The CK-Birla Group run Hindustan Motors (HML), which is on the verge of a turnaround, is close to clinching a deal with Japanese automobile major Isuzu Motors to manufacture pick-up trucks at its Chennai plant. According to sources, the deal is expected to be finalised early next fiscal.

Isuzu Motors has been scouting for a partner in India for contract manufacturing of its pick-up trucks. The company will launch its D-MAX pick-up trucks and sports utility vehicle (SUV) MU7 in India. The pick-ups will compete against M&M models like Bolero pick-up and Genio.

Uttam Bose, MD and chief executive officer, HML said, ?We are in talks with Isuzu Motors, which are are at an advanced stage.?

The Tiruvallur plant in Chennai manufactures and markets Mitsubishi vehicles, which holds 9.2% stake in Isuzu. ?The Chennai plant is an easy entry for Isuzu since its stakeholder Mitsubishi already produces out of the plant. The HML’s tie-up with Isuzu has come through due to the former’s association with Mitsubishi,? said an auto consultant.

HML is in the process of restructuring its business wherein the Chennai plant is to be demerged from HML to Hindustan Motor Finance Corporation (HMFCL) from April 1, 2012. In a filing in the BSE in February, the company informed that HMFCL is a wholly owned (100%) subsidiary of HML with HML and its nominees holding all the existing equity shares issued by HMFCL. The scheme of arrangement is subject to court approval.

?The idea is to separate the Chennai plant from HML so that it is open to third party for contract manufacturing,? said a source in the auto sector. The Chennai plant has a capacity to produce around 12,000 units per year. But the demerger process, if approved by the Kolkata high court would take around a year to be operational.

The company is eyeing operational profit for the fourth quarter of the current fiscal. It has been reducing losses for last few quarters and is likely to register an operational profit of around Rs 2 crore during the quarter ending March, 2013. ?In last two years, we have increased our production from 150-200 units per month to 550-600 units at present. We have made our operations lean and efficient and that improved our margins,? said Bose. Sources close to the development said that the company would have significant impact on its balance sheet after it signs the deal with Isuzu Motors.

Source added that Isuzu will use the Chennai plant for initial entry of its pick-ups till its plant reportedly gets ready at Andhra Pradesh, which is expected to have a minimum capacity of one lakh units per annum.

?We expect the competition to revive in the four-tonne pick-up segment in the country with many well known players going to enter the market? said an auto analyst based out of Mumbai. He added that M&M, that holds majority share in this segment, would have to strategise in this segment to save itself from losing market share.