Tata Motors Limited shut down plants to adjust demand. Ratan Tata advises top management to clear all loans and stop further acquisition plans.
In the face of lowering sales of automobiles, Tata Motors Limited (BOM:500570), the largest commercial vehicle producer in India, is going to shut down its two manufacturing plants from November 22 to November 27, 2008. On November 7, 2008, Tata Motors Limited announced that in order to avoid inventory build up, the company is going to shut down its plants in Pune and Lucknow for six days. The company is also adopting approaches like working single shift and triple shifts instead of double shifts to keep up with the demand of the vehicles. Times of India reports:
Tata said it was shutting production to avoid inventory build-up. A spokesperson said the Pune plant will be shut from November 21-26, while production will be halted at Lucknow from Nov 10-15. Unavailability of finance coupled with high interest rates was forcing customers to postpone purchases, the company said. “This will call for appropriate action from Tata Motors from time to time, to match production with demand and avoid unnecessary build-up of inventory in the company or with the company’s dealers,” the spokesperson said.
Workers at Tata Motors are given three day forced leave and three day leave on half-payment. They are also told to write and submit an application for leave for the six days. In October, Tata Motors laid off its 400 non-permanent workers at the Jamshedpur plant.
The other companies of Tata Group are also facing similar problems. On November 6, 2008, Ratan Tata, head of the Tata Group, forwarded an email to the top management of its 98 companies. In the email, he ordered the managing directors and CEOs to finalize all pending loans and funding agreements. He also ordered the top officials not to continue with any other acquisition plans. The $6.25 billion business conglomerate is under huge debt which has been caused by the funding of its aggressive acquisition plans. In 2007, Tata acquired UK-based steel producer, Corus Group Limited. This year, the group acquired Jaguar and Land Rover from America’s Ford Motor Company (NYSE:F). In his email, Ratan Tata said that he is not optimistic whether the ongoing economic slowdown would end next year. Ratan Tata ordered the top management of his companies to become proactive and cut down all unnecessary costs.
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