Motherson Sumi Systems (MSSL), the leading global automotive component manufacturing company, has announced its preparedness to tackle the Covid-19 impact, and is exploring growth opportunities that lie ahead.

April 17, 2020

According to the media reports, Motherson Sumi has taken a holistic approach to protect the interest of various stakeholders including employees, customers, investors and societies where it is present. In response to Covid-19, the company says it has instituted many measures to protect their health and well-being of its employees.

Motherson Sumi is in close contact with all its customers and is receiving regular updates on plant reopening dates and customer schedules. At present, it does not see any change in contracts or programs, and most of its customers are looking to catch up on the lost production time in the coming months due to pent up in demand.

The company is seeing positive development on demand coming from its China plants, which were first to shutdown (on the back of Covid-19 impact) but have since recovered production levels to nearly pre-Covid-19 times soon after starting.

Most of Motherson’s plants in India, Europe and the Americas are at present temporarily closed, but the company has received positive reopening dates for the majority of the plants by end of April / early May. The company has also created multiple internal task forces to monitor the situation on a daily basis across all plants. It says it is in constant touch with various government organizations, customers, suppliers and employees to ensure for getting the latest updates and are ready to commence production in alignment with its customers. However, since it is a dynamic situation, there could be further delays in reopening plants in case the local governments extend lockdowns, of which there are no current clear indications.

Commenting on the present situation, Vivek Chaand Sehgal, chairman, Motherson said: “Our team has done a phenomenal job in almost doubling MSSL’s turnover over the last 5 years to $9.6 billion (Rs 63,000 crore) on an unaudited basis. Our aspirational 5-year plans cannot be timed perfectly, and the unprecedented Covid-19 situation has hindered us in closing many target acquisitions. However, we believe that these same opportunities have become more attractive in valuations since the Covid crisis.”

“Secondly, with our strong financial position and with customer faith intact, we are also being asked by many of our customers to look at more specific companies which are in trouble and we believe can be acquired at low valuations. We wanted to showcase our plans to the investors in June but keeping in mind the current environment, we will probably do so in October. We are grateful to all the customers, government bodies and our financing partners for their support in these trying times.”

Motherson Sumi says that keeping in perspective the changing environment since the onset of Covid-19 in China, it had instituted many projects globally, aimed at cost rationalization, controlling non-critical business investments and optimizing working capital to conserve and generate cash flows.

It is actively working with various governments to further reduce fixed costs during this period of non-production. Furthermore, its future capex is aligned with the launch schedule of OEMs and will only get reduced / deferred if there are any changes in customer launches.

As reported in a leading daily, the company is monetizing engineering working capital by actively working with customers. And is working closely with them for realization of receivables as well as with supply chain for smooth continuity of operations as lockdown restrictions are removed. It is working towards ensuring upkeep and maintenance of facilities during the lockdown period. As a result of these measures, Motherson reports that as of March 31, 2020 its net debt levels have been the lowest in 11 quarters.

Lastly, to further enhance liquidity in these uncertain times, Motherson’s Board of Directors have accorded in-principle approval to raise up to Rs 1,000 crore and delegated its Committee of Directors to evaluate and decide on various borrowing proposals. It is also proactively working to leverage various government support schemes to enhance liquidity.