Chennai floods: Carmakers like Ford and BMW struggle to restart work after screeching halt

MUMBAI: Life may be returning to normal in flood-hit Chennai, but carmakers in the city are still struggling to restart work after weeks of incessant rain forced them to shut down plants, leading to production loss. American carmaker Ford and German luxury carmaker BMW — two of the five passenger vehicle companies that have plants here — have not rolled out a single vehicle this month, according to people aware of the matter.While BMW India is expected to resume production on January 4, Ford India is likely to begin production only after December 18, as the company's press shop was inundated, they said.

The torrential downpour, which started mid-November and continued till the first week of December, has caused an estimated production loss of Rs 1,500 crore so far. Ford and BMW are expected to add another Rs 850 crore to Rs 900 crore in production loss.

A back of the envelope calculation suggests that BMW, which was producing 500-600 cars a month, has suffered a production loss of Rs 250 crore since heavy rains started on December 1, with average car price pegged at Rs 50 lakh. Ford, which had plans of producing 500 to 600 cars a day, has seen a production loss of over Rs 600 crore with average car price at Rs 6 lakh.

Both companies had planned maintenance shutdown in the second half of December 2015. This has been factored in in the likely production resumption dates.

BMW's plant was shut from December 1-4 as workers were unable to reach the plant. According to the company spokesperson, water had entered several areas of the plant during this period. The plant stayed open from December 7-11 for repair and maintenance work and hence no cars were produced. The company has extended maintenance work till January.

The production loss is likely to make things tougher for BMW, which has seen volumes shrink 25-30% in the past few years. But Munich-based carmaker is upbeat.

The company said it is gearing up for a product offensive in 2016. Some industry executives told ET that flooding has affected hundreds of finished BMW cars, but the company spokesperson said the number is not large and the company is inspecting these cars. Losses could rise as these cars are not covered under insurance. On the other hand, Ford India's plant has been operating partially — the engine plant is running but vehicle assembly has not yet resumed. The company had advanced its maintenance shutdown scheduled for the second half of December along with the repair work so as to make up for lost volumes.

The plant is likely to resume operation by December 18-19, said people in the know.

Ford India's spokesperson confirmed the information. Apart from meeting the new EcoSport demand, the plant was also gearing up for new Endeavor launch, which may see a small delay in roll out. Floods in Chennai has also hurt the supply chain and component makers. According to industry body SIAM, about 10-15% of the country's production was impacted in November because of rains. While car companies are gearing up to restart output, there is a big challenge at the suppliers' end, which needs to be addressed, said industry players.