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Dec 06, 2013, 10.00 PM IST | Source: CNBC-TV18

Ashok Leyland banks on restructuring drive for sales boost

The people at Hinduja Foundaries are worried. Their flagship company -- Ashok Leyland -- has been struggling to keep growth engines turning.

It's been a difficult year for Ashok Leyland . And in a bid to offset rising debt in the face of falling sales, the commercial vehicle giant is now looking at a restructuring exercise. CNBC-TV18’s Poornima Murali reports.

The people at Hinduja Foundaries are worried. Their flagship company -- Ashok Leyland -- has been struggling to keep growth engines turning. Sales are down, input costs are soaring and debt levels are fast becoming unmanageable. But a reduction in working capital alone will not help. The company is also desperate to boost sales and one idea it has hit upon is an operational restructuring. Ashok Leyland is shifting some of its employees from the manufacturing plant to work in frontline sales—a move it hopes will help it reach out to more customers.

"Already 50 people have gone into sales and another 50 will go this month. We are hoping that 200-300 employees like this will go and work in the frontline sales, along with the sales team. These people are mostly from operations - it could be from plant, planning, sourcing etc," Vinod K Dasari, MD, Ashok Leyland told CNBC-TV18.

But Ashok Leyland is adamant that this restructuring is purely temporary. But in keeping with its recent cost-cutting drive that saw over 500 of its 12,000 executives being offered a voluntary retirement scheme, a move that it says, helped cut costs by 10 percent.

Dasari says: "We had a VRS in November; 500 executives were offered VRS. It was only for executives and not for workers."

The company is banking on this latest restructuring move to make operations more agile. It will also focus on improving its dealer network to mitigate the hit from sluggish demand but the company admits that until there's a solid turnaround in the economy, any measure it takes will still leave it under quite a bit of stress.

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