Maruti Suzuki to resume production at Manesar from August 21, 2012; sacks 500 workers

Maruti Suzuki India Limited (MSIL), India's largest car maker, has announced to resume partial production at its Manesar factory from August 21, 2012 after facing a month lockout, which left the car maker with revenue loss of millions. Along with the declaration, the news of firing around 500 workers whose agitation with management over salary issues on July 16, 2012 caused the much publicised riot. The violent riot claimed the life of company’s senior HR executive and leaving over 100 others being injured.

MSIL’s Manesar factory, based in Haryana, annually produces around 550,000 units of company’s popular hatchback Swift, which remained inactive just after the fateful day. Reportedly, the factory is expected to restart at a slow pace of 150 cars a day, which is about 10 per cent of its average production capability.

Regarding the recommencement of production, Deepak Jain, an auto expert at Sharekhan said, “Maruti has always managed to surprise the market with the way it has managed to bounce back from several strikes and ramp up production." A similar issue, not so violent, also occurred last year, wherein the auto major suffered a production loss of $ 500 million because of labour related problems.

This year’s lockout caused the company lose around $ 256 million and analysts at Reuters estimated the losses of the company at $ 15 million a day. It is believed that the impact would cut short Suzuki's operating profit margin by 6 million yen amounting to about 5 per cent of its prediction for this year.

Maruti Suzuki's Chairman, R.C. Bhargava mentioned in a news conference that production at its Manesar facility is expected to start on August 21, 2012 with 300 workers. He could not comment on when the factory would be back to its full capacity and also told the press that services of 500 workers (one-third of the total work force) involved in the agitation will be terminated and more firings are in-line, depending upon the investigation.

Regarding the future security aspects of Manesar facility, he quoted, “The primary concern for Maruti had been the safety and security of its employees. We are now satisfied about the arrangements that will guarantee their safety. Hence, we will lift the lockout from Tuesday.”

Reportedly, Maruti Suzuki will now hire only 20 per cent of its labour force on contract, while the workers under contract would be restricted from the shop floor. Before the agitation, Manesar facility was operated with 1,525 permanent and 1,869 workers on a contractual basis.

Citing the importance of Manesar facility to itself, Haryana government has promised full support. On this, Yudhvir Singh Malik, Principal Secretary, Industries quoted, “We have posted a full battalion of India Reserve Battalion. The force will be stationed inside the company as long as Maruti wants.” The state will also engage 500 Rapid Action Force personnel, led by a senior police officer, near Manesar with 100 of them being deployed inside the Manesar premises.

Presently, Maruti Suzuki would be hoping to recoup for the losses and market deficit of Swift as well as DZire models. The resumption of production is a well-thought step to restore company's reputation at time when the country’s festival season will be on peak very soon, wherein people tend to invest in cars.