May 25, 2020
Home  »  Magazine  »  Business  » Automobiles »  End Of An Era?

End Of An Era?

The Ambassador, an ageing warhorse, is running on empty; management and labour share the blame

End Of An Era?

IS this the end of the road for the Ambassador, that 'ugly dumpling' mainstay of Indians, much-loved despite its obsolete technology? The car that Indian prime ministers ride in, but also the car exported to England as a funny 1950s-vintage curio item? Decades of indifferent management and irresponsible labour have combined to leave a cloud of uncertainty over the plant at Uttarpara near Calcutta, where Hindustan Motors (HM) manufactures the old warhorse.

Hundreds of unsold Ambassadors gather dust in a field opposite the company's office, while demoralised workers mill around, unsure of their fate. The flagship company of the G.P. Birla-C.K. Birla group is in big trouble. The pincer of demand recession and cut-throat competition has choked the Uttarpara unit. The managements efforts to cut costs by reducing the workforce of 11,000 to 3,000 have hit a solid wall. Its voluntary retirement scheme (VRS) has been rejected outright by the unions. Its subsequent proposal to reduce the six-day workweek to three days has not been sanctioned by the West Bengal government. Its impasse, with the clock ticking away.

The next step by the management could be suspension of work. If this happens, it will not only cause immense hardship to HM workers but may vitiate the industrial climate of the state, already reeling from numerous closures. HM is a company identified with the state. Like Dunlop, whose Sahagunj unit has been closed for months now, like Philips, which wants to sell its Salt Lake plant. Says HM employee Prakash Sahu: The employers are now much stronger than the union. Dunlops Sahagunj factory is closed for nearly a year and in spite of the state government's assurances, there are no signs of the unit reopening. If we were public sector employees, we would be assured of our jobs. But this rule no longer applies to private companies.

Feels Subhash Ghosh, another employee: The VRS offer of Rs 1 lakh lumpsum is far too little and would soon be spent as chances of getting another worthwhile job are bleak. If the offer is raised to Rs 2 lakh or Rs 3 lakh, many of us would accept the offer. The company should be more generous. After all, the workers are not responsible for the sorry state of the company or of the automobile industry.

There is substance in Ghosh's anguish. The first Ambassador rolled out of the Uttarpara factory way back in 1957. The cars shape remains the same today. Till 1984, when the Maruti 800 was launched, the Ambassador faced practically no competition as government policy did not allow new entrants and buyers had no choice. A smug management neglected quality, and did not upgrade technology. Says a retired senior technical manager of HM who did not wish to be named: No attempts were made to change the model, the body or improve fuel efficiency. Shopfloor machines were old - many were bought second-hand - and were seldom replaced. So there was considerable variation in the performance of cars produced in the same batch. That's why people with the right connections chose their car from the plant in consultation with the management.

Customers have been unhappy for years, but the company has paid no attention. Calcuttan T.S. Srinivasan is a typical harassed Ambassador customer. He has owned Ambassadors since 1985, and has always received poor service from the authorised dealer. His numerous letters of complaint to HM were never answered. And today, with a wide range of options available in the market to suit every budget, 14 years after HM should have changed its ways, the company's sins have caught up with it.

Says Ajit Chakraborty, joint secretary of the intuc-affiliated HM Employees Union: It was total management negligence. It should have upgraded the Ambassador. His other grouse is that in spite of having 741 acres of vacant land in Uttarpara, all HMs diversifications were made elsewhere. The Lancer, manufactured in collaboration with Mitsubishi, is manufactured in Chennai, the earthmoving equipment division is in Pondicherry, the power products division at Hosur in Tamil Nadu. Labour at Uttarpara is not to blame for this, Chakraborty claims, and cites, as proof, remarks from the company's last balance sheet: The relations between management and employees during the year remained cordial.

But, says the retired HM manager: Although the unions are far more restrained now, they were not so a few years ago. Workers heckled officers on trivial issues. Also, the incentives offered by the state government did not match what other states offered. For all practical purposes, Chandra Kant Birla has moved out of this state. The HM management gives another reason too for setting up plants outside West Bengal. The eastern regions share of the all-India car market is disproportionately low, they say, steadily declining from 17.5 per cent in 1985 to 9.7 per cent in 1995. Consequently, we have to transport a greater proportion of the cars produced at Uttarpara over longer distances than competitors, says a spokesperson. This adds to the final cost of our products and is a handicap for us.

Having failed to attract workers to the vrs, the management wrote to the intuc and citu union bosses in November, explaining why the workweek should be cut to three days instead of six. The letter pointed out that the automobile division had incurred a loss of Rs 17.11 crore between April and October 1998. While in the last two years vehicle prices increased 20 per cent, employee costs rose 30 per cent. The three-day week would save HM Rs 32 lakh per week or Rs 16.66 crore per year. The letter said that the number of managers and executives was reduced from 1,338 in 1995 to 939 in 1998, and it planned to trim it to 900 by March. It added that while Maruti in 1997-98 produced 66.54 cars per employee, HM produced 2.33 per employee.

Chakraborty says this is an unfair comparison, since Maruti has modern machines and the workers are needed mainly to assemble the cars. Also, a large part of Maruti's spare parts are outsourced, while HM manufactures these at Uttarpara. About average worker earnings rising from Rs 59,700 in 1995-96 to Rs 66,200 in 1997-98, he feels that given the spurt in the cost of essential items, this is not too high. He points out that between 1996 and 1998, the executive directors yearly gross income increased from Rs 10 lakh to Rs 20.7 lakh, and the senior presidents from Rs 10.36 lakhs to Rs 16.50 lakh. The earnings of other senior managers have also risen similarly.

But what really does the HM management want? When a worker's average salary is Rs 66,000, he cannot be expected to accept a lumpsum VRS of only Rs 1 lakh. This offer cannot be taken seriously. By the management's calculations, the three-day week will save Rs 16.66 crore per year. But this is unlikely to substantially relieve the units cash crunch. On the other hand, if the number of workers are reduced 70 per cent to 3,000, the unit will save over Rs 46 crore, a substantial and permanent saving. Obviously, reducing employees is HM's ultimate gameplan; everything else could be just pressure tactics. The question is whether the management will offer an acceptable VRS or close down the unit for a few months to further weaken the workers morale. Whichever way the dust settles, the Ambassador, an Indian icon, has surely entered the fag end of its life.

Next Story >>
Google + Linkedin Whatsapp

Read More in:

The Latest Issue

Outlook Videos