Tyre major MRF Ltd has decided to go slow on production, following a sharp decline in overall offtake, from original equipment manufacturers (OEMs) as well as the after-sales market. The company has cur production by 15% in order to avert inventory build up and mounting losses.
MRF Ltd reported a net loss of Rs 38.30 crore during the quarter ended December 31, 2008, against a net profit of Rs 51.75 crore during the year-ago period. In this regard, it has decided to move cautiously till the market revives.
It has also ruled out any fresh price cuts in the near future to increase its sales volume. MRF has cut prices twice in the last two months; once, after the excise duty cut announced by the Union government in December, and again, after the sharp drop in raw material prices in January.
Koshy Varghese, executive director, MRF, while speaking to FE, said, “The economic downturn has affected MRF adversely during the past few months. There are no signs of improvement of the market and the downward trend in the auto sector, including the export front, continues. In accordance, the company has decided to cut its production by 15% across all its plants. This is to avoid inventory pile up while minimising losses in the quarters to come.”
He also said that the company is not thinking of any job cuts; rather, it is involved in managing the current crisis using “different ways and means”. “We are adopting a wait and watch attitude now,” he said.
Meanwhile, Justice R Bhanumathi of the Madras High Court passed orders in the two writ petitions filed by the MRF management challenging the orders of reference and prohibition of lock-out on Tuesday.
The Justice said that “industrial disputes shall be taken up by the Industrial Tribunal and expeditiously decided within a period of six months. As per this order, the management need not pay wages to the workers for the period of lockout and is subject to the final orders of the Industrial Tribunal.” Both parties were directed to cooperate with the tribunal for expeditious hearing.
It may be recalled that the company had to resort to a few weeks’ lockout at its Tiruvottiyur factory near Chennai due to labour unrest. It was alleged that a section of labourers were not complying with the agreement between them and the company.