Tata Hispano Motors Carrocera SA, a Spanish bus chassis manufacturer, has announced plans to stop production at Zaragoza factory on mounting losses and falling demand.

The company, a wholly-owned subsidiary of Tata Motors, has accumulated operating losses of €60 million (Rs 506.6 crore) in the last five years.

The company, formerly Hispano Carrocera, has also received an offer from Benseny Group.

The proposal, which is not a purchase offer, is being pursued to explore the possibility of achieving continuity of Zaragoza factory, it said in a statement.

The production is likely to stop by October, after fulfilling the existing delivery orders and post settlement with the employees.

This is the only plant in Spain for the company.

The decision to cease the activity at Tata Hispano Motors Carrocera has been compelled due to economic and business factors, as despite strong investments, there has not been a positive result to reverse the challenging business situation and losses for the plant, it added. Apart from the operating losses, there has been a constant decline in production due to falling sales.

In the recent years, the bus market posted a 38 per cent decline in registrations.

The company has also informed the workers committee about the decision to cease production and expressed willingness to reach an agreement.

It has also invited the workers' representatives to discuss and formally initiate consultation period to agree on a social plan for the 287 employees working in the factory.

>rajesh.kurup@thehindu.co.in

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Published on September 24, 2013