For the first time in seven years, Tata Motors [Get Quote] has decided to shut its Jamshedpur plant for three days starting November 6, due to demand slump.

In a statement issued today, India's largest commercial vehicle maker said it will take a block closure at at Jamshedpur from November 6 to 8, to match production with demand of vehicles produced at the plant.

This is "to avoid build-up of inventory either in the company or with our dealers," a company spokesperson said.

"About 95 per cent of commercial vehicles are purchased through financing. While we do not declare production rates, unavailability of finance, coupled with high interest rates, is forcing customers to postpone purchases," the company said.

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In October, the company reported 29 per cent decline in commercial vehicles sales at 19,154 units, against 27,103 units in the same month last year. Tata Motors commands a share of 64 per cent in this segment, according to figures provided by the Society of Indian Automobile Manufacturers.

Meanwhile, Chennai-based Ashok Leyland [Get Quote] has not taken a decision yet on suspending production at its manufacturing facilities, but said that it will look at downsizing inventory in the coming months. The company will cut production this month and the following month.  

Similarly, Eicher Motors [Get Quote], India's fourth largest CV maker has clarified that it will not shut down or reduce working hours at its plant based in Pithampur but will moderate production to suit demand.

"Our plant capacity stands at 4,500 units a month. We had reduced our production by about 15 per cent approximately in the last month. Apart from the Diwali holidays, we have not stopped production work at Pithampur", a company spokesperson said.  

Most of the CV making companies have been building up inventory expecting a reduction in interest rates and relaxation of lending norms from banks.

S&P affirms rating: Standard & Poor's Ratings Services said today it affirmed its 'BB' corporate credit rating on Tata Motors and removed it from CreditWatch. The outlook is negative. 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 (B-/Watch Neg/--) 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.

S&P stated that the negative rating outlook on Tata Motors reflects deteriorating market conditions in the US and Europe, weakening domestic market demand and 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.

S&P also said that 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.

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