Hindustan Motors denies sell off rumours and plans for small cars

Reacting to rumours that the company was planning to sell its earthmoving equipment division (EED) to its collaborator, Caterpillar Inc. of the US, Mr. A. Sankara Naryanan, executive director of Hindustan Motors Limited (HM), emphatically denied any moves for a sell off or hiving off the division as a joint venture with Caterpillar.

The rumours of the sell-off gained currency as Caterpillar Inc., which recently established a wholly owned subsidiary in Bangalore, started selling some earthmoving equipment here. This move coupled with the fact that the CK Birla-controlled HM was in the throes of a restructuring exercise, only added fuel to the rumours.

Mr. Narayanan also sought to deny rumours that HM was planning to transfer the property belonging to EED -- city office and some buildings at Tiruvellor factory -- to its Lancer car division; Caterpillar has consented to take out EED provided the workforce is reduced by 100 numbers etc. Hindustan Motors' EED has two plants - the major one at Tiruvellore, near Chennai and a smaller plant at Pondicherry. While the Tiruvellore plant rolls out big machines like dumpers, loaders, excavators, crawler tractors the latter manufacturers small machines like wheel loaders, backhoe loaders. According to Mr. Narayanan, the EED sold 580 machines in the immediately preceding financial year, as compared to 630 sold during 1998-99. In value terms last year EED has contributed around Rs 400 crore to the company's total turnover.

Further, according to Mr. S.R. Subramanian, vice president, EED, the market for earth moving equipments was growing with the demand for smaller machines is going up and demand for the bigger machines coming from the mining and the cement sector. He, however, conceded that in the small segment a price war was in the offing. Mr. Subramanian also said that the company was hopeful of picking up a substantial share of the Rs. 200 crore order for 550 units of 50 ton dumper trucks that Coal India Limited was expected to float shortly. Mr. Narayanan also denied media reports that the company was planning to manufacture two passenger cars from the Mitsubishi stable – the 660cc small car, Minica, and the Pajero. According to him, small car projects need massive investments and, given the break even volumes required, the project is not viable.