What Hindustan Motors could learn from Royal Enfield

Will HM learn anything from the turnaround story of Royal Enfield? I don’t know but I think it should.

Ashish K Mishra
Updated: Apr 25, 2012 12:04:19 PM UTC
RoyalEnfield

Sales of Hindustan Motors' Ambassador fell to an all time low of 2, 506 in the last financial year (2011-12). The year before, HM had sold 6, 500 Ambassadors. The whole company put together (and this includes the sale of vehicles from its joint venture partner Mitsubishi) sold 4, 926 vehicles- about half of what they sold the year before.

Last week I met a senior executive, who had worked for HM for a year. He said, “I read about Royal Enfield’s success this morning in the newspapers. And I couldn’t help but think that at HM we had a golden opportunity to do something similar. But we squandered it.”

Royal Enfield, of course, has had a great run. The company sold 78, 546 motorcycles in the April-March 2011-12 period. That’s 44 percent more than what it sold last year.  However, this number underscores what Enfield has been able to achieve from its 10 acre plant in Chennai. Believe it or not (though estimates have been revised over the years) the plant was built to produce only 30, 000 motorcycles a year. When it began, everything from making seats to frames and tanks, was done inside the plant. This doesn’t happen anymore. Much of the work is outsourced. “Today the plant  is churning out almost a lakh motorcycles a year,” says Venki Padmanabhan, CEO of Royal Enfield. None of this has happened by luck or because of fear from competition.

Padmanabhan, 48, joined Enfield from Chrysler in December 2008. A Non-resident Indian who has spent most of his career in the automotive industry in Detroit. When he was designated COO in 2008, Padmanabhan found Enfield struggling to produce even 140-150 motorcycles a day. The company had started on the path to revival compared to its loss making streak in the late 1990s. “Everyday was a fire-fight. There were issues with painting in the right sequence, getting the right set of headlights from the supplier…several problems,” says Padmanabhan. For him, there was only one way out. Spend the entire day on the plant floor or with suppliers. “I don’t remember being in the office in the initial days,” he adds.

Producing more became the mantra. “The idea was to bring a Can-do spirit in the company. To tell everyone that hey even if we are small but if we do what we are good at, we will succeed. Himmat ki baat hai bas (It is just about being strong),” says Padmanabhan. At the time, Enfield had no paint capacity in its plant so they started painting at the Luna plant at Ahmednagar, followed by another tractor plant and then the TI Cycles export plant paint shop. “Thankfully we were sitting on a great brand which people loved. And this was not on the basis of experiences but it was still there. Enfield did not die like Rajdoot or Yezdi. It was almost like people are waiting for us,” he says.

RoyalEnfield

Now contrast this with what's happening at Hindustan Motors. There is no doubt that the Ambassador is an iconic car. Like Enfield, it has British lineage. The Ambassador is based on the Morris Oxford. The senior executive mentioned above says, In many meetings the top management promised that a revival strategy was needed, but shied away when it came to execution. The ailing HM is still the flagship company of the C K Birla Group. “When I went for meetings, the Chairman was very interested. During the Commonwealth games  we made some inroads, looked at private contractors, but in the end nothing materialized. HM was not willing to take any cuts on margins. In the end, people at the top must say if they want to continue with the company,” he adds.

While Enfield built on its strengths, over the years it has become quite evident that HM lost focus on what are the businesses it really wants to play in. The company’s foray in the heavy trucks space with Bedford or Isuzu never really worked out. Its joint venture with Mitsubishi is not doing well. Not when the company sells 341 units of the Lancer sedan in a year. In fact, I am keen to meet people who have bought a Lancer last year! More recently, the HM Winner, a 1 tonne LCV has turned out to be a failure. “For quite a long time the sales and marketing guys were struggling to sell the Winner in the East but it never took off. Then we ventured in the South where we sold it as a Cash van to security agencies and as a Garbage van,” says the executive.

It didn't help that HM has seen an exodus of senior management. According to sources, Manoj Jha who came in as CEO of HM from Escorts was a big disappointment. The exit of Moloy Chowdhury, executive vice president at HM was a big blow. Whatever HM has been able to do in the past few years is all because of him. Again finding productivity at a plant in Kolkata was never easy. “You know it was a tough place like a jungle raaj. You go to work in the morning and say today we are going to make 40 cars. The worker comes, has his chai and beedi and by the end of the day it was just 25,” says the executive quoted earlier.

Analysts say that HM’s play is not in automobiles anymore, but in real estate. “Theirs is a land play. The plant huge but not producing anything. It seems as if the promoters just want a chowkidaar to take care of the land. I feel sorry for the shareholders of this company,” says an analyst who did not want to be quoted. Will HM learn anything from the turnaround story of Royal Enfield? I don’t know but I think it should. If not, it should shut shop.

The thoughts and opinions shared here are of the author.

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