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Investors slam Maruti on labour dispute

Investors slam Maruti on labour dispute

New Delhi: Shareholders of Maruti Suzuki India Ltd criticized the management of India’s biggest car maker on Tuesday for poor handling of labour relations at its plant in Manesar, where militant workers killed a senior company executive and injured 100 others in an 18 July rampage that led to a month-long lockout.

“We need to have a good industrial relations department, which should not let these evils crop up," shareholder Yashpal Chopra said at the company’s 31st annual meeting in New Delhi. “Our chairman should be reported about every single incident that happens at the plant. It is not only loss of life, but loss of moral values."

Maruti Suzuki’s Manesar plant reopened on 21 August as the car maker attempts to meet the demand ahead of the festive season.

Responding to concerns about the violence, Maruti chairman R.C. Bhargava said the attack was premeditated and the company is yet to find a reason for the incident.

“We are not happy with the circumstances, and whatever has happened on 18 July, it was unprecedented in the history of Maruti and India," Bhargava said. “Most surprising part is that from our knowledge, there was no ostensible cause for this violence. There were no outstanding demands. No further demands were made by the workers."

Investors also raised concerns over the drop in profitability at Maruti, but they expressed satisfaction that the dividends have not been cut.

“The profit has declined substantially. I understand the fuel prices and interest rates have gone up. I would like to know what is the company doing in that direction," Sadhana said.

Maruti Suzuki’s first quarter net profit declined 23% from a year earlier to 424 crore.

Bhargava said that the biggest factor for the decline in profit was the depreciation of the Indian currency, which pushed up import costs, and the company will minimize its dependence on imports.

“We have started a drive to reduce the imports not only at Maruti, but also at our vendors. At the same time, a cost reduction programme is also in the process and you will start seeing an impact in the next two-three years," Bhargava said. Maruti, which is controlled by Japan’s Suzuki Motor Corp., suffered a revenue loss of at least 1,500 crore because of the lockout, a year after a series of labour strikes disrupted production and led to a revenue loss of at least 2,500 crore.

Bhargava said that the company has to increase its share of diesel car sales in India, because “that’s the way the market is going. We do intend to get 40% market share; for that we’re expanding diesel engine capacity," he said, adding that car sales are unlikely to even reach double-digit growth this year. “We expect the industry to grow in the range of 8-8.5% this fiscal."

Bhargava said that the company hopes to restore full production at Manesar in a reasonably short period of time. “At least 700 workers have reported (to work) so far, contract workers are being regularized. We will make additional recruitment to replace 500 odd permanent workers, who have been asked not to come back," Bhargava said.

Prior to July, the total number of workers at the plant was around 3,300. Of these, 1,528 were permanent.

Maruti’s managing director and CEO Shinzo Nakanishi said that the company will introduce a new 800cc car on schedule.

Separately, Nakanishi wrote in the company’s annual report that Maruti will look to change its strategy to produce more utility vehicles.

Maruti, which has a dominant presence in the nation’s small car segment and petrol driven cars, was affected more than some rivals as consumers chose to buy more diesel-powered cars and utility vehicles. The company’s local sales fell by 11.2% to about 1 million units in the year ended 31 March compared with a 4.66% gain in overall passenger vehicle sales to 2.62 million units.

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