In wake of the recent developments in the land acquisition case, Maruti Suzuki is planning to shut down its Manesar plant following the additional Rs. 500 crore compensation it was asked to pay. As the judgement is still pending in Supreme Court, industry experts are of a view that the company may think of shutting its Manesar facility to avoid giving this large compensation. Meanwhile, Suzuki's Chairman, Osamu Suzuki visited India for attending the board meeting meeting of the company.
During 2011, Maruti Suzuki faced serious protests against its land acquisition in Manesar following which the Supreme court ordered to increase the compensation amount from Rs. 28.15 lakh to Rs. 37.40 lakh. This order made a hefty Rs. 500 crore additional burden on the auto maker, which the company objected as the case is pending in Supreme Court. It is rumoured that if judgement of the apex court turns against Maruti Suzuki, the company may draw curtains on its plant in Manesar.
It must be noted that the Manesar facility of the Maruti Suzuki is essential for its operations in India. This plant has a capacity of producing around 5-6 lakh cars each year, which is expected to go up till 7.5 lakhs in near future. The main worry for the company is the fact that this unit is its only diesel engine production facility. Apart from it, best selling cars like Swift and DZire are produced at this facility only.
While appearing before the Supreme Court, the counsels for Maruti Suzuki, P S Patwalia and Abhishek Manu Singhvi said “If further enhancement is granted, the (Maruti) management may have to take a decision to discontinue the plant at Manesar.”
Meanwhile, the Chairman of Suzuki Motors had a much anticipated visit to India. After a long time, the Chairman of Suzuki was present at the board meeting. Another reason seen at his visit could have been the declining sales for Maruti Suzuki, which is subsidiary company of Japan-based Suzuki Motors Corporation. However apart from it, he met Gujarat's Chief Minister Narendra Modi to discuss about the ongoing projects of Maruti Suzuki in the state.
Accompanied by company's Managing Director and Chief Executive Officer Kenichi Ayukawa, the delegation is expected to visit the site of their plant in Gujarat. The Chairman of Maruti Suzuki R C Bhargava said, “We shall be going tomorrow to the site for a visit to take a look how are the villages and what is the approach to them." Further commenting on the company's low yearly yields Bhargava said “they were above the market expectations.”
Interestingly, last year in June, Maruti Suzuki acquired a second piece of land of around 700 acres, far from the first site of the proposed plant in Gujarat. The company had earlier signed a State Support Agreement with Gujarat Government for setting a greenfield facility near Hansalpur. Reportedly, the company's first plant is expected to come up at Hansalpur while the second one is expected to be built at Vithlapur, which is located at a distance of 40 km from the first plant.