Nov 7, 2008

Business - India;3 day week at Ashok Leyland

Demand slowdown forces company to slash number of working days.

A day after auto major Tata Motors announced a three-day shutdown of the Jamshedpur plant, Hinduja flagship company Ashok Leyland today said it will restrict production activity to only three days a week at its plants until December to downsize the high inventory.

The company has been facing problems of inadequate funding and high interest costs, due to which the demand for medium- and heavy-duty commercial vehicles has been hit.

"Taking into account the inventory in pipeline and the suppressed market demand, Ashok Leyland has decided to moderate the production plan for the next two months. This decision has also been partially influenced by problems encountered by suppliers as a result of power shortage in some parts of the country," the company said in a release issued here.

Meanwhile, its sales have halved to 3,397 units in October as against 6,825 units sold in the corresponding month of the previous year. A major part of the sales loss is from the medium and heavy goods carrying segment (heavy trucks), which showed a decline of 60 per cent during the month, with sales of 1,950 units compared with 4,861 units in the year-ago period.

Analysts suggest that the outlook for the commercial vehicle segment for the rest of the year looks bleak as major banks and financial institutions are yet to pass on the benefit of the interest rate cut to the customer, which was announced by the Reserve Bank of India recently. Meanwhile, the Chennai-based commercial vehicle manufacturer reported a 50 per cent drop in sales during October sales at 3,397 units as compared to 6,825 units a year ago.

Total production has come down by 38 per cent to 3,609 units from 5,873 units. Domestic sales dropped to 2,976 units from 6,280 units and exports dropped to 421 units as compared to 545 units, a drop of 52 per cent and 22 per cent respectively.