Where's the compensation?

The wafer-thin margins of component suppliers to Tata Nano are undergoing pressure with Tata Motors not compensating them for moving facilities from Singur to Sanand and also with the slow speed production at the Pantnagar facility. The compensation issues were related to the fresh investment some vendors had to make at the Sanand facility, when they had already invested at the previous site in Singur, West Bengal. Since the margins on Tata Nano parts are thin, parts suppliers need huge volumes to make profits.

Angad Paul, CEO of the Caparo group found this year very painful. But Angad Paul is intending to look forward at the long-term benefits Tata group can bring. Tata Motors maintained that the compensation issue is under discussion. The company and the vendors are engaged to have a word on the cost of manufacturing and the cost of shifting facilities. Out of a total of 100 vendors that are part of the Tata Nano project, around 46 tier-I vendors will be part of the integrated new plant in Sanand. Unlike Singur, where around seven tier-II vendors were also accommodated because of the lack of automobile suppliers in West Bengal, the Gujarat plant will only house the tier-I suppliers.

According to suppliers, so far only a few component suppliers such as Caparo, Amtek, JBM, Rico, Anand group companies Gabriel India, Behr India and Purolator India and Taco have started construction at Sanand. The Tata Motors spokesman told that a majority of vendors have been allotted plots and several have already started construction. Tata Motors MD PM Telang told that small design nips and tucks and improvements are part and parcel of any car project not just the Tata Nano so there’s nothing unusual about this. However, the spokesman said Tata Motors has fully taken care of any cost impact in case a vendor has had to bear any impact due to any nips, tucks or improvements.

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