Hindustan Motors to make engines for Ford India

NEW DELHI, Jan 14 Reuters reports that Global automobile maker Ford Motor Co announced on Monday a strategic partnership with Hindustan Motors to manufacture engine and transmission units for the Ikon, the only car it makes in India.

``We are the first global company to source engines and transmission from a local partner...which will help us cut costs over a period of time,'' David Friedman, managing director and president of Ford India Ltd, told a news conference.

The gearbox and transmission units would be manufactured at Hindustan Motor's Pithampur plant in the central Indian state of Madhya Pradesh.

Ford said it would begin by sourcing 20,000 engines and gearboxes a year that would help increase the share of local made parts in the Ikon to about 90 percent from 75 percent now. The purchases would be increased gradually over time.

Friedman also said the sweeping job and capacity cuts at Ford's North American business announced last Friday would not affect its operations in India.

Ford Motor Co announced last Friday it would cut 10 percent of its work force, or 35,000 jobs and close up to seven North American plants to slash production capacity as part of a plan to pull the automotive giant out of stunning tailspin.

The pressure to restructure the North American operations in fact presented opportunities for increasing the supply of cheaper design and accounting services from India, which it began doing in 2001, Friedman said.

Ford began operations in India in 1996 with the locally assembled Escort model. It launched the Ikon in December 1999, a mid-sized family car which it makes in 1.3 and 1.6 litre versions, and the new Mondeo in December 2001.

It has since discontinued making the Escort and imports the Mondeo fully built from its Belgian plant.

PRODUCTION TO BEGIN BY END 2002

The first engines are expected to roll out by the end of 2002, Hindustan Motors officials told the joint news conference.

One of India's oldest car companies, Hindustan Motors makes products like the 1950s-vintage Ambassador car, the Lancer sedan in collaboration with Japan's Mitsubishi Motor Corp and the Trekker and RTV utility vehicles.

``We will need to invest about 700 million rupees ($14.5 million) over a period of time...and expect revenue of about 1.25 to 1.5 billion rupees in the first full year of production,'' Chandra Kant Birla, chairman of Hindustan Motors, said.

The agreement will be a boost for Hindustan Motors which has been struggling to return to profitability. A market leader until the mid-eighties, the company is now a niche player in the Indian car market.

Officials said the investments would be made over a period of four years, 70 percent of which was expected to be made by Hindustan Motors and the remaining by Ford.

Ford's India unit sold 43,341 mid-sized Ikon cars during 2001 which represented a 89.7 percent rise over the previous year. The sales include exports of 28,130 completely knocked down kits. It also sold 110 Mondeos.

It has so far invested 17 billion rupees in the country, including a new plant to manufacture the Ikon in the southern city of Madras.

($1 equals 48.33 rupees)