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Tags: Touch | Thomson Reuters | Suzuki Motor | suzuki | rush | Replay | Maruti Suzuki | maruti |
Manesar plant | headache | Fiat
Maruti Suzuki faces months of
supply woes and slump in market
share
Reuters Jul 26, 2012, 11.24AM IST
MUMBAI: Maruti Suzuki faces months of supply
woes and a slump in market share and sales as a
lockout at the key Manesar car factory enters its
second week, threatening a replay of a dismal 2011
when labour unrest battered volumes and profit.
The shutdown of the factory, which suppliers and
analysts expect to last at least a month at a daily
cost of $15 million in lost production, is likely to
hobble operations for months to come, hampering
the carmaker's performance in India's key October
sales rush for a second straight year.
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Investors have knocked $700 million off the value of India's largest car maker and shares in
parent Suzuki Motor Corp are down over 10 percent since a riot at the factory last
Wednesday killed one manager, injured scores more and landed more than 90 people in jail.
Maruti is expected to post its fourth consecutive quarter of profit falls on Saturday, hit by a
weak rupee and sluggish demand. While the latest lockout will not affect the results, which
cover the three months to June, it creates another headache for the struggling company.
"If it takes around a month or so, then the volumes going into the festival season will be
impacted, which could bring down the overall volumes for the company ... which was the
case last year as well," said Yaresh Kothari, auto analyst at Angel Broking in Mumbai.
Sales of cars and other big-ticket items typically surge during the annual festival period in
October, which is traditionally seen as an auspicious time for consumers to splurge.
"They cannot achieve full production immediately once restarting the plant," Kothari added.
The slide in quarterly profit was sparked by shutdowns at the Manesar factory last summer,
when weeks of intermittent strikes led to seven straight months of declining sales in 2011.
For the fiscal year to March, its sales fell 11 percent and its annual profit dropped almost 30
percent.
Lost production
Maruti's share of the passenger car market fell 8 percentage points to 40 percent by the time
the strikes ended. That had recovered to 44 percent in the April-June period of this year, but
a similar slide looms.
"We really don't know when (resumption of operations) will be," Suzuki Chairman Osamu
Suzuki told reporters at a seminar in Hamamatsu, Japan, on Wednesday. Suzuki plans to
send 10 employees from Japan to Manesar to help it reopen.
RELATED ARTICLES
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October 11, 2011
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June 8, 2011
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July 19, 2012
IN-DEPTH COVERAGE
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Vorutl Buzukl loces months ol supply woes ond slump ln morket shore... http://ortlcles.tlmesollndlo.lndlotlmes.com/2012-07-26/lndlo-busln...
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Manesar's closure is especially painful because it is the only plant that makes the company's
hugely popular Swift hatchback, which already had a waiting list of two months and in April
was India's most popular car, outselling even Maruti's cheapest model, the Alto, which is
usually the market leader.
Maruti has said it will not be able to import cars or shift production elsewhere to meet the
shortfall in production at the plant, which accounts for just over a third of the company's
total vehicle output.
"While the recent stock correction might have captured most of the financial impact that
could arise from the lockout, we expect the stock to languish till the issue is completely
resolved," Antique Stock Broking wrote in a recent report.
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Maruti is expected to report net profit of 4.87 billion rupees for the quarter that ended on
June 30, down 11 percent from a year earlier, according to analysts polled by Thomson
Reuters I/B/E/S.
Around 100 of the 150 companies in Manesar that supply parts to Maruti have seen their
business affected by the shutdown, said Manmohan Gaind, general secretary of the Manesar
Industries Welfare Association (MIWA), a lobby group.
"The economy of the place runs on Maruti ... A lot of people are very, very worried," said
Gaind. "We are closely in touch with Maruti ... I think they will be closed for at least one
month."
A spokesman for Fiat SpA's Indian unit, which manufactures diesel engines for Maruti's cars
built at Manesar, declined to comment when asked if it had suspended supplies.
Maruti, which has not provided a timeframe for reopening the plant, says workers attacked
managers after a disciplinary incident. The factory's workers' union says its representatives
were attacked first. Police have launched an investigation.
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Vorutl Buzukl loces months ol supply woes ond slump ln morket shore... http://ortlcles.tlmesollndlo.lndlotlmes.com/2012-07-26/lndlo-busln...
2 ol 2 21-07-12 18:29
Readers' opinions (23)
Sort by: Newest | Oldest
27 Jul, 2012 06:50 AM
colranbir lamba (PTA)
RECOVER ALL DUES FROM MISCREANTS. SHUNT THEM OUT & JAIL
26 Jul, 2012 07:33 PM
baba lalu dev (jammu)
did they not do the same with Honda a few years ago? Now with Maruti. I think Jat Khopris in Harayana want to go
back to the old days of getting drunk and loot pat. Industries are too good for them. If Suzuki sees no change they
will go somewhere else like TATA but they will not leave India. India is their small car hub for the world.
26 Jul, 2012 05:41 PM
BullT (Bangalore)
The Manesar incident might have cause the biggest loss for them in India in all these years :(
26 Jul, 2012 05:37 PM
Santhosh Kumar (Chennai, Tamil Nadu)
If you are starting business in area of goons (Manesar) you will face these kind of problems.
26 Jul, 2012 05:18 PM
joynandan haldar (Bangkok)
Need to check if this is a dirty ploy sponsored by maruti's competitors--i will not be surprised !!
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Vorutl Buzukl loces months ol supply woes ond slump ln morket shore... http://ortlcles.tlmesollndlo.lndlotlmes.com/2012-07-26/lndlo-busln...
2 ol 2 21-07-12 18:29