The Hindu Business Line : Ford India moves into profit lane; Hyundai net slides

Chennai, Dec. 30 Ford India has registered a profit after tax in 2006-07, for the first time since it started manufacturing at a greenfield plant here eight years back. Hyundai Motor India’s net profit for the year is down compared to that in 2005-06.

Ford India’s financial performance has been boosted by a 45-per cent increase in vehicle sales, mainly driven by the Fiesta sedan it launched towards the end of calendar year 2005.

Hyundai Motor India’s vehicle sales increased 19 per cent during the year.

Both Ford India and Hyundai Motor India have their plants on the outskirts of Chennai. Ford India’s plant is at Maraimalai Nagar, about 35 km south of the city, and that of Hyundai Motor India at Irungattukottai, about 45 km to the west.

Ford India signed an agreement with the Tamil Nadu Government in January 1996 and started manufacturing operations at its plant here in 1999 while Hyundai Motor India signed the agreement in early 1997 and launched its first car in October 1998.

Ford produces the Ikon, Fiesta, Fusion and Endeavour, while Hyundai manufactures the Santro, i10, Getz, Accent, Verna and Sonata.

Ford India carries over an accumulated loss of Rs 768.80 crore.

The company has not declared a dividend for the year.

Pressure on cost

Hyundai Motor India, in its annual report, has attributed the lower profit figures to the pressure on cost as a result of launch of new models, higher selling expenses, surge in interest costs and to the withdrawal of export benefits such as Target Plus scheme.

Hyundai has not declared a dividend for the year “as part of prudent financial measure” and “keeping in view the fund requirement for meeting the company’s investments in the new capital projects.”

However, Hyundai Motor India has paid a royalty and technical assistance fees of Rs 369.77 crore for the year (Rs 308.30 crore in the previous year) to its parent Hyundai Motor Company of Korea. Hyundai has transferred its “after service parts” – manufacturing and marketing auto parts, components, spare parts and related accessories – business division to Mobis India Ltd on a slump sale basis, so that it can concentrate on vehicle manufacture only. Mobis is a Hyundai group company.

Hyundai had an other income component of Rs 356.86 crore (Rs 470.48 crore), which included Rs 45 crore as gain on exchange fluctuation, and about Rs 190 crore as export benefits compared to export benefits of Rs 363 crore in the previous year. Hyundai Motor India had protested the Centre’s move to withdraw the Target Plus scheme for exports (under which it got Rs 160 crore in 2005-06, compared to Rs 8.5 crore under a new scheme this year) retrospectively from April 2006.

Accumulated losses

Ford India’s auditors have noted that the accumulated losses of Rs 768.80 crore exceeded 50 per cent of the company’s net worth as on March 31, 2007.

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