Maruti production at Manesar to Normal by end of December

Friday 04 November 2011, 18:06 PM by

India's largest car manufacturer, Maruti Suzuki India Limited, is going through labour unrest for quite sometime now, not only affecting industry but also the economic stability. As a result of labour unrest, Maruti Suzuki has fetched disappointing sales in the second financial quarter of 2011. The situation is expected to return to normal with complete resumption of car production at the Manesar plant by the end of December this year.

Addressing media, a Maruti Suzuki India spokesperson said the company is planning to increase production at the unit in Manesar. This positive change is result of the tripartite agreement signed between the management of the company, workers and the state government. This also ended the 14-day long strike on October 21, bringing back normalcy at the Manesar plant. The company spokesperson also said that they expect to achieve normal level of production at the unit.

The car production facility of Maruti at Manesar has production capacity of 1,200 cars per day, which include manufacturing Swift, A-Star and SX4 models. As per industry experts, 14-day-long unrest due to labour issues resulted in Rs. 700 crore loss. The tripartite agreement between management, workers and Haryana government reinstated 64 dismissed permanent workers and 1,200 casual workers. Referring to the agreement, Maruti spokesperson quoted, “Lots of initiatives were taken while reaching the agreement, which is targeted for a long-term solution. The atmosphere was positive and constructive when it was signed."

Share markets experienced depreciation in the value of Maruti Suzuki share by 5 percent. Affecting economy, the situation also resulted in appreciation of Japanese Yen against Indian Rupees. Meanwhile, loss of India's leading car maker turned out to be gain for other car making entities that came forward with discounted models for sale. All-time dominating car maker now faces an uphill task to beat foreign car makers exploiting the situation.

The consent will be followed by setting up of the 'Grievance Redressed Committee' and 'Labour Welfare Committee'. Speaking about work practices at the Manesar facility, Maruti official said, "Fundamentally, there is nothing wrong in the practices, as the same have been there in Gurgaon for the last 30 years. Probably there was some misunderstanding and miscommunication. We could have done a better job there."

Slapped by the loss that valued Rs. 630 crores, the automaker also dealt with rising interest rates and high fuel prices during this period. To get on with other opportunity grabbing car companies Maruti offered heavy discounts on models. The impact of unrest on Forex was calculated to be loss of Rs. 100 crores. Speaking in regard to Forex loss, Maruti spokesperson said, “We were under cover for the second quarter as we had hedged our yen exposure, but we are not hedged beyond October 30. Fortunately, yen is correcting now. So we may not have much impact in coming quarters."

To make up for the wreckage, Maruti Suzuki India Limited is increasing production output of Maruti Swift to 16,000-17,000 units per month from 10,000-12,000 units. Moreover, production output of the sedan sibling Dzire will be increased to 10,000-11,000 units a month from 7,000-8,000 units.

These measures are expected to help Maruti Suzuki India Limited to get back on track and regain its position as the undisputed leader of the market.