Tata Motors plans restructuring

Tata Motors is exploring options to restructure its loss-making subsidiary TAL Manufacturing Solutions.

In the financial year ended March, 2004, TAL, a wholly-owned subsidiary engaged in factory automation solutions and design and manufacture of machine tools, suffered a loss of Rs 33.19 crore (Rs 331.9 million), compared with Rs 28.2 crore (Rs 282 million) recorded in the previous year.

In 2003-04, turnover of the company stood at Rs 76.51 crore (Rs 765.1 million), down from the previous year's Rs 63.01 crore (Rs 630.1 million). Due to the continued losses of TAL, Tata Motors has made a further provision of Rs 49 crore (Rs 490 million) in FY-04, it said in the annual report for 2003-04.

Performance of TAL, continues to be disappointing due to cheaper import of capital goods and therefore, losses have not been arrested, Tata Motors said in the report.

"While the management of TAL is taking steps for its revival, the company is also looking at various options in restructuring of TAL so that its losses can quickly be arrested," the report added.

Referring to the commercial vehicles segment, the company said development of a range of 12-60 seater in standard, deluxe and luxury versions for school, city and inter-city movement was in progress.

"These buses are expected to be introduced in 2004-05 after their exhibition at the recently concluded auto expo," the report added.

On the risks and concerns, Tata Motors said over last 18 months steel prices have been abnormally high and seem to continue this trend. Similarly, the cost of certain other inputs like rubber products are also on the rise.

The company has been countering such increases through long-term contracts, identification of alternative sources and through cost reduction in other areas.

"However, if these input costs continue to increase, margins and results of operations of the automobile industry would be adversely affected and the demand for vehicles would be impacted by any price increases that the industry would need to make", the company pointed out in the annual report.

In recent months, the international crude prices have risen to highest levels of over $40 per barrel. If the price continues to be at such high levels, domestic fuel prices would be greatly affected and could have an impact on the auto industry demand and the company's sales, it added.