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Final countdown

Source : BUSINESS_STANDARD
Last Updated: Fri, Feb 08, 2013 21:02 hrs

As Dunlop faces closure - this time for good, it seems - Probal Basak and Ishita Ayan Dutt look back on the history of the marquee tyre brand and Dunlop Estate in Sahagunj

The writing on the wall of Dunlop’s Sahagunj factory could not have been more ironical. “Leader is back”, it says on the closed gates of the Dunlop factory, located at the end of the road leading up to “Dunlop Estate” in Sahagunj, around 75 kilometres north of Kolkata in Hooghly district of West Bengal.

The tag line, say the workers, is one of the few contributions of Pawan Kumar Ruia, after he bought controlling stake in the company in 2005 from Manu Chhabria and his family. Today, however, the Kolkata-based chartered accountant-turned-industrialist’s dream of turning around the beleaguered company is on the verge of being shattered as he fights a legal battle in a division bench of the Calcutta High Court. Last week, Justice Sandip Banerjee had ordered the winding up of Dunlop India, following applications from creditors who had sought relief for non-payment of dues.

For many, it is the end of the road for a company that has been a market leader for most of its existence.

 

 

* * *

The Dunlop story started at the 239-acre plant in Sahagunj in 1936. Dunlop had, of course, started operations in India much earlier, in 1896. It then marketed cycle tyres. In 1926, the business was incorporated as Dunlop Rubber Company (India) with an authorised capital of Rs 50 lakh, the name changing to Dunlop India when Sahagunj came into being a decade later.

Fifty-seven year-old Kuntal Nath, who regularly visits the office of the CPI(M)-affiliated Centre for Indian Trade Unions at Sahagunj to check when — and if — he will get the Rs 6 lakh due to him in retirement benefits, was witness to some of its glory days. Nath, who joined the company as a boy of 14 running errands for the British officials, remembers a “short-tempered Mr Wallace”, “a good looking saheb in Mr Neil”, and a “tall Mr Smith” who were part of the management at different times from 1970 to 1983-84.

The traces of lost glory are evident all over Dunlop Estate. It clearly was a beautiful place once. A row of bungalows lined the self-contained township, among which the managing director’s mansion was the most luxurious. Many recall the club houses — one for the brass and another for lesser mortals — which had among other amenities, tennis and basketball courts, swimming pools and a grocery run by co-operatives. With a population of 11,000 workers, Dunlop Estate was an oasis of quiet and prestige.

Such was its standing that on a state visit to India in December 1980, Prince Charles drove down to Sahagunj to see it for himself. Nath remembers the visit clearly. A stone plaque next to a Devdaru tree that Charles had planted bears witness to the royal visit.

Sahagunj looks worn-out and shabby today; its swimming pool and basketball courts have an abandoned and dilapidated air. “All these were functional even after Manu Chhabria and [R P] Goenka took over in 1984. Sahagunj started losing its glory in the late-1990s when the plant was closed for the first time due to a financial crisis. Some buildings were still around when Ruia took charge, but the new management decided to demolish them,” says R N Bhandari, a Dunlop old-timer.

Around 300 families, mostly former employees, live in some of the existing structures in the township.

For the Dunlop management, however, Sahagunj was as much a liability as it was an asset. And the reason for that, clearly, were its intractable labourers and their unions.

“In the 1960s [the British owned the company till 1984] the company was run by Nirmal Sen,” recalls a former general manager. Sen was a union leader, a Congress supporter and disciple of Mahatma Gandhi and much respected among all sections of workers. But not all union leaders were so principled or respected. In later decades, labour problems at Sahagunj got out of hand as protracted negotiations had to be held through the day over issues as trivial as the location of tables, demands for bathing soap, boiled eggs, and what not.

Obstructive labour aside, Dunlop had other problems too. “Tyres is a low margin, high-technology product,” an observer of the tyre industry points out. And Sahagunj was anything but modern. Moreover, with brand equity such as Dunlop enjoyed, its expectations and responsibilities were huge.

The perception was that Dunlop had a near monopoly on the market. It had a wide range of products catering to everything from the humble bicycle to heavy vehicles and aeroplanes — at one point, the company manufactured as many as 300 kinds of tyres. But in reality, matters were not that simple and despite the brand equity and perception of market leadership, the company’s coffers did not benefit.

“There was a huge demand-supply gap,” recalls an official who served as general manager until 1980s. Partly as a result of labour troubles, Dunlop could not keep pace with the demand. To make matters worse, dealers often sold the product at a premium in the black market. Sahagunj’s never-ending problems prompted the management to set up a smaller, more modern plant in Ambattur near Chennai in 1959. Ironically, the Ambattur factory — which, too falls under the ambit of the Calcutta High Court order — was closed down by the Dunlop management in February 2012 citing labour issues and financial difficulties.

The large product basket, however, was trimmed down after Chhabria and Goenka took over in 1984. Key focus areas were identified — passenger cars, scooters, trucks and aeroplanes. But it wasn’t an easy task. It took three months to get the plan approved by the Dunlop management.

“Dunlop used to be a company where everyone had huge and fragile egos. The delegation of responsibility and authority were properly defined, systems and processes were perfect. But there were too many senior people and there was not that much work, so there was a lot of time for politicking. There was so much bureaucracy, and everyone was always busy with committee meetings,” recalls another top official.

 

 

* * *

But Dunlop did turn around. From number five among the major tyre manufactures (Modi, Apollo, MRF and Ceat being the other four), Dunlop regained its number one position in 1987. An advertising campaign was released to underline its market leadership — “Dunlop is Dunlop. Always ahead.” It remained at the top till 1990.

After a tumultuous working relationship with Chhabria, the Goenkas decided to exit the business in 1988, selling their 5-6 per cent stake. From the 1990s, Dunlop was back in the doldrums. In 2000, Sahagunj closed down; Ambattur was limping. Finally, in 2005 Ruia took over Dunlop from the Chhabria family and Sahagunj was reopened with much fanfare in 2006.

A rich legacy apart, Ruia inherited huge liabilities. “We inherited liabilities of Rs 800 to Rs 900 crore. This should now be around Rs 50 crore. Also, all the liabilities, for which the creditors have moved court, belong to the 1994-98 period,” Ruia says in his defence.

And then, of course, there were the labour problems in Sahangunj. “When I took up Dunlop, no one thought tyres could come out of the plant. I did what others thought was impossible. But I could not control labourers who never wanted the plant to run. Also, there was theft. There are over 70 FIRs that we have filed,” Ruia claims.

But what of the real estate that Dunlop owns? The story goes that Chhabria had a diary that he flaunted in corporate circles in Dubai (where he lived later) that had a list of the lucrative properties that Dunlop owned in different parts of the country.

Calcutta High Court has found that property in excess of Rs 2,300 crore has been removed from Dunlop’s books, despite the fact that it has not cleared the debts of its creditors or even paid the pending salaries of employees. “More importantly, the company received no consideration against the transfers other than some dud shares in newly-formed companies that had no business at all,” the court order says.

According to Ruia, the restructuring — “the properties were transferred to an SPV, which is owned by the holding company of Dunlop,” he says — was imperative because he needed money and the banks did not want to lend to Dunlop. Ruia has filed an appeal in the Calcutta High Court against the winding-up order.

While Ruia has a ready defence against the claims of the creditors, he is silent on the issue of the Dunlop brand. Is the Dunlop brand still with Dunlop India or has it been transferred to one of his group companies?

Earlier there were allegations that Ruia had initiated the process of transferring the trademark of Dunlop India to one of his group companies. This can be crucial for Ruia as his group company, Falcon, which has a production facility in Mysore, sells tyres under the Dunlop brand. Also if the brand is not the legal property of Dunlop India then the winding up of Dunlop India’s plants may not have much meaning. “I do not want to comment. I can only say the order will have no adverse impact on other group companies,” is all Ruia says.

But he does say that the court’s winding up order is not the end of the road for Dunlop. If he can’t do it, someone will acquire it. “Someone was attempting to climb the Himalayas. If the person fails in his attempt, you cannot abuse him. I never thought the job was impossible, or I would not have taken it up. And I still believe in reviving Dunlop,” Ruia says.

At Sahagunj, Nath is not interested in the rhetoric. He is just waiting for his dues.




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