Tata Motors to soothe vendors with payment for low-rollout

CNBC-TV18's Ronojoy Banerjee reports that Tata Motors is mulling a new vendor-support scheme which would compensate suppliers whenever there is a drastic drop in production.

The idea had been doing the rounds among the Tata Motors management against the backdrop of the overall production at the company's Sanand facility being far below the capacity which adversely affected suppliers considerably.
According to a senior Tata Motors official the move was also an attempt to forge a close bond with suppliers and to keep them updated on the cyclical changes in demand and supply affecting production.
A large majority of the suppliers who set up shop at Sanand in fact followed Tata Motors from Singur a few years ago and raised the issue of being compensated for fall in production with the company a few months ago. Suppliers explain that the contract price was based on certain volume projections for the Nano which have not been met.
The senior company official added that the compensation, the details of which are still being worked upon, could include an offer to marginally hike the contract prices.
Vendor-sources add that one of the top component suppliers in the country had to shut down the production facility at Sanand owing to a cut in demand. Many of the suppliers indicate that if there is no compensation, then they be forced to follow suit and could result in a spate of lay-offs. However, Tata Motors has officially declined to offer any comment.