August 11, 2006 | The Economic Times

Tata Motors moves to streamline production

Tata Motors, the country's largest truck and bus maker, has begun a move to streamline its commercial vehicle manufacturing operations in order to cut costs and better manage the logistics involved, three people familiar with the plan said. The company has already started organising its vendor base to fit into the new scheme of things and is hoping to complete the transition in a year. Tata Motors now manufactures medium and light commercial vehicles in Jamshedpur, trucks and pick-ups in Pune, and cars, trucks and buses in Lucknow.

Under the proposed plan, the three manufacturing centres will focus on a product or a set of products. Lucknow, for instance, which produces both trucks and buses, will only make buses. All medium and heavy commercial vehicle operations will be handled at Jamshedpur, while Pune's priority will be cars and light commercial trucks. "Jamshedpur, in any case, produces medium and heavy vehicles, and will continue to do so. The Pune plant produces a mix of trucks and pick-ups, and the Lucknow plant produces a mix of trucks and buses.

They will continue to do so. However, in the future, there may be some rationalisation," a Tata Motors spokesperson said. He did not provide details. Explaining the rationale behind the move, an industry insider said, "Once a company reaches a certain critical mass, it's important to rationalise manufacturing activities. Only then can it exercise proper control over inventory and despatches."

Tata's move reflects growing role of light vehicles
It is even more imperative for a company like Tata Motors, which is involved in manufacturing different products out of different locations. The vendor base has to be streamlined at one point or the other." For instance, a vendor who supplies parts for medium trucks now has to despatch them to three different centres. In the future, once Tata Motors implements the new plan, he will be supplying only to Jamshedpur.

The move also reflects the growing importance of light commercial vehicles in Tata Motors' portfolio, as the Pune facility will concentrate on LCVs besides passenger cars. On the passenger car front, sources indicated, Tata Motors has shortlisted Dharwad and Uttaranchal as possible locations for its satellite plants to assemble the proposed Rs 1-lakh car. Tata Motors refused to comment on the development, saying, "We have no comments to make on the small car in addition to our announcement in May this year that the first plant for the small car will be set up in West Bengal."

Industry observers point out that this would make eminent sense for the company. "Keeping in mind the scale of the project and the volumes they are targeting, the company would require a presence in the north and the south. It's good logistics," said an analyst. Tata Motors already owns land in Dharwad, where it manufactures land excavators, and the Karnataka government is said to be in talks with Tata Motors to get a piece of the action on the Rs 1-lakh car project.

Uttaranchal, on the other hand, has emerged as a hot destination for the auto sector in recent times, with companies lining up to cash in on the tax holiday schemes. Tata Motors is setting up a plant there to manufacture its mini truck Ace, while Bajaj Auto and Mahindra & Mahindra are also investing in the state.