6/23/2016 HindustanMotors'StruggleforSurvival|TheTurnaroundEffortsPhaseI|FreeManagementArticles|FreeManagementCaseStudies

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HindustanMotors'StruggleforSurvival
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Themes:TurnaroundStrategy
Period:19982002
Organization:HindustanMotors CaseCode:BSTR021
PubDate:2002 CaseLength:10Pages
Countries:India Price:Rs.300
Industry:Automobile&
Automotive

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BackgroundNoteContd...
However in 1981, with the entry of MUL, the scenario changed drastically. MUL's small, fuelefficient and welldesigned car,
Maruti800,becameahugesuccess.Bythelate1980s,MULbecamethemarketleader,leavingHindustanMotorswaybehind
in the war for market share. During the 1980s, HM was in the news only because of its tieups with GM and its subsidiary
Vauxhall Motors (VM). In 1984, HM launched the Contessa, which was labeled one of the first 'upmarket' cars in India, in
technicalcollaborationwithVM.

In 1987, the company launched the Contessa Classic considered the most
powerfulcaravailablethen.TheContessawasareasonablysuccessfulcar,
though it never managed to match Ambassador's success. In 1995, HM
enteredintoacollaborationwiththeJapaneseautomobilemajorMitsubishi
Motor Corporation (Mitsubishi), wherein Mitsubishi agreed to provide
technicalassistancetoHMtomanufactureitsproductsinIndia.

HMproducedamidsizeluxurycar,OpelAstraincollaborationwithGMin
1996. In 1997, the Contessa GXL version with power steering was
launched. HM terminated the GM joint venture in 1999, by selling off its
staketoGM.

TheTurnaroundEffortsPhaseI
In the early 1990s, when the Indian economy was opened up for foreign
players,manymultinationalautomobilecompaniesenteredthecountry.In
the 1990s, companies including Daewoo, General Motors, Daimler Benz,
Hyundai and Honda entered India through joint ventures and partnerships
withIndianfirms.

HMwasoneoftheworstaffectedcompaniesduetothisinflowofcompetitors.Forcedtoreactduetothepoorperformance
of its vehicles, HM launched the Ambassador Nova in 1990 (with better interiors) and an improved Ambassador 1800 ISZ
(withbetterengineperformance)in1993.ThecompanyalsoappointedconsultantsMcKinsey&Coforarestructuringplanto
turnarounditsbusiness.

McKinseyaskedHMtofocusonthemarketingofcomponents,refurbishtheAmbassadormodelandupgradeothervehicles,
speedupthedeliveryprocessandimproveproductivitythroughreengineeringonthefloorshopandreducetheworkforcein
itsproductionplantatUttarpara.Thecompanybegantoimplementtherecommendations.

HMdecidedtotapnewsegmentstoeasethecompetitivepressuresitwasfacinginthepassengercarmarket.In1995,the
companycollaboratedwithOkaMotorCo5todevelopavehiclespecificallytargetedatruralmarkets.Thisledtothelaunchof
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 twothirds 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,HMcouldnotstemthedeclineinsales.(ReferTableII).

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5]AWestAustralianautomotivecompanyspecializingindesigningandbuildingfourwheeldrivevehicles.

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