In India, the Ambassador Car Fights to Survive Competition
By BARRY BEARAK
UTTARPARA, India -- Streets in India are an extraordinary sight for
two reasons, one of them the cows that wander sacredly and
indifferently through traffic, the other an antiquated-looking
automobile with a bowler hat of a roof called the Ambassador.
Little in the look of the car has changed during its 41 years on the
road. The Ambassador is part icon, part curio, a beast of an
automobile that easily seats seven, stands high off the ground and
usually offers a ride with all the smoothness of an earthquake.
Until the early 1980s, most every car sold in India was an
Ambassador, and, for its manufacturer, Hindustan Motors Ltd., this
was clearly too much of a good thing. Near monopoly conditions led to
lingering corporate somnolence.
Now, with India's economy more open and foreign auto makers joining
up with local partners, sales of the "Amby" have fallen to a 5
percent niche in a crowded market. At the same time, after finally
modernizing production, the company finds itself with too many
workers and a prickly dispute with its unions.
"The Ambassador is in a fight for its survival," said Prabal
Chatterjee, the senior vice-president in charge of the factory here
in Uttarpara, just northwest of Calcutta. "There are so many other
companies making cars right now."
Auto sales in India, though modest, have more than doubled during the
past decade, with 1998's total at 403,000. But drivers prefer
vehicles that are smaller, sleeker and made far better. While the
Ambassador, now priced at around $8,000, always has been a very easy
car to keep running, it is not known as a car that runs particularly
well. A standard joke is that everything in the auto makes a noise
except the horn.
Over the years, little was done to streamline production or attend to
quality control. A fresh-from-the-factory Ambassador already could be
a rattletrap with doors that did not quite fit and windows that
allowed water to seep in around the edges.
Last year, the company finally responded with $20 million of
improvements for the Uttarpara factory, but the plant was so badly
outdated that some of the newly installed equipment was as basic ar
its current 11,000 workers, but, in India, employees are not easily
"We could make the car with 800 to 1,000 workers," said R. Santhanam,
the company's chief executive. "At one time, when we made everything
including the nuts and bolts ourselves, we needed a large work force.
This is no longer true."
The average pay in the Uttarpara factory is $140 a month, which is
not insubstantial to a worker in one of the world's poorest
countries. In October, the company offered its older employees a
lump-sum buyout but found few takers.
There is urgency to lowering costs. In the past year, the factory
lost $9.5 million, according to Chatterjee.
Scaling back hours was Hindustan Motors' fallback option, and late
last year the company announced that it wanted to reduce the work
week to three days from six and cut wages accordingly.
By law, such action requires government approval, hard to get in most
states but nearly impossible in West Bengal, where economics is often
seen as a guerrilla war between capital and labor. Communists have
been in power here for the past 22 years.
When the company proposed a retrenchment, its unions protested.
"Hindustan Motors has sucked the blood out of its workers and now
wants to discard them," said Samar Chakraborti, joint general
secretary of the Indian Trade Union Congress.
The workers' logic, influential and irrefutable around Calcutta,
might be considered naive in a setting more obedient to capitalism's
ruthless energy: just because the company has been stupid, the unions
say, why should we suffer?
"Management has shown little understanding of modern marketing," said
Ajit Chakraborty, another union leader. "The true punishment should
be given to the people who have done the bad work, the people who run
Chakraborty points out that Hindustan Motors, flagship of C.K. Birla
Group, is still turning a profit, largely through its production of
other vehicles at other sites. The company's after-tax earnings in
its most recent fiscal year were $9.4 million, according to its
annual report. By Chakraborty's reckoning, any losses on the
Ambassador are merely an appropriate penance, and executives ought to
leave their innocent employees alone.
"The bosses say they are suffering during a recession, but recessions
ought to be planned for, like a man standing in the sea prepares for
the waves," Chakraborty said.
Chatterjee, who runs the factory, said the unions needed to be more
pragmatic or instead of losing a large chunk of the jobs, they will
lose them all. The company has gone ahead with its plans to operate
with a reduced work week. But without government approval, it must
pay the workers their full wages.
"At least, we are able to save some money on electricity and water
and our subsidized canteen," Chatterjee said.
In January, the West Bengal labor department rejected the company's
proposed retrenchment plan as "absurd," issuing a decision that
chastised management for inefficiency.
"I do understand the economic realities," said V. Subramanian, the
labor secretary. "Hindustan Motors does have too large a work force,
and if we choke them, they might be dead soon. But this is a leftist
government and we are pro-labor.
"Why didn't the Ambassador respond to changing times?" he added. "It
had a virtual monopoly at one time, but this was not a monopoly that
could last forever."
The Indian auto market changed radically in 1984 when the first
Maruti 800 came off the assembly line. The product of a joint venture
between the government and Suzuki, the car was small and cute and
easy to drive.
Hindustan Motors never countered with its own subcompact, while
Maruti added a line of sedans, four-wheel drive vehicles and
minivans. For the most recent fiscal year, Maruti Udyog Ltd. had an
86 percent share of new car sales in India.
In the 1990s, as India rid itself of many of the shackles of
Nehru-era socialism, some of the world's biggest auto makers decided
to enter the market and assemble cars. Among the companies that
jumped in were Ford Motor, General Motors, Peugeot, Daewoo and Honda.
To varying degrees, most have forged partnerships with Indian
Over the past two years, as factories have opened, a new model or
make has entered the showrooms every few months. Hindustan Motors
itself recently introduced the mid-sized Mitsubishi Lancer, an
automobile that the company produces in a modern factory in Madras
using Japanese technology.
India's potential market has sent many an auto executive's salivary
glands into overdrive. The country has nearly a billion people and 50
million urban households. Two million motorcycles and scooters are
sold here each year.
While most people remain poor, if not destitute, there is a
burgeoning middle class, mostly people of relatively modest means but
millions of others on the cusp of being able to afford a small $5,000
Two months ago, Telco -- a giant truck manufacturer owned by the Tata
family, a leading name in India's industrial aristocracy -- began
selling an eagerly anticipated subcompact auto, the Indica, for
$6,000. Already, tens of thousands of buyers have put down deposits
and joined a fast-lengthening waiting list.
Just a few years back, as car-buying appeared to be in a pattern of
exponential growth, many analysts predicted that sales were headed
toward nearly 900,000 a year by the turn of the century.
This has proved wildly optimistic, and most manufacturers are now
fighting price wars, offering cheap financing plans, and, in more
costly models, adding extras to the cars: compact disk players, power
windows, remote-control door locks.
In this faddish competition, the Ambassador seems stodgier than ever,
even if it can now be bought with an Isuzu engine. "The Indian buyer
is getting pretty savvy," said Murad Ali Baig, a leading auto
columnist. "A car is more than a set of wheels and a motor. A car is
a symbol of what kind of guy you are. And, today, if somebody brought
an Ambassador home, it would bring shrieks of 'Oh, no!' from the
If the Ambassador has a future -- and Santhanam, Hindustan Motors'
chief executive, insists that it does for "7 to 10 years minimum" --
it will be produced with the same familiar appearance in annual
quantities of about 35,000. Much as today, about 80 percent of its
buyers will be taxi owners and the government.
"The car has so many benefits," Santhanam said. "It's so big it can
be used as a mobile office. On Indian roads, where safety is a big
issue, it's rugged. Mechanically, it is unlikely to fail. If it does,
any mechanic in India knows how to fix it."
But that final virtue -- the Ambassador's ease of repair -- may in
the end prove its undoing as much as any cheaper, faster and flashier
"What goes on inside an Ambassador is simple to understand, no
electric parts that no one's ever seen before," said Pramod Shaw, a
mechanic in a Calcutta bazaar. "You can fix anything with a hammer
and a wrench. Six-year-olds can do it."
In Calcutta and most other big cities, there are entire markets where
dozens of resourceful mechanics not only sell used Ambassador parts
but home-made "duplicate" ones as well. These copies are decidedly
cut-rate. An entirely "new" Ambassador body can be bought for $350,
an entire shiny "new" car for under $1,000.
"I can take a 1960 Ambassador and make it look and run the same as an
Ambassador just out of the factory," Shaw said. "The Ambassador never
changes. Why would anyone buy a new one?"