Mahindra counters lawsuit by US dealer Global Vehicles
01 July 2010;dailypioneer.com:New Delhi: Mahindra & Mahindra on Wednesday said that it has filed a motion to dismiss the lawsuit by its US distributor Global Vehicles over delay in the launch of the company’s pick-up truck in the American market. “Mahindra & Mahindra (M&M) has filed a motion to dismiss the lawsuit that Global Vehicles USA, Inc. (GV) filed against Mahindra in the US District Court for the Northern Georgia,” the company said in a statement. “Mahindra firmly believes that GV’s claims are without merit and will vigorously contest the lawsuit,” it said, adding it would like to expeditiously arbitrate the matter.
30 June 2010;business-standard.com:Swaraj Baggonkar:Mumbai: Slow ramp-up and discrepancies in tyre prices affect output Issues relating to shortage of key automotive components, which were supposed to be sorted out a month ago, will hit production even for the next two quarters, as slow ramp-up and discrepancies in tyre prices impact output. Production of leading vehicle manufacturers, especially utility vehicles (UV) and commercial vehicles such as those from Mahindra & Mahindra (M&M), Tata Motors and Ashok Leyland, has suffered due to lack of adequate supply of components. Maruti Suzuki and Hyundai Motor, the two biggest domestic carmakers have maintained that so far the crunch in parts supply hasn’t hit production but analysts tracking the industry state that if vendors do not raise production, it could mean longer waiting periods for the car. While M&M said it lost about 3,000 units in production of UVs in the past few months, Tata Motors Commercial Vehicle Unit President Ravi Pisharody blamed reasons ranging from power outages to slow production ramp-up by vendors for the short supply. “We are working with our suppliers, we keep updating our projections so they are mainly successful but there are shortages,” Pisharody added. R S Thakur, executive director & CEO, Tata Autocomp Systems (Taco), said, “We are working on seven-day-shifts for the past three months to meet the demand. It is true that component capacities are stretched but we are trying to resolve the problems.” Taco is the component making arm of Tata Motors. Recently, M&M President (Automotive and Farm Equipment Division) Pawan Goenka outlined three grey areas, namely casting, fuel injection parts and tyres, where the maximum crunch in supply is experienced. Tyremakers, meanwhile state there is no shortage of tyre supply within the industry and that the matter is related to differences over prices of tyres between the tyre manufacturers and original equipment manufacturers (OEM). Arnab Banerjee, executive director - sales, marketing and outsourcing, Ceat, said, “We do not believe there is any loss in supply of tyres in the local market. Since OEMs were not able to procure the tyres at a price which they were asking for, we could not sell it to them. Prices of rubber have skyrocketed, leading to a corresponding surge in tyre prices, which OEMs do not agree to.” The dependence on domestic tyre producers for procuring radial tyres, which is in limited supply, has forced companies like Chennai-based Ashok Leyland to approach the government and seek a tyre import licence. When contacted, a company spokesperson refused to comment on the production loss it faced due to the shortages. Chinese truck tyres, which faced flak from the international community for allegedly compromising on quality, carry a price tag 20-30 per cent cheaper than Indian counterparts. At present, imports from China constitute more than 70 per cent of total tyre imports into the country. According to today’s rubber prices available from the Rubber Board, a kilogram of RSS-4 grade rubber is priced at Rs 180, whereas the same was sold for Rs 99 per kg same month last year. RSS-4 is the chief raw material used for making tyres in India. An executive from auto industry body stated, “The issue is more of a commercial issue but is projected as a capacity issue. OEMs are demanding 25-30 per cent lower rates than the current prices. Despite the strike at the Apollo Tyres facility, there is very nominal impact of it on supplies. OEMs are not ready to pay the revised prices, although the rates of rubber have touched an all-time high.” Meanwhile, companies like Ceat are selling their produce in the international market for better realisations. “When we are getting better prices in the export market, why should we sell them at lower rates to Indian OEMs? The price realisation overseas is significantly higher than in the domestic market,” added Banerjee.
India’s fuel move to add stability to global markets
30 June 2010;economictimes.indiatimes.com:India’s decision to free up petrol prices and raise the cost of diesel and other fuels, as part of a move towards a market regime, will help make emerging-market demand much more sensitive to changes in crude oil prices and lessen the probability of another price spike. It reinforces the impact of similar moves across Asia and the Middle East. Market analysts remain fiercely divided about what caused the doubling of crude oil prices between Q1 2007 (when they averaged $58 per barrel) and Q2 2008 ($124). But three factors were crucially important: Extensive price controls and subsidies on refined product prices across most of Asia and the Middle East ensured households and firms were insulated from the rise in oil prices. Price controls broke the “invisible hand” and meant regional consumers faced no real pressure to reduce consumption or switch to alternative fuels despite the doubling in crude costs. The entire burden of adjustment therefore fell on households and firms in the advanced industrial economies. Prices had to surge high enough to force deep cuts in the western world’s oil consumption to offset supply shortages and unrestrained demand growth in emerging markets. Oil producers were unwilling or unable to materially increase supply in response to soaring prices. In the short term, supply is fairly fixed. Those producers holding spare capacity (mostly Saudi Arabia) either had the wrong sort of crude (heavy, sour) or doubted that adding additional barrels to the market would make much difference, given inventories already appeared to be at reasonable levels and there was no sign of physical shortages. Hedge funds and other “managed money” participants built up a (then record) net long position in oil futures and options on the assumption that although prices were already high, they would need to rise even further to “choke off” demand and balance the market. In particular, many investors seem to have concluded that neither emerging market demand nor crude supply would be very responsive to prices unless they spiked to exceptionally high levels. The interval between mid-May and early July 2008, when prices started peaking, saw two significant developments which probably convinced many participants the market was turning: China announced huge increases in state-controlled gasoline and diesel prices to take effect from June 20, and Saudi Arabia said at the Jeddah summit in June it would increase output to 9.7 million barrels per day.
30 June 2010;timesofindia.indiatimes.com:NEW DELHI: Oil minister Murli Deora said on Wednesday companies have committed an investment of $1.1 billion in the eighth oil and gas blocks auction round held in 2009. Deora said, later in the day, India will be signing contracts for 31 exploration blocks awarded to 23 companies, including BHP Billiton Petroleum International, BG Exploration and Production and Cairn IndiaCAIL in the eighth round. "Out of (the) 31 blocks, 17 blocks are awarded to national oil companies like ONGC, Oil India Ltd and NTPC," Deora said in his written speech at the event to sign the contracts for the blocks. India aims to launch the ninth round of oil and gas blocks licensing in the third quarter of 2010, Deora said. "...The total investment under the earlier NELP (new exploration licensing policy) rounds stands at $13.8 billion," he said, referring to the earlier seven auction rounds.
29 June 2010:hindustantimes.com:Prime Minister Manmohan Singh on Tuesday said that diesel prices too will be freed from government control as part of "much-needed reforms" but LPG and kerosene will continue to be subsidised. He also rejected the Opposition criticism of last week's decision to hike fuel prices, which saw petrol prices being pegged to market rate. "The fact that petrol prices have been set free, the same is going to be done to the diesel prices. (These are) much-needed reforms," he told journalists accompanying him on his way back home from Toronto where he attended the G20 Summit. The government on June 25 decontrolled petrol prices, resulting in a Rs 3.50 a litre increase in rates in Delhi, and raised diesel prices by Rs 2 a litre in preparation for an eventual decontrol. Diesel rates, at current prices, will rise by another Rs 1.50 if it is freed from government control. The Prime Minister did not say by when the diesel prices will be decontrolled but said domestic cooking gas LPG and kerosene prices will continue to be regulated by the government. Last week, domestic LPG prices were hiked by Rs 35 per cylinder and kerosene rates went up by Rs 3 per litre, the first increase in the poor man's cooking fuel in more than 8 years, as part of a move to cut government's subsidy bill. Even after the hike, kerosene is being sold at Rs 15.07 per litre below cost, while a 14.2-kg LPG cylinder is under priced by Rs 226.90. "And the adjustment that has been made in the prices of kerosene and LPG was also necessary, considering the very high amount of subsidy that is implicit in their pricing structure," he said. The Prime Minister was replying to a question on the government's decision Friday to effect an increase in the prices of petroleum products to cut losses for oil marketing companies and whether it indicated that the government was getting ready for tougher reforms and further deregulations. "Well I can't tell you what we are going to do next. I think that when things get crystallised in the government system you will know them," he said. The Prime Minister said the government had taken due care to ensure that the poorer sections were affected to the least possible extent and that was why the attempt to keep under regulation the prices of kerosene and LPG. The hike in fuel prices was necessitated because of the rising gulf between the cost of production and the retail prices. Without the increase, public sector oil firms were projected to lose Rs 74,300 crore in revenues in 2010-11 fiscal and after the hikes, they will be saddled with Rs 53,000 crore of losses.
Oil could hit $100 if dollar doesn't surge: BofaML
29 June 2010;timesofindia.indiatimes.com:NEW YORK: Oil could hit $100 a barrel in 2011 if the dollar does not surge against the euro as it did this year and the economies of China and India expand enough to consume at least a third of production, Bank of America Merrill Lynch said in a forecast on Monday. US oil's benchmark West Texas Intermediate (WTI) crude and London's Brent crude were both expected to average $78 a barrel in the second half of this year and $85 through 2011, BofaML's Commodity Strategist Francisco Blanch told a media briefing on the bank's half-yearly global markets outlook. "We still think oil prices will cross $100 a barrel at some point next year but not if the dollar appreciates against the euro like it did this year," Blanch said. "Every 10 percent decline in the euro results in a 15 percent decline in oil over a three-month period." The dollar has risen 10 percent year-to-date against a basket of major currencies. The greenback's rally last month had sparked a sharp sell-off in commodities as investors holding other monies such as the euro suddenly found dollar-denominated commodities costlier. Growth in China and India was also key to oil prices, Blanch said. "If China and India account for 35 to 40 percent of the world's growth in oil demand, then it's possible to hit $100." US crude last traded above $100 in October 2008, just before the onset of the recession. WTI's front-month contract in New York settled at $78.25 a barrel on Monday.
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