Hindustan Motors' Struggle for Survival

The Turnaround Efforts – Phase I

In the early 1990s, when the Indian economy was opened up for foreign players, many multinational automobile companies entered the country. In the 1990s, companies including Daewoo, General Motors, Daimler Benz, Hyundai and Honda entered India through joint ventures and partnerships with Indian firms. HM was one of the worst affected companies due to this inflow of competitors. Forced to react due to the poor performance of its vehicles, HM launched the Ambassador Nova in 1990 (with better interiors) and an improved Ambassador 1800 ISZ (with better engine performance) in 1993. The company also appointed consultants McKinsey & Co for a restructuring plan to turn around its business.

McKinsey asked HM to focus on the marketing of components, refurbish the Ambassador model and upgrade other vehicles, speed up the delivery process and improve productivity through reengineering on the floor shop and reduce the workforce in its production plant at Uttarpara. The company began to implement the recommendations.

HM decided to tap new segments to ease the competitive pressures it was facing in the passenger car market. In 1995, the company collaborated with Oka Motor Co⁵ to develop a vehicle specifically targeted at rural markets. This led to the launch of the Trekker (also referred to as the Rural Transport Vehicle – RTV) in 1995. Launched in three northern states, the Trekker was received well in the rural markets.

However, the vehicle soon came under criticism owing to a host of technical problems. By late 1998, Trekker's sales dropped by two-thirds of its initial volumes to around 800 a year. In 1999, HM launched the redesigned Trekker and an upgraded version of the Ambassador. Despite all the product upgradations and restructuring efforts, HM could not stem the decline in sales. (Refer Table II). Analysts opined that HM's dismal condition was a result of its lax management policies and shortsightedness. Before MUL entered the market, HM was the market leader. It was able to sell whatever it produced and therefore it did not care to upgrade the technology or production facilities. However, pressure from competition was just one aspect of HM's problems.

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5] A West Australian automotive company specializing in designing and building four-wheel drive vehicles.

Case Details

Case Code : BSTR021
Themes: Turnaround Strategy
Case Length : 10 Pages
Period : 1998-2002
Organization : Hindustan Motors
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Automobile & Automotive

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