Search the Internet          Tips  Sites: Finance, Investment

Hindustan Motors in talks with M&M to supply engines

Hindustan Motors Ltd said on Friday it was in talks to supply gear-boxes and engines to the country's top utility vehicles maker, Mahindra, but needed to address such issues as demand before striking a deal.

Mahindra & Mahindra, which has a commanding domestic utility vehicles' market share of 47 per cent, wants to use transmissions and petrol engines made by Hindustan Motors for its Bolero utility vehicle.

Hindustan Motors, one of India's oldest automobile companies and maker of the vintage-looking Ambassador cars and Mitsubishi's Lancer sedan is trying to grow into a supplier of engines and other parts for vehicle firms in the country.

"We have to do nothing special for Mahindra. They just want our existing product, not a new one, so it's just a question of capacity and how many we can give them," Bhuwan Kumar Chaturvedi, Hindustan Motor's president and executive director told Reuters.

"But in case they want more (than our capacity), then how do we do that? Would we need to invest more and will they join us in the investment? Those are the issues we need to discuss."

Earlier this year, Hindustan Motors signed an deal with Ford's Indian unit to make engines for its Ikon sedan in the country and later with General Motors Corp to make engines for a vehicle that it will launch locally in the future.

Most foreign vehicle makers, including General Motors, Toyota and Fiat import engines for the vehicles they assemble in India.

Chaturvedi said Hindustan Motors will begin production of engines for Ford Ikon sedan in December, some financial benefits of which will be seen in the company's fourth quarter beginning in January but fully in the next financial year.

A car market leader in the mid-1980s, Hindustan Motors has since then lost out to foreign automakers which have entered the market with smaller and cheaper cars.

It reported a second-quarter profit of Rs 3.87 crore (Rs 38.7 million), which it said represented a turnaround after three years, helped by cost cuts and pruning manpower at its oldest plant.

Its shares, on the upswing for the past month on hopes of a continuing improved financial performance, ended nearly 10 per cent up on Friday at Rs 10.35 on the Bombay exchange outpacing a broadly flat market.

Chaturvedi said the company would introduce a 1.8 litre version of the Lancer sedan in mid-2003 as well as an upgraded version of its Beford bus and truck that year. In 2002, it launched Mitsubishi's Pajero utility vehicle in India.

ALSO READ:
More Money Headlines