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Fortunes of Ambassador carmaker hit pothole

Fortunes of Ambassador carmaker hit pothole
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First Published: Sun, May 09 2010. 11 06 AM IST
Updated: Sun, May 09 2010. 11 06 AM IST
New Delhi: Losses at Hindustan Motors, maker of the Ambassador car — easily India’s most recognisable vehicle — have been mounting, raising questions about the company’s survival.
The snub-nosed Ambassador once ruled India’s potholed roads, but last week Hindustan Motors reported that losses widened in the last fiscal year to Rs42.9 crore ($9.5 million) from Rs37.8 crore the previous year.
In addition, India’s oldest automaker said its net worth has tumbled by over 50% and it must now report to the state-run Board for Industrial and Financial Reconstruction — part of India’s socialist-style bureaucracy that oversees revival of “sick companies” as financially troubled firms are known.
But the company remains upbeat, insisting the future appears much brighter, helped by an improving outlook for sales which took a hit during the financial downturn.
“Our operations are looking up,” Ravi Kathuria, Hindustan Motors’ senior vice president, told AFP, adding that the company has extensive land assets “which can be leveraged.”
“We’re not in a bankruptcy situation,” Kathuria said.
In a boost to the company’s spirits, the Ambassador also has been chosen as the official car to ferry athletes around at the October Commonwealth Games.
But analysts are doubtful about longer-term prospects for the company, whose shares have nosedived.
It “could hang on tenaciously to some small corner of the market, but it’s no longer the purchase of choice,” says Murad Ali Baig, one of India’s leading independent automobile analysts.
The woes engulfing Hindustan Motors come as the rest of India’s vehicle industry booms with firms such as automaker Maruti Suzuki doubling profits in the world’s fastest-growing automobile market.
Hindustan Motors, flagship company of the CK Birla Group, joined forces with Japan’s Mitsubishi Motors in the 1990s to manufacture Lancer sedans and Pajero sports utility vehicles (SUVs).
But it has never returned to its glory days in the 1970s when “the Amby,” as it was affectionately known, held a market stranglehold of around 70%.
For much of independent India’s history when the economy was closed to foreign manufacturers, “the joke was you could buy any car in India so long as it was an Ambassador,” Hormuz Sorabjee, editor of automobile magazine Autocar, said.
The Ambassador was muscled out by sleek new cars that made its plump contours look dowdy when India began opening its markets to the world.
Kathuria said he sees a rebound in demand for the Ambassador, with sales expected to double to 1,000 units a month in the coming year, but this represents just a fraction of India’s total annual car market of 1.53 million units.
The Ambassador’s bulky design, based on the 1950s British-built Morris Oxford, has changed little since it first rolled off the assembly line in 1957, although the engine is now more powerful.
For years the Ambassador was the only car driven by senior government officials and people always knew when a “power do” was on in the national capital because of the fleet of Ambassadors outside.
The car’s “power status” allowed Islamist terrorists to drive an Ambassador past security and attack parliament 10 years ago, bringing nuclear-armed rivals India and Pakistan to the brink of war.
But now many bureaucrats have abandoned the 9,460-dollar Ambassador in favour of sportier sedans or SUVs. Prime Minister Manmohan Singh is ferried around in an armoured black BMW.
Even taxi drivers -- who were among the Ambassador’s most loyal buyers -- are opting for more fuel-efficient compacts.
“This is cheaper to run, it’s more reliable and it’s easier to drive,” said New Delhi taxi driver Rajiv Singh, who drives a small Maruti hatchback.
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First Published: Sun, May 09 2010. 11 06 AM IST