Manesar violence blow to Maruti, may hit Japanese investment
By Rohit Vaid, New Delhi, July 20 : The violent clashes between workers and management staff at Maruti Suzuki's Manesar plant in Haryana Wednesday may hit the leading car maker's plans to reach production targets, its image and possibly the upward trend of Japanese investment in India, industry observors feel.
The largest passenger car manufacturer in the country has enjoyed a loyal customer base for around 30 years, which has helped it to maintain a dominant position in the industry.
But, frequent labour unrest of late has caused production loss and pushed back delivery dates of its best selling cars like the Swift, eroding consumer confidence.
Swift's sales have increased by 50 percent to 18,000 units per month in the current fiscal compared to 12,000 per month sold in 2011-12.
The Manesar plant manufactures some 1,200 cars per day on an average and has been specially designed for manufacturing diesel cars.
The company's hopes to roll out 1.5 million units in the current fiscal are likely to be hit as a result of the workers-management standoff. The auto major had planned to reach the production milestone last fiscal. The plan was hampered by another strike in October and November 2011 as well as a slowdown in the market.
In the September-October 2011 labour unrest, the company suffered nearly Rs.2,500 crore in production losses. The strike that time had ended in the first week of November after union leaders resigned after accepting hefty payouts.
Maruti Suzuki produced 1.13 million cars last fiscal, which was 11 per cent lower over 1.27 million units produced in 2010-11.
Industry insiders fear that Wednesday's violence and fire will impact not just the company's production but overall growth of manufacturers and suppliers of other components like tyres and batteries.
They expect no relief from the present situation soon.
Although Maruti's flagship plant in Gurgaon, where the mass sold Alto and other famous hatchbacks are manufactured, is working smoothly, component manufacturers who were exclusively catering to the Manesar plant fear they may have to shut operations if the company does not restart operations soon.
This may also affect job creation in the short run, they said.
The company started its manufacturing facility in Gurgaon in 1981 as a joint venture (JV) between the Indian government and the Japanese automobile Suzuki.
Industry observors say Japanese companies have been raising investments in India following expansion of trade and diplomatic relations between the two countries. There are 812 Japanese companies operating in the country, generating more than three lakh jobs in India, according to diplomatic sources.
Japanese FDI in India in 2011 was Rs 15,000 crore.
Maruti-Suzuki is, meanwhile, pinning its expansion hopes on a new plant in Gujarat, away from home state of Haryana.
The company plans to set up a new plant with an installed capacity of two million units per annum in Mehsana, Gujarat. It envisages two sites with an area of 600 acres each - one for the plant and the other to be allotted to components and ancillary vendors.
Gujarat Chief Minister Narendra Modi, who will be leaving for Tokyo Sunday to garner investment, is expected to meet Suzuki Motor's top executives to persuade them to shift to his state.
Earlier, Modi had convinced Tata Group to shift its Nano car factory to Sanand after the company's plans to set up the plant in Singur, West Bengal, failed due to farmers' agitation.