Situation at Maruti Suzuki's Manesar plant remains the same; local traders feel the crunch

The recent instance of ghastly violence at the Manesar plant of Maruti Suzuki has dented the reputation of the car maker in the Indian auto industry, affecting the country's economy as well. More than 500 workers have reportedly fled Kasan, Haryana in order to escape from the arrest, following the mishap that resulted in the death of an HR manager at the plant on 18th July 2012.

Situation at Maruti Suzuki's Manesar plant remains the same; local traders feel

The shutting down of the unit has spelt doom for the local traders, who looked-up to the contractual workers of Maruti for their daily earnings. The earnings of the nearby villages of Manesar, including Kasan, Sahrawan, Nainwal, among others, was almost dependent on the wages earned by the labour working over there. The entire community of local traders and workers has suffered a big blow from the clashes that took place in the plant of Maruti Suzuki.

But the impact of the incident is not just limited to the labour class. Maruti Suzuki's market shares also have to bear the crunch, since two of its most popular models - Swift and DZire were being solely manufactured at the Manesar plant. Shutdown of the plant would possibly augment the waiting period for the models, consequently, leading to the possibility of customers going for a quicker alternative. DZire enthusiasts might think of opting for non-Maruti models and rather go for the diesel variant of Toyota Etios, while the prospective Swift buyers might consider opting for Figo. The rivals of Maruti have already sprung into action; Ford is offering a discount of Rs. 3000 on its Figo, while Hyundai is trying all possible schemes to push the sales of its i20 and Verna.

The workers' unrest might also have the implications for the reconsideration of contractual labour in the country. According to a media briefing by Maruti Suzuki's Chairman, RC Bhargava, "We will not have any contract worker in the core areas of manufacturing after March 2013. We have decided to change the mode of employment and all future recruitment would be done through the HR department to remove distortions." Other auto makers in the country are closely following company's moves and might think of implementing similar strategies in their workforce as well.

The mishap may additionally affect the marketing prospects of Delhi NCR in the Indian auto industry. The region has already been ignored by premium carmakers like Nissan and Ford while choosing their plant location. And now the Manesar issue may act as the final nail in the coffin of the NCR, according to a research firm, JD Power (Asia Pacific). This, in turn, may translate into big gains for Gujarat, which apparently offers a favourable atmosphere for India Inc.

Moreover, the entire issue may create negative sentiments for India in the global arena. According to Deepesh Mathur, Managing Director at IHS Automotive, a consulting firm, "The message it sends to anyone planning to invest in Indian manufacturing is very negative. India seems to be an unfriendly country for investment with lots of complex labour problems." Unless the issue is solved at the earliest, it may bring in more losses for the already sluggish Indian car market.