end waiting period for cars Maruti zips past 80-lakh-mark in 25 years SkodaAuto to drive in true blue performance car Ford India begins bulk export of cars from Chennai COMMERCIAL VEHICLES Tata Motors may buy Thonburi stake in Thai truck JV CONSTRUCTION & AGRI MACHINERY | ALLIED INDUSTRIES FINANCE & INSURANCE US-owned GM plans to float IPO by July 2010 No breakthrough yet on Opel deal Ford may sell Volvo Cars this year ECONOMY & FINANCE
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| INDUSTRY Go To Top The Telegraph (Web Edition) (Aug 10)
Mumbai: Tata Motors, in talks with the UK government for loan guarantees to support Jaguar Land Rover (JLR), has received a financial blow from the pension liabilities of JLR. The Tatas had acquired JLR a year ago.
Tata Motors has accounted for actuarial losses (net) of Rs 1,457.21 crore on a defined pension scheme for Jaguar Cars Ltd and Land Rover UK in the 2008-09 fiscal. The losses have been charged in the reserves and surplus of the companys balance sheet for the last fiscal. The actuarial losses significantly represent short-term valuation impact on the plan assets, Tata Motors said in its balance sheet.
Tata Motors may not be alone some large Indian companies that have made overseas acquisitions may also have to account for losses on defined pension schemes. Several foreign companies offer defined pension schemes, in which employers offer a certain level of pension payments even if the assets that the pension fund is invested in do not fare well.
Indian companies that bought these overseas firms promised to make good the losses suffered in the defined pension funds as part of the buyout agreements.
Last year, several pension funds were expected to be in the red as they had invested in equities which lost value after the global markets crashed. At that point, it was difficult to estimate the losses that the Indian companies would have to account for, as actuaries calculate this number at a predetermined time in a financial year.
Fund deficit Pension funds suffer deficits when the value of the assets they have invested in is lower than the payouts to the employees.
Last year, pension fund deficits were widely discussed in the US and the UK, when the shortfalls rose because of declining equity values, and companies faced a cash crunch as a result of recession.
According to the Tata Motors balance sheet, on June 2, 2008, the company acquired the Jaguar Land Rover businesses from Ford Motor for $2.5 billion. Of this, Ford contributed around $600 million to the JLR pension plans. The acquisition includes the ownership of three manufacturing plants, two advanced design centres in the UK, a worldwide sales network, intellectual property rights, and brands and trade marks. http://www.telegraphindia.com/1090810/jsp/business/story_11341823.jsp
HINDUSTAN MOTORS, OTHERS ASKED TO REFUND SALE PRICE OF CAR PTI See this story in: The Economic Times (Web Edition), Hindustan Times (Web Edition) (Aug 10)
New Delhi: Holding them guilty of unfair trade practices and deficient in services, a consumer court here has directed Hindustan Motors Limited and other parties to refund the sale price of a car and pay a compensation of Rs one lakh to the complainant for causing mental agony. http://economictimes.indiatimes.com/News/News-By-Industry/Auto/Hindustan- http://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=NLetter&id=
RELIEF FOR HYUNDAI (Aug 10)
New Delhi: In a reprieve for the countrys largest car exporter, Hyundai Motor India (HMIL), the Supreme Court on Friday dismissed the plea seeking initiation of action against it for undervaluation export items. A bench headed by Chief Justice KG Balakrishnan refused to entertain a special leave petition filed by an anti-corruption organisation, Fifth Pillar India. Advocate PV Yogeshwaran on behalf of petitioner submitted before the court that the Indian arm of Koreas Hyudai Motor is flouting the provisions of the Central Excise Act, Customs Act and Foreign Exchange Management Act. The petition said, the company, which started production during 1998-99, picked up production during subsequent years and paid Rs 518.83 crore in PLA (personal ledger account) during 2000-01. It excise duty payment gradually came down substantially due to undervalued exports. During 2005-06, 06-07 and 07-08 (up to November 2007), the company has paid Rs 141.21 crore, 128.51 crore, which again went down to Rs 87.16 crore, respectively. Copyright 2009, Bennett, Coleman & Co. Ltd. All Rights Reserved"
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| INTERVIEWS/FEATURES Go To Top Just one day of rain and Delhi almost drowned. All talks about the city gearing up for the 2011 Commonwealth Games got washed away, like strips of balsa wood. I was sitting in the Ritz then, wipers blazing, watching scores of bikers scurrying under the numerous flyover arching over the city. Vehicles were inching ahead slowly, headlights blinking in the lashing downpour. There was just one relief though. The waterlogged section of the road was empty. (CNG vehicles are not really water proof. And the ones here avoid swamped areas like the plague.) Copyright 2009, Bennett, Coleman & Co. Ltd. All Rights Reserved" http://economictimes.indiatimes.com/Consumer-Life/When-Delhi-lost-its-
Ram Prasad Sahu Business Standard (Smart Investor)
Two-wheelers
The battle in the motorcycle space which is the largest in two wheeler category is likely to shift to the executive segment (100 cc+ upto 125 cc) with Bajaj launching 100cc Discover DTS-Si bike in July. While Hero Hondas dominance is unlikely to be challenged in the rural sector anytime soon, Discover is aimed at grabbing customers away from Hero Hondas top-selling executive segment models Splendour and Passion. Both companies are also looking at tapping the low-cost bike market with prices expected to hover at about Rs 20,000. Going ahead, expect Hero Honda and TVS to post double digit growth and Bajaj Auto to improve its position from flat sales growth. The key concern, especially for Hero Honda, will be a deficient monsoon which is likely to drag down sales from the rural segment.
Cars, UVs and tractors
Commercial vehicles
Conclusion
Companies have not completely passed on the excise duty benefits and are likely to use the surplus to aggressively promote new launches. Though there are signs of a turnaround as the sector has been exhibiting consistent numbers, stocks of auto majors (see chart price performance) despite the recent correction, are up significantly. The biggest gainers over the last one month have been Tata Motors (48 per cent) and Maruti Suzuki (20 per cent). Analysts believe that the stocks are trading at close to their 52-week highs and future prospects on account of higher sales are already priced in. http://www.business-standard.com/india/news/ready-to-roll/366405/
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| CAR EXPORTS TO BE HIT AS EUROPE REMOVES AUTO SOP Mumbai: Maruti Suzuki and Hyundai Motors, two of India's biggest car exporters, are expected to see overseas sales fall sharply following the recent removal of a scrappage incentive scheme in several European countries
The scheme provided car owners a subsidy to replace their older, polluting vehicles with low-emission and fuel-efficient ones. The incentive varied from 750 to 4,000. Governments from 11 nations including Germany, France, Italy, Romania, Spain, Portugal, Cyprus and Luxembourg withdrew the scheme from the last week of July or the first week of August. Only the UK has chosen to continue the scheme, which has helped raise demand for hatchbacks.
About half Hyundais monthly production of 42,000 to 48,000 units is exported. Society of Indian Automobile Manufacturers data showed that Hyundais first-quarter exports stood at 66,500 units, a 26.54 per cent growth over the same quarter last fiscal. HMIL sells both the i10 and i20 hatchbacks to Europe.
"We have orders for the next two months that is, till September, so we will remain unaffected by this move but exports for the last two quarters will be slightly impacted," said Arvind Saxena, senior vice-president (sales and marketing), Hyundai Motor India said.
He, however, declined to specify the extent of the drop. Meanwhile, Maruti, which more than doubled exports in the first quarter of this fiscal to 29,314 units over the same quarter last year, said there was no let-up in exports. Demand for its A-Star hatchback, launched late last year, has been impressive in Germany, the UK, Netherlands, Spain and France, according to a recent company statement.
Mayank Pareek, executive officer (marketing and sales), Maruti said the 6 billion scheme in Europe was supposed to last till December but added, The US Congress launched a similar $1 billion scheme that was supposed to last for five months but was over in five days".
According to the Brussels-based European Automobile Manufacturers Association, new car registrations grew 2.4 per cent to 1,461,859 units for the first time in 14 months in June. Germany, Europe's largest auto market, reported a growth of 40.5 per cent.
CHEAPER LOANS REV UP CAR SALES IN JULY Chanchal Pal Chauhan The Economic Times (Web & Print Edition) (Aug 10)
New Delhi: Car sales bounced back in urban centres in July on cheaper loans, improved consumer sentiment and better corporate results, after slipping 10% in the past one year. Sales of new cars grew 12% last month in 20 cities, including Delhi, Mumbai, Bangalore, Cochin, Ahmedabad, Chandigarh, Calicut and Kolkata, which usually account for 85-90% of new cars sold in a year. Copyright 2008, Bennett, Coleman & Co. Ltd. All Rights Reserved"
SLOWDOWN FAILS TO END WAITING PERIOD FOR CARS
New Delhi: Even in the midst of an economic slowdown, people have to go through the ordeal of a waiting period to acquire their favourite car.
Marutis Dzire tops the list with a waiting period of four months, while Swift follows with a three-month waiting period. The customer, however, has to wait for 15 days for the delivery of the newly launched Ritz.
"Maruti manufactures its new cars at Manesar plant, which has a capacity of only three lakh units. The company is aggressively increasing the capacity of the the plant to meet the demand," said sources. Maruti has another plant in Gurgaon, where it makes older models like Wagon-R and Omni.
With the auto sector showing a recovery, the waiting period of these models is expected to increase in the coming days.
The countrys second largest car maker, Hyundai Motor India, has only one model i20 which has a waiting list of 45-60 days. "For i20, the demand has far exceeded our expectations. The demand is increasing day by day as more people want to buy the i20," said a company official.
Another car which has beat recession is Honda City, which has a waiting period of 3-4 weeks. Toyota has two models which have a waiting list. Recently launched Fiat Punto has a waiting period of around one month.
MARUTI ZIPS PAST 80-LAKH-MARK IN 25 YEARS
SKODAAUTO TO DRIVE IN TRUE BLUE PERFORMANCE CAR John Sarkar The Economic Times (Web & Print Edition) (Aug 09)
New Delhi: There is something about fast cars that keep people on their toes. And SkodaAuto seems to have quickly caught on to it. After the successful launch of its new Laura and Superb in the C plus and D segments, respectively (both premium segments), the Czech carmaker is readying another exciting launch, the new RS (Rally Sport) the sports icon of all Skoda cars.
Other car companies such as Honda, Toyota, Ford, Mitsubishi and Maruti Suzuki tried similar experiments here by launching sports versions of their regular cars. Honda did it by launching a sports variant of its Civic. Ford still sells the Fiesta 1.6S. Copyright 2009, Bennett, Coleman & Co. Ltd. All Rights Reserved"
FORD INDIA BEGINS BULK EXPORT OF CARS FROM CHENNAI T E Narasimhan Business Standard (Web Edition) (Aug 10)
Chennai: Ford India Pvt Ltd has for the first time started exporting cars in a large number from Chennai. It has just exported 158 units through Chennai port to Durban in South Africa and is planning to export more models, especially its proposed small cars. According to the Society of Indian Automobile Manufacturers (Siams) data, Ford India between April and June produced 6,752 cars, of which 219 units were exported, through containers in different shipments.
Initially the company is looking at exporting small cars from the middle of next year to countries in the Asia-Pacific and Africa, Michael Boneham, president and managing director, Ford India, told Business Standard. We are having discussions and intend to export more in the future, provided the infrastructure is set up at the port.
The companys focus markets would be Asia-Pacific and Africa, where the demand is high for small cars. Europe and the US markets will not be included at this point of time, he added. We are looking at increasing the share of exports (from India) once the capacity is expanded. Plus, we will export the small car in the region, apart from petrol and diesel engines, Nigel E Wark, executive director, marketing, sales and service, recently told Business Standard. http://www.business-standard.com/india/news/ford-india-begins-bulk-exportcarschennai/366489/
The Hindu (Metro Plus) (Aug 10)
If there ever was an award for most talent but far too little glory, then Fiat India would certainly be a winner. The company has always delivered cars that are ideal for Indian conditions, but failed to achieve even half the sales glory that rivals with comparatively compromised cars have managed.
All that could well be history with the arrival of the aptly named Grande Punto (it translates into grand point). It promises to be everything that small-car buyers want.
For a start, its got the same 1.3 Multijet diesel engine that has legions of buyers waiting for months for the Maruti Swift and Swift Dzire. Interested?
One look at the Punto will assure you that Italians are indeed great at design. The Puntos silhouette is well-balanced, whichever angle you look at it from. The big lights up front and the long nose look sporty, and give it plenty of character. The rear gets compact lights mounted high up on the pillars. And the big wheels complete the purposeful stance. Well, Fiat owns Ferrari and Maserati; easy to understand once you look at the Grande Puntos design.
Fiats are always known for their tough and robust build quality, and the Punto is no different. The first thing you will notice when you step into the cabin is the manner in which the doors shut with a solid thunk. It is a sound that is found on more expensive saloons, and theres no tinny, built-to-a-price feel. The next thing youll notice is that the rear seats arent really as impressive as the generous external dimensions of the car suggest. The width means that three occupants will fit nicely but legroom is just about adequate and similar to most rivals. The high-set seats are very comfortable and both underthigh and back support is good.
Front seat passengers wont have any reason to complain. The seats up front are wide and legroom is also generous. The drivers seat adjusts for height but the steering only adjusts for rake, not reach, so finding the ideal driving position can be a little tricky.
The dials are similar to the ones found on the Linea, except they are in black. Fiat oddly hasnt marked a redline on the rpm gauges. The dashboard controls fall easily to hand, and are intuitive to use. The indicator stalks, though, are annoyingly placed on the left.
The company hasnt followed the beige interior trend that most rivals have made the norm now. The dark grey-black cabin can be a bit tiring to look at after a long drive. Another grouse is the inconsistent quality of plastics. Though the dashboard is made from relatively dense materials, some bits let it down.
Another area that Fiat hasnt been paying attention to is the usability of the cabin. There arent too many places where you can put that takeaway glass of iced tea or your cellphone. The boot, at 280 litres, is again the norm in its class rather than a standout feature. The suspension towers intrude into it, limiting its usability. The high sill doesnt help loading either.
What you will greatly appreciate is the number of features on offer in this car. The Grande Puntos top-end Emotion variant comes with ABS and twin airbags, a voice-activated Bluetooth pairing for your phone (dubbed Blue & Me), climate control, alloys and an iPod dock, among other features.
There are three engine options on sale. The cheapest is the small 1.2-litre petrol, which develops 68bhp. Fiat didnt offer this for a test drive, so we reserve our judgment on this model. The other is a 1.4-litre petrol motor with 89bhp. This engine is refined and revs till its redline without any fuss. It lacks outright punch but is more than adequate for town driving. There isnt much in terms of power low in the rev range, so you will have to push the revs up if you want a rewarding drive. We managed to get 10.2kpl in the city and 14.6kpl on the highway. Decent figures for the cars size and weight.
The third engine is the familiar 1.3 Multijet diesel that weve seen in the Swift and Swift Dzire. Start it up, and youll notice the familiar diesel clatter from a cold start. If youve driven a Swift, youll immediately notice that the Punto isnt as refined, and there is plenty of engine noise entering the cabin.
The engine is slow to respond to throttle inputs below the 2000rpm mark. But even after crossing that mark, it fails to excite. While the Swift diesel leaps forward like a cat chasing a mouse, the Punto moves progressively. The 1.3 diesel delivers 13.7kpl in the city and 17.5kpl on the highway. The gearbox isnt as slick as the ones found in the Fabia or the Swift.
The Punto excels in the ride and handling department. It manages to damp out road undulations really well, tackling most bad roads adroitly. Ride quality improves as speeds increase and there is always a reassuring feel about the suspension, even at faster highway speeds. The steering also offers plenty of communication from the front tyres. Body roll is minimal and the grippy tyres aid handling further. The Punto is willing to be pushed into corners at faster speeds, always following a predictable and composed line.
Overall, the Punto is near the top of the small car pecking order, and will be adequate for families. Its solidly built, well-priced, has a comfortable ride and decent fuel economy figures, but it fails to match class leaders in driving pleasure.
Technical Data
Engine size 1.2/1.4/1.3 (P/P/D) Price from Rs 3.99 lakh
Power 68/89/75bhp 0-100kph NA/16.58/17.84sec
Economy NA/ 10.2/14.6; 13.7/17.5kpl (city/highway) 20-80kph in 3rd NA/ 14.11/12.57sec http://www.thehindu.com/mp/2009/08/05/stories/2009080570240500.htm
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| COMMERCIAL VEHICLES Go To Top Suresh P. Iyengar The Hindu Business Line (Web & Print Edition) (Aug 09)
Sales have dipped 39 per cent to 164,518 in the financial year 2008-09, against 268,360 logged in the last fiscal. IFTRT sources its information from automobile companies as part of research programmes.
The truck sales picked up on the back of cheaper and easy auto finance and improved activity in the manufacturing sector, while the demand from construction sector still remain negative, said Mr S.P. Singh, Senior Fellow and Co-ordinator, IFTRT.
Despite the positive trend in the medium commercial vehicle (MCV) and multi axle vehicle (MAV) segment, sales of tipper truck, which are largely used in construction sector, dipped by 50 per cent to 1,718 units in July against 3,371 units sold in the corresponding period last year.
Banks and Non-Banking Finance Companies have lowered the lending rates and eased the process for securing loans for fleet owners to replace their ageing truck fleet.
The prolonged fall in sales in the last four quarters had knocked down the possibility of an addition of 1.10 lakh new vehicles in last one year. Besides, the improvement in goods transportation in certain trucking centres in northern and eastern part of the country will keep up the demand for the next few months, Mr Singh said.
Consumer spending In addition, the sustained consumer spending has helped the manufacturing sector to make a modest recovery and generate the positive shift in mood of truckers to look forward to new truck purchases, he said.
The recent Government move to push up infrastructure spending and financial measures by the Reserve Bank of India has added more liquidity leading to increase in consumer spending.
The manufacturing sector is expected to look up from mid-September as the annual festival season begins. The small and medium manufacturing units may start gearing up for increased production in the next six weeks and will increase the movement of raw materials, intermediate products and finished products across the country.
The truckers are expected to gain from the anticipated incremental cargo offering. It seems that economy is somewhat coming out of highly demoralised phase and entering a stable scenario in the next couple of quarters, said Mr Singh. http://www.thehindubusinessline.com/2009/08/09/stories/2009080951120200.htm
TATA MOTORS MAY BUY THONBURI STAKE IN THAI TRUCK JV Swaraj Baggonkar Business Standard (Web & Print Edition) (Aug 10)
Mumbai: The three-year joint venture between Mumbai-headquartered commercial vehicle giant Tata Motors and Thailand-based Thonburi Automotive may see some changes in the ownership, with the former keeping options open on buying its partners stake.
The JV company, Tata Motors (Thailand) Ltd (TMTL) was formed between the two in December 2006. Tata Motors holds 70 per cent stake and Thonburi the balance 30 per cent.
Thonburis stake is split between Thonburi Automotive Assembly Plant Co (20 per cent) and Viryah Insurance, a Thonburi company (10 per cent).
Tata Motors latest annual report says it may have to consider buying 20 per cent stake from Thonburi if the Thai company is unable to infuse fresh equity into the JV.
As per proposed arrangement to be entered between the company (Tata Motors), Thonburi and Citibank NA, on occurrence of certain event, the company (Tata Motors) may have to purchase Thonburis stake of 20 per cent in TMTL, states the annual report. Tata Motors has already given a letter of comfort to Citibank NA against the short-term and long-term loans aggregating THB 850 million (Rs 121.7 crore, as on March 31) given by the bank to TMTL. The letter of comfort is restricted to 70 per cent of the total amount lent by Citibank to TMTL.
The annual report further explains that if there is an increase in the Tata Motors stake in the JV company there will be a consequent increase in the share of the letter of comfort, which will appropriately reflect the increased stake.
A Tata Motors spokesperson stated in reply to a Business Standard questionnaire that, In any joint venture, funds infusion is done by the partners involved proportionate to their equities in the joint venture.
The expression, occurrence of certain event, only means that should an eventuality arise when the joint venture requires infusion of funds and Thonburi itself does not infuse funds proportionate to its 20 per cent stake in the joint venture, then Tata Motors may require to acquire Thonburis 20 per cent stake from Thonburi, he added.
Tata Motors commenced production of pick-ups in Thailand, also the worlds second biggest pick-up truck market after the US, in the first half of last year. The company currently produces only one model from that plant, Xenon, which has three variants, including a four-door Xenon 2.2L (diesel), Xenon Super CNG and Xenon Single Cab Giant (diesel).
As adverse economic conditions impacted vehicle buying across the world, including Thailand, TMTL posted a loss of Rs 89.2 crore during the last financial year, according to disclosures the Tata Motors annual report. http://www.business-standard.com/india/news/tata-motors-may-buy-thonburi-stake-in-thai-truck-jv/366478/
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| CONSTRUCTION & AGRI MACHINERY Go To Top
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| 2/3 WHEELERS Go To Top Tapash Talukdar The Economic Times (Aug 10)
Ahmedabad: Riding high on domestic demand, Ahmedabad-based Electrotherm is considering investing close to Rs 220 crore in capacity expansion in steel, engineering and e-bikes businesses. With a target of Rs 2,400-crore turnover by this fiscalend from the current turnover of Rs 1,600 crore, the company has submitted an ambitious plan to its bankers. The fund will be raised either through the QIP route or a mix of equity and preferential issue. We will finalise the plan after discussing it in our board meeting, said Electrotherm MD Shailesh Bhandari. Its steel division is expected to contribute up to Rs 1,900 crore while the engineering and e-bikes divisions would bring in Rs 400 crore and Rs 100, respectively. Electrotherm clocked Rs 440-crore turnover for the first quarter of FY10 against Rs 384 crore during the corresponding period last year. The company has recently forayed into transmission towers business and is bullish on bagging long-term projects from major telecom players. Anticipating revenue growth of 30% from the domestic market, Electrotherm has been working out plans to deliver turnkey projects from its engineering division. We plan to manufacture value-added steel and cast iron products to reach out to the growing domestic market, Mr Bhandari said, adding that to strengthen its R&D capabilities, it could opt for technical JV or tie-ups with a foreign company. It has expanded its ductile iron pipes manufacturing capacity to 1.5 lakh tonnes per annum to meet increasing demand from various industries. For its electric vehicles business, the company is reaching out to neighbouring markets such as Sri Lanka, Bangladesh and Nepal. Electrotherm makes 3 lakh units of e-bikes at its Kutch plant, where it invested Rs 110 crore last year. Copyright 2009, Bennett, Coleman & Co. Ltd. All Rights Reserved"
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| COMPONENTS Go To Top The Hindu Business Line (Aug 09)
The infusion of funds is happening through an issue of shares to the promoters on a preferential basis, which will result in their stake going up from 53.04 per cent to 70.49 per cent.
Borrowings up Ucal took over Amtec, a company engaged in the manufacture of precision components for the automotive industry, for Rs 100.86 crore; the acquisition was funded by equity and debt support by State Bank of India and Exim Bank of India.
A notice to shareholders by Ucal says that Amtec has loans of Rs 149 crore. Thanks to this burden, Ucals own borrowings rose to Rs 156 crore for 2008-09.
Incurring losses Despite several cost-cutting initiatives, Amtec continued to incur losses as funds infusion was not commensurate with requirement, the notice says.
The supply chain was affected and the company was slipping in its deliveries. The loss of two customers and the strike at another from February to May 2008 also had a telling effect on Amtec, the notice says.
Just as Amtec was coming out of the impact and was on the verge of achieving break-even, the recession in the US economy started, it notes.
Infuse more capital The promoters observe that there are two options before the company either to bring in further funds and keep Amtec alive, so that it is ready to capture business when the US economy improves, or, to discontinue the operations. The second option, Ucal notes, will mean a shut-down cost of Rs 28 crore, which will have to be funded by Ucal.
Against this backdrop, Ucal has decided to infuse further capital into Amtec, sustain its operations on a low-key, and wait for the economy to improve.
Restructuring loans State Bank of India has agreed to restructure its loans, subject to the condition that Amtec will raise Rs 33.76 crore through long-term funding from Ucal.
Raising further debt funds is not advisable as it would further burden Ucal with interest costs.
EGM on Aug 19 It would not be fair on the part of the management of Ucal to obtain further funds from small shareholders and thereby, expose them for further risk, says the notice.
Hence, the preferential issue of shares to the promoters. A resolution to enable that would be placed before the shareholders at the EGM on August 19. http://www.thehindubusinessline.com/2009/08/09/stories/2009080951100200.htm
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| ALLIED INDUSTRY Go To Top See this story in: Yahoo India (Aug 10)
It is understood that the ATMA (Automative Tyre Manufacturers Association) is planning to approach the ministry of commerce this week with the plea that consuming industry is underrepresented on the board of directors of the Rubber Board. Consuming industry has just two directors, while small-holdings growers, large estate owners, rubber dealers and other stakeholders are amply represented, Rajiv Budhiraja, director-general of ATMA, told FE.
Surprisingly, rubber farmers, who have been fighting the tyre industry tooth and nail on the issue of zero-duty rubber imports, do not mind more industry representation. We would, in fact, fully endorse the tyre industry in seeking more director-representatives on the board. After all, in business, raw material producers and consuming industry are mutually valuable, says Siby Monipilly, general secretary, IRGA (Indian Rubber Growers Association).
Meanwhile, all stakeholders--growers, dealers and industry--are dead against of expanding the board just to include more government nominees. The Prabhu Committee report, on the functioning of the commodity boards, not only draws flak at the practice of filling the boards with government nominees, but also stipulates that total number of directors be restricted to 20.
The Bill on Amendment to Rubber Act proposes that the present 26-member board of directors of the Rubber Board be expanded to 29, adding more government nominees. Including the chairman, there are ten government representatives at present.
This week, ATMA intends to inform the government of its dissent to the move to dilute stakeholder-run management that contributed to the Commodity Boards much-lauded efficiency, says Budhiraja.
The Bill, which was introduced in the Lok Sabha on July 28, includes creation of a rubber development fund, removing regulations like registration of estates and licence for planting and replanting of rubber. http://www.financialexpress.com/news/Tyre-makers-seek-more-members-on-Rubber-Board/499950/ http://in.biz.yahoo.com/090809/50/bau0n1.html
Sambit Saha The Telegraph (Aug 10)
Calcutta: City-based Ruia Group has chalked out plans to become the largest two- and three-wheeler tyre maker in the country by expanding Mysore-based Falcon Tyres in a phased manner.
The group will invest Rs 1,300 crore over the next two years to increase its capacity to 2.7 million units a month.
It will not only make us the undisputed leader in India in two- and three-wheeler tyres, but also one of the top players globally, as well, Pawan K. Ruia told The Telegraph. At present, Falcon makes 750,000 tyres at its Mysore plant and another 300,000 at its wholly owned subsidiary Monotona at Thane in Maharashtra. The tyres are sold under the Dunlop brand.
TVS Srichakra and MRF are the other dominant players in the two- and three-wheeler tyre segments.
Ruia said Falcons capacity would be increased to 900,000 pieces a month from August 15. A pact has been signed with the old workers and the company has hired 280 people. Falcon has also commissioned a Rs 300-crore expansion of its Mysore plant to take its capacity to 1.4 million pieces a month.
The market for two- and three-wheeler tyres is strong and we are able to get good margins, too. I do not foresee any fall in demand in medium term, Ruia said. He is now planning to set up a new unit at Uttarakhand. The facility will have capacity to manufacture 500,000 units and will require an investment of around Rs 500 crore. Two wheeler-maker Hero Honda also has units there.
Ruia Group also plans to expand the capacity of Monotona Tyres by another 500,000 units a month, entailing an investment of another Rs 500 crore.
Falcons first quarter results have reinforced Ruias optimism at a time when industry is wary of investing in capacity addition. The company made a profit of Rs 12.03 crore in the April-June quarter compared with Rs 6.6 crore in the whole of last year.
Ruia said he was confident of maintaining the margin. The Falcon scrip was the best performer on the Bombay Stock Exchange, gaining 132.94 per cent in the last month to close at Rs 848 on Friday.
Dunlop plan After tasting success with Falcon, Ruia is making efforts to put Dunlops troubled past to rest. The company has signed a fresh wage pact with the Dunlop Factory Employees Union at Ambattur in Chennai. The plant, which employs 666, has been closed for 16 months. http://www.telegraphindia.com/1090810/jsp/business/story_11341829.jsp
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| FINANCE & INSURANCE Go To Top | |
| OIL, LUBRICANTS & ALTERNATIVE FUELS Go To Top | |
| INTERNATIONAL NEWS Go To Top Matt Moore / AP (Aug 09)
Berlin: For months, European car buyers have been junking clunkers for cash, boosting automakers sales but making experts fear that once the government handouts stop, the struggling car industry will return to a slump no pile of cash can conquer. The various programmes have surged in popularity since France introduced the idea in December 2008.
Germany, Italy, Britain, Romania, Austria, the Netherlands, Spain and Serbia have introduced their own versions aimed at shoring up local automakers, from Germanys Daimler AG to Romanias Dacia.
While critics contend the billions of euros in handouts only benefit automakers at the expense of other industries and have just delayed a slump in car sales, proponents point out that it has kept large companies operating and helped reduce layoffs and temporary shutdowns.
But only for a time, some fear. The question is, what happens when the money runs out will the industry ease off the ramp or drive off a cliff. It is a question of somewhat forestalling the inevitable, Paul Newton, an auto analyst for IHS Global Insight, said recently. The reality is that without it, the chances are youll see a lot of businesses going to the wall.
Instead, he said that auto companies and dealership owners are using the programmes to clear inventory and build up cash on hand before for what is very likely to be a very tough 2010.
US officials consulted with Germany before implementing their own version of the auto rebate programme, according to guidelines published by the National Highway Traffic Safety Administration, the federal agency running the US cash-for-clunkers effort. One dramatic difference? The US has idled the clunkers by requiring dealers to kill the engine by pouring sodium silicate into it in order to claim a refund for the clunker rebate. The substance, often referred to as liquid glass, permanently damages engine parts.
German officials noted this week that there has been firm evidence of clunkers there being routed abroad to Africa and even eastern Europe and being resold. The Association of Criminal Investigators, or BDK, estimated that about 50,000 cars - polluting makes and models - have been sent outside of Germany. Clunkers in Germany arent required to have their engines disabled and thousands have not made it to the scrap yard.
The programmes have drawn fierce criticism. In July, Czech President Vaclav Klaus vetoed parts of a stimulus package, including a local version of the cash for clunkers. His office said the measure favoured short-term interests of several strong players from the auto industry at the expense of other sectors and firms. In Germany, critics have likened the bailout to giving free drugs to addicts. The auto industry is waiting on the bonus like a drug addict waits for the next shot, Steffen Kampeter, a senior lawmaker in Chancellor Angela Merkels Christian Democrats, said.
Sylvie Cariou, the director of a Citroen dealership just outside of Paris, said that as soon as France implemented its own programme, the impact was noticeable. Right away the effect that we saw was more traffic in her dealership, she said. For people who didnt think they could afford a car, it motivated them to buy.
Across Europe, the programmes had helped to limit the year-on-year sales decline in the second quarter to 5.6%, compared to a 17.4% drop in the first quarter. European manufacturers group ACEA reported a 2.4% rise in European car sales in June, the first increase after 14 months of falling sales. It said sales at Europes top seller Volkswagen AG rose 9.5%, while Italys Fiat saw a 11.7% gain as its cheaper small cars sold strongly.
Peugeot Citroen SA sales increased 4.4%, Ford Motor Co rose 2.2% and Renault SA was up 3.4%. Among the chief beneficiaries have been makers of small cars such as Peugeot and Fiat. After France launched its program in December, Renault said that orders for its cars were boosted by 40% that month by the government-sponsored euro1,000 ($1,435) bonus for French consumers who trade in old cars for new lower-emission models. Germany quickly followed suit, starting its plan in February after Europes biggest economy fell into a recession.
Owners of cars that are at least nine years old and registered in Germany for at least a year receive a euro 2,500 ($3,590) bonus if they buy a new car. The initial goal was to help the economy, expected to shrink by some 6% this year, by promoting big-ticket consumer purchases and newer, lower-emissions vehicles.
Some analysts also insist that the surge in sales is not merely pushing up demand, leaving automakers to face a precipice once the incentives are removed, but are instead creating sales because buyers trading in older polluting models would normally buy used, and not new, cars.
How long they can last, though, is not certain. Germany home to Volkswagen AG, BMW AG and Daimler AG has made clear that when the money runs out the programme wont be continued. After that, its over, said Economy Minister Karl-Theodor zu Guttenberg.
Europes auto makers are pleading for governments to withdraw the support gradually, fearing that until the economy is back on track, a dramatic end to the plans could result in a disorderly collapse in demand and chaos in the industry http://www.financialexpress.com/news/cash-for-clunkers-drives-sales/499710/
US-OWNED GM PLANS TO FLOAT IPO BY JULY 2010 Bloomberg See this story in: Business Standard (Aug 09)
The target date range for an IPO was given in a US regulatory filing yesterday. GM and its government owners will take reasonable best efforts to sell shares within a year, dependent on market conditions, according to the filing.
That would be the very earliest they could do it, said Erich Merkle, president of Grand Rapids, Michigan-based consulting firm Autoconomy. A lot of its going to depend on where auto sales are and how many vehicles GM is producing.
GMs filing narrowed the timetable for a stock sale, after the Detroit-based company had said only that it was aiming for an IPO in 2010. Ron Bloom, the Treasurys chief auto adviser, told reporters at an industry conference on August 5 that he expected a sale by GM next year.
GM hasnt specified how the proceeds from the IPO would be utilised, said Renee Rashid-Merem, a spokeswoman. The auto maker filed for Chapter 11 bankruptcy on June 1 with $65 billion in US aid.
While GM is now closely held, it will start releasing financial results after the third quarter, Rashid-Merem said. Yesterdays filing summarised GMs activities in the four weeks since leaving court protection, without financial data.
Remain transparent
The Treasury owns 60.8 per cent of GM, the successor to the former General Motors Corp. The other stakes are 17.5 per cent for a trust for United Auto Workers retiree medical bills; 11.7 per cent for the Canadian and Ontario governments; and 10 per cent for Motors Liquidation, as the remnants of the old GM are now known.
Chrysler Group, which also reorganised in bankruptcy court with US aid, probably wont have an IPO until 2011 or later, Treasury adviser Bloom said this week at the auto conference.
GM said it was authorised to issue 2.5 billion shares of common stock. Only a portion of them would likely be issued if an IPO is launched, Rashid-Merem said.
GM slid into bankruptcy after losses of $88 billion since 2004, when the company last posted an annual profit. Henderson is facing a streak of monthly sales declines at the biggest US auto maker dating to October 2007.
Volt technology
The technology required to power the car may not be developed in time for its planned November 2010 debut, the auto maker said.
Our competitors and others are pursuing similar technologies and other competing technologies, in some cases with more money available, GM said. There can be no assurance that they will not acquire similar or superior technologies sooner than we do.
GM also said it might not receive loans being sought from the US Department of Energy to help fund advanced-technology vehicles.
The auto maker said it applied three times and hasnt received funding from the $25 billion program.
A fourth application will be made this month, said GM, which has based its business plan on winning $5.7 billion of such funding. http://www.business-standard.com/india/news/us-owned-gm-plans-to-float-ipo-by-july-2010/366366/
NO BREAKTHROUGH YET ON OPEL DEAL Reuters See this story in: The Economic Times (Aug 10)
Frankfurt: Chief executives of General Motors and auto parts maker Magna made some progress in talks on the sale of GMs Opel unit, but key barriers remain, Opels top labour leader and board member has said. GM chief Fritz Henderson and Magna co-chief executive officer Siegfried Wolf met in an attempt to jumpstart a stalled bidding process, with unions favouring a deal between the two sides in preference to financial investor RHJ International. Progress was made, but there was no final breakthrough, Opel labour leader Klaus Franz told Reuters. But he said that the fact that General Motors and Magna executive management had met was a positive signal. Franz has said that he would ask German Chancellor Angela Merkel and vice-chancellor Frank-Walter Stein Meier to intervene personally to advance the stalled takeover talks, should no deal be reached by the middle of next week. Both sides are trying to approach each other and I think that mid next week well be able to see a bit clearer, Franz said. Ahead of a general election next month, politicians have prodded General Motors to come to terms with Magna, which wants to expand Opels full-scale car assembly business and forecasts high growth rates, particularly in Russia, home of its bidding partner Sberbank. General Motorss chief negotiator has praised RHJs offer, but Berlin rejected its first offer for Opel in May and the private equity firm has been unable to undermine widespread backing in Germany for Magna, even after dropping plans to close two German plants. To make its bid more attractive to the government, RHJ has offered to take only 3.6 billion euros ($5.17 billion) in state aid, down from an initial 3.8 billion euros, but it wants to pay lower sales royalties to General Motors in return, a source with knowledge of RHJs offer said. German daily Die Welt on Saturday cited one person close to matter saying that General Motors could not make concessions over patents and licensing which Magna is demanding without breaking the United States patent laws. Magna declined to comment. General Motors was not available for immediate comment.
FORD MAY SELL VOLVO CARS THIS YEAR See this story in: The Hindu Business Line (Aug 09)
Ford is not in the same rush to dispose of the unit as General Motors, which is in the process of selling Saab Automobile to Koenigsegg Automotive AB, Mr Haegglund said.
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| Oommen A. Ninan The Hindu
"The country is facing a difficult situation. The monsoon has been delayed and in many places it has been deficient, though some parts of the country have received normal or excess rainfall. Agricultural operations have been adversely affected in several parts of the country causing distress to farmers and their families. A deficit of more than six million hectares has been reported in paddy, which is the worst affected crop," Dr. Manmohan Singh said on Saturday while addressing the State Chief Secretaries.
Outlook The monsoon outlook for June-September has further deteriorated and initial estimates available with the India Meteorological Department (IMD) suggest that the shortfall in rain has become worse in the past week with expectations of further deterioration.
The Bombay Stock Exchange 30-share sensitive index, Sensex, closed at 15160.24 for the week, a fall of 353.79 points or 2.28 per cent against its previous close. The market lost 744 points or 4.68 per cent in the last two days. An overwhelming response to the initial public offer by NHPC, subscription for which opened on Friday last, could not enthuse the markets.
"We think that the overall shortfall over the June-September period could rise to 15-18 per cent from the current 8 per cent forecasted by the IMD. We estimate that this could reduce agricultural growth to (-) 2 per cent yearon- year, down from our earlier estimate of +1.4 per cent year-on-year. We think that rural demand will be negatively impacted and this is a significant negative shock for the equity market, with sectors catering to rural demand such as FMCG particularly affected. We think bond yields may push higher in the near-term," said Tushar Poddar, Vice-President and Chief Economist, Goldman Sachs India.
RBI survey A forecasters' survey conducted by the Reserve Bank of India (RBI), which was released last Friday, shows that for the year 2009-10, the forecast for agriculture growth has been revised downwards from 3 per cent to 2.5 per cent. For the industry and services sector, the growth forecasts have been revised upwards from 4.1 per cent to 4.8 per cent and from 7.5 per cent to 8.3 per cent, respectively, in 2009-10.
The `Survey of professional forecasters' conducted by the central bank presents shortto medium-term economic developments on major macroeconomic indicators like component-wise detailed forecasts of GDP growth, inflation, savings, capital formation, consumption expenditure, export, import, interest rates, money supply, credit growth, stock market movements and corporate profit. The Prime Minister also warned that "we need to be aware of the possibility that reduced production of kharif crops in the current year may have an inflationary impact on prices of food items in the coming months. Of late, we have seen a rising trend in prices of certain essential commodities like pulses, sugar and some vegetables".
The RBI-conducted forecasters' median estimates for Wholesale Price Index (WPI) inflation on a year-over-year basis in the second, third and fourth quarters of the current financial year are (-) 1.4 per cent, 2.5 per cent and 5.4 per cent, respectively.
WPI-based inflation The forecasters were asked to assign the probabilities to the possibility that average WPI-based inflation during the current financial year and the next financial year will fall into various ranges. Forecasters have assigned the highest 41.2 per cent chance that inflation will be in the range 4- 4.9 per cent in 2009-10 and highest 39.8 per cent chance that it will fall to 5-5.9 per cent in 2010-11.
Inflationary pressure would also affect interest rates. The forecasters expect the repo rate to be 5 per cent in 2009-10 which is revised upwards from 4.5 per cent in the last survey. The reverse repo rate is perceived to be 3.5 per cent by the end of current financial year, higher than the last survey forecast of 3 per cent. This means interest rates would be rising by the time the busy season starts, from October.
Forecasters have revised their real GDP growth rate upwards to 6.5 per cent in 2009-10 from 5.7 per cent in the last survey. They were asked to assign probabilities to the possibility that yearover- year real GDP growth will fall into various ranges. The highest probability of 41.1 per cent is assigned to the growth range of 6-6.4 per cent for 2009-10. For 2010-11, they have assigned the highest probability of 42.7 per cent to 7-7.4 per cent.
"We retain our financial year 2010 GDP growth forecast of 5.8 per cent, and think that consensus forecasts of 6.3 per cent, and the Prime Minister's Economic Advisory Council's forecast of 7 per cent looks a bit rich," said Mr. Poddar.
"The sharp decline in WPI inflation has not been commensurately matched by a similar decline in inflation expectations," RBI Governor D. Subbarao had said a few days back in his first quarter review of Annual Policy. Within WPI, inflation of primary articles, particularly food articles, remains significantly positive. Moreover, consumer price indices (CPIs) have remained elevated, indeed also hardened in recent months. Said Dr. Subbarao, "Global commodity prices have rebounded ahead of global recovery and the uncertain monsoon outlook could further accentuate food price inflation".
Dr. Sigh also pointed out that "we are operating against a back drop of record production and procurement of foodgrains in 2007-08 and 2008-09". This was made possible by the substantial increase in the minimum support prices and other policy initiatives. Thus, "we are in a position to ensure adequate availability of foodgrains in the drought affected areas". As a warning, he said "We should not hesitate to take strong measures and intervene in the market if the need were to arise".
The risks to the current projections of real GDP growth and inflation for 2009-10 are on the upside. The RBI Governor also had pointed out that the comfortable levels of foodgrain stocks should help mitigate the risks in the event of price pressures from the supply side.
The RBI will also closely monitor the level of liquidity so as to contain inflationary expectations if supply side price pressures were to rise. Indian agriculture and its farmers always got a raw deal. Even after several years of independence, the Indian farmer depends on monsoons for a good crop as 60 per cent of the agricultural land is not irrigated. http://www.hindu.com/2009/08/10/stories/2009081050061400.htm
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