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Ratan Tata blames losses on poor commercial vehicle sales

Our Bureau

MUMBAI, July 20

ECHOING an earlier similar statement of his, Mr Ratan Tata, Chairman, Tata Engineering & Locomotive Company Ltd (Tata Engineering), has said the company has failed to perform as well as it should have on the commercial vehicles (CVs) front.

``The year has, without doubt, been a year of crises for the company and while it has aggressively addressed several areas relating to cost, quality and product offerings, it should have performed better in the marketplace by protecting or possibly even growing its market share.''

``One recognises that the passenger car marketplace became highly proliferated with new product introductions from the various international car manufacturers, but in the case of commercial vehicles, with no such product introduction or competition, the company did not perform as well as it should have,'' he said in his Chairman's statement in Tata Engineering's 2000-2001 annual report.

Tata Engineering had earlier reported a loss of Rs 500.34 crore on a turnover of Rs 8,164.22 crore, for fiscal 2000-2001.

Putting the slide in perspective, Mr Tata said the CV segment which relates directly to the level of economic activity was ``devastated'' by the prolonged economic downturn which caused a demand decline of close to 40 per cent compared to 1996-1997 level s.

Tata Engineering being the dominant domestic CV player bore the brunt of this demand contraction. Market demand for new CVs was also affected by the rise in diesel price and a substantial increase in sales tax arising from a uniform sales tax policy.

The situation was compounded by the company's car project, which returned better financials but took aboard the full impact of depreciation and interest owing to its gestation period.

Since closures and huge lay-offs like the ones done by global manufacturers are not resorted to in India, Mr Tata said, ``There is a need for the Government and industry to find acceptable alternate means of dealing with the effects of a prolonged econom ic slowdown on capital-intensive or labour-intensive industries, to meet the transient needs of such economic change. Failure to do so, will result in major industrial sickness in the country.''

About the company's future, Mr Tata hoped that steps to revive the massive national road network project will directly contribute to better CV sales by generating greater need for materials transport, while the eventually improved road connectivity shoul d help restore profitability to the road transport industry.

``The current lack of demand in the commercial vehicle sector, where most of the company's costs are incurred, and which has led to the disappointing results posted during the year, has been an issue of the greatest concern to the company's board and man agement.

The task ahead is not easy and some of the decisions that need to be taken could be hard and painful, but there is however a commitment and a great sense of pride in the people of Tata Engineering which I am sure will enable this effort to succeed,'' he said.