The Hindu Business Line : Vendors upset over Ashok Leyland ‘negotiating’ dues

Chennai, Dec. 25 Ashok Leyland appears to have incurred the ire of its suppliers over the company “negotiating” with them for taking a cut on the payments due.

According to the suppliers Ashok Leyland is asking for a 10-15 per cent discount if the outstanding payments are to be settled immediately. Otherwise, they would have to wait for a further six to eight months before their payments are released.

Calling attention to this, the Association of Indian Forging Industry has termed this “unfair”. The Association has said the overdues have caused the forging units to delay interest payments to the banks. Consequently, they are getting classified as non-performing assets, with attendant difficulties of access to bank funds.

Steel inventory

Further, the steel used for supplies is from the earlier inventory bought at high prices. “The forging industry was compelled to buy steel at these high prices and pile up inventory in order to ensure uninterrupted supplies to you. Therefore, at least for these supplies, a reduction/correction in payments should not be insisted upon. In fact, Ashok Leyland is yet to neutralise the Rs 5,000 a tonne increase enforced by the steel producers with effect from July 1, 2008,” the Association has said.

“We do appreciate that the commercial vehicle sector is going through a tough period and hope that the situation will change.

“However, we feel that this is the time for maximum cooperation between customer and supplier to get through this difficult time,” the letter said.

Mr K. Vidhyashankar, President of the Association, declined to comment saying that it was a matter between the suppliers and the original equipment manufacturer.

Fund trail

When contacted by Business Line, several other auto component suppliers to Ashok Leyland said pretty much the same, but did not want to be quoted.

Responding to the issue, top officials of Ashok Leyland said: “The credit crunch is still very acute and funds, when available, come at very high costs. Despite that, Ashok Leyland has been sourcing funds to fulfil commitments.”

The company’s payment commitments to all medium, small and micro enterprises are being fulfilled. In the case of some of the larger suppliers, there are outstandings which the company is trying its level best to address, they said.

The vehicle manufacturer has sought the cooperation of suppliers by sharing the pain in these bad times, just as the gains have been shared in good times.

The company has sought price re-negotiations in line with commodity price reduction and the price expectations of a market in recession.

Related Stories:
Ashok Leyland cuts production target for November
Ashok Leyland net dips on interest costs, forex volatility

More Stories on : HCV/LCV/Tractors | Automobile Components

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page