Maruti may miss festive season jump5 min read . Updated: 16 Sep 2011, 12:49 AM IST
Maruti may miss festive season jump
Maruti may miss festive season jump
Manesar, Haryana: Maruti Suzuki India Ltd halted operations for the week after industrial strife spread at the country’s biggest car maker, putting the firm at risk of being unable to take advantage of the forthcoming festive season to try and perk up flagging sales and preventing frustrated buyers from switching to rivals.
In the latest blow, at least 350 contract workers, who load vehicles onto transporters that are then despatched to dealerships across the country, went on strike.
“We have our own issues—we don’t know if Maruti will address them or our contractor. We can’t trust either of them," said Mahesh Kumar, who said he was the leader of the group protesting at the despatch gate. Kumar said no cars had been loaded on Thursday.
The agitation also turned violent with Maruti supervisors being attacked by some agitating workers. The company is struggling to manufacture cars due to labour unrest that began on 29 August at various plants in Gurgaon and Manesar in Haryana.
Meanwhile, Haryana labour minister Shiv Charan Lal Sharma was cited as saying by PTI that he would seek to broker peace between the management and workers that would see the strike ending on Friday.
The immediate beneficiary of the production disruption seems to be Honda Siel Cars India Ltd, which has seen demand for its premium hatchback Jazz soaring. Honda dealers say there’s now a four-month waiting period for the car that was relaunched with a price cut because the earlier version wasn’t selling too well.
“We are sold out for the next three months," said a Honda spokesperson. “We have only been able to meet 55% of the demand that Jazz has generated. We cannot ramp up production as parts supply from Japan is still a concern. Things should improve from November onwards."
The labour trouble will hamper Maruti’s sales, market share and margins, said Nikhil Deshpande, research analyst with a Mumbai-based brokerage firm.
“Things are getting bad to worse for the company," he said. “I think these issues are beyond money and profits. It has become a long-term worry for the company. These issues will linger on and will take at least three-four years to heal."
Maruti fell 0.94% to ₹ 1,083 on BSE on Thursday, even as the benchmark Sensex rose 1% to 16,876.54 points.
The company’s woes will allow rivals such as Hyundai Motor India Ltd, Honda, Toyota Kirloskar Motor Pvt. Ltd and Volkswagen AG to boost sales as customers look for alternatives during the festive season, which traditionally sees a bump up in consumer spending. Auto makers hope this will reverse the decline in car sales, which fell 10.1% in August to 144,516 units, according to data from the Society of Indian Automobile Manufacturers.
“I think it is an excellent time for Hyundai to launch its (Eon) small car that will compete with Alto," Deshpande said.
Maruti dealers have been forced to stop taking orders for the Swift, the new version of which was launched on 17 August, a day after the new Jazz was unveiled.
“We have stopped taking bookings for Swift," said a Delhi-based Maruti dealer on condition of anonymity. “There is a waiting period of six-eight months for the Swift. This has forced customers to look for other options. A lot of them have gone to Honda."
In the 13 days after its relaunch, Honda sold 600 Jazz cars against an average of 200 cars per month since February.
“If the product is not available in the market, people will look for other options," said a senior Maruti official who didn’t want to be named. “With Suzuki Powertrain (India Ltd) going on strike, the waiting period for other models will also go up."
Meanwhile, the petrol price hike on Thursday will increase the attractiveness of diesel cars. “And in these conditions, we can’t do anything," said the official cited above.
That will help boost sales at Toyota and General Motors India Pvt. Ltd, which have recently launched diesel versions of their small cars. Diesel costs ₹ 41.29 a litre in Delhi, compared with ₹ 66.84 a litre for petrol after the latest increase.
Tellingly, out of over 100,000 bookings for the Swift, 80,000 were for the diesel version even before the latest increase. Hyundai, Volkswagen, Skoda India Pvt. Ltd, Fiat SpA and Tata Motors Ltd all have small cars that run on diesel. At least 56% of all compacts sold in August were diesel cars. The figure has steadily risen from 39% in July 2010 to 45% in January to 51% in June.
At least 70% of the cars sold in India are small cars.
Suzuki Powertrain employs more than 2,000 workers at its Manesar plant, where it manufactures diesel engines and transmissions for Maruti. The plant has an annual production capacity of 300,000 units.
The company said operations were being halted for the week as the supply chain had been disrupted. While 17 September (Saturday) is a designated holiday on account of Vishwakarma Puja, the company does not work on Sunday.
“Following the strike at its vendor, Suzuki Powertrain India, supply of certain critical components to Maruti Suzuki’s facilities has been disrupted," the company said in a release on Thursday. “These components include diesel engines and transmissions for certain petrol engine models."
A Maruti spokesperson denied that the contract workers who load vehicles were on strike and said despatches were taking place.
The workers, who are not affiliated to any of the unions, move cars from the assembly line to the parking lot and then on to 16-wheel trucks.
“We are called parkers inside the factory. We have been working with the company for the last five-six years and I get ₹ 4,200 every month. Out of this, 30-35% gets deducted if I take even a single day off," said a contract worker highlighting concerns similar to those expressed by workers protesting at other Suzuki plants. He didn’t want to be named.
The workers said at least 35,000 cars were standing in the parking area of the company’s facility in Manesar. Another company official, who also did not want to be named, said the lot can only hold 15,000 cars.
The company does not have a parking area at its Gurgaon plant, Maruti’s main facility. Cars made in Gurgaon are sent immediately to Manesar, 20km away for despatch.
Agitating workers attacked a group of supervisors belonging to the Manesar plant, injuring 11, the company said. One worker was detained, it added.
The latest phase of the labour trouble began at Maruti’s Manesar factory in August after the company said it would only allow workers who had signed a so-called good conduct bond to work, citing indiscipline and sabotage by employees over the previous two months, following a strike in June.
The bond required the workers to declare that they would “not resort to go-slow, intermittent stoppage of work, stay-in-strike, work-to-rule, sabotage or otherwise indulge in any activity which would hamper the normal production in the factory".