The Hindu Business Line : Tata Motors declares 3-day closure of Jamshedpur plant

“Tata Motors is taking a block closure at Jamshedpur from November 6 to November 8, to match production with demand of vehicles produced at the Jamshedpur plant to avoid build-up of inventory either in the company or with our dealers,” said the company’s spokesperson.

Tata Motors, the largest commercial vehicle maker in the country, produces heavy trucks including tractor-trailers, multi-axle vehicles and tippers at the Jamshedpur plant. The company makes medium and heavy commercial vehicles at its Pune plant too.

“About 95 per cent of commercial vehicles are purchased through financing. As we saw in October across the industry, unavailability of finance, coupled with high interest rates, is forcing customers to postpone purchases,” said the spokesman. He clarified that the company’s car plant is working to normal capacity.

Tata Motors had recorded a 29 per cent decline in the domestic commercial vehicles sales at 19,154 in October. Medium and heavy commercial vehicle segment was the worst hit segment with a 48 per cent fall at 7,321 units.

Ashok Leyland, the second largest truck makers, is also looking to curtail production in November. Tata Motors had reduced workforce at the Jamshedpur plant in October.

At the time of quarterly result announcement last week, Mr Ravi Kant, Managing Director, told reporters “Production continues to be moderated. We do not want to build up our inventories. Production will always be determined by demand.” About job cuts, he said that the permanent work force would not be pruned while temporary work force would be reduced according to the situation.

S&P Rating

International rating agency, Standard & Poor’s Ratings Services said today it affirmed its ‘BB’ corporate credit rating on Tata Motors with negative outlook and removed it from CreditWatch. The ‘BB’ foreign currency rating on all Tata Motor’s rated debt was also removed from CreditWatch and affirmed.

The rating was lowered on April 4, 2008, to ‘BB’, from ’BB+’, after Tata Motors’ announced its agreement with Ford Motor Company for the purchase of Jaguar and Land Rover (JLR). It was placed on CreditWatch with negative implications on January 7, 2008, when focused discussions with Ford Motor started.

The negative rating outlook on Tata Motors reflects the following: deteriorating market conditions in the US and Europe; weakening domestic market demand; increase in debt, especially short term, led by higher working capital requirements; slowdown in the vehicle loan securitisation market; and capital expenditure, resulting in weakening of the company’s financial profile, said a statement from the rating agency.

The financial profile could also be adversely affected in the near term by the possible underfunded status of the JLR pension fund, which was fully funded by Ford Motors as of October 31, 2007, and is due for review in April 2009, said the statement.

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