Maruti Suzuki's Manesar plant faces lockout; car industry

braces for slump

Chanchal Pal Chauhan, ET Bureau Jul 20, 2012, 06.01AM IST

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Suzuki Motor|
Maruti Suzuki Workers Union|
Maruti Suzuki India Ltd.|
Manesar plant|
Gurgaon administration|
Cars

GURGAON: The spectre of a prolonged lockout loomed large over Maruti Suzuki's car plant at Manesar, a day after a
senior executive was charred to death in a fire that broke out when workers went on a rampage.
Haryana government officials are believed to be seriously considering recommending a shutdown of the plant after
Wednesday night's violence, easily the country's worst industrial relations-related incident since 2009 when the vicepresident of auto parts maker Pricol was beaten to death by workers in the southern city of Coimbatore.
The deceased Maruti official, Awanish Kumar, is a human resources professional with the designation of general
manager. His charred body was found on Thursday and identified by his family. Scores of workers and managers
were also injured in the violence.
The ominous development signals more trouble for Maruti, which has been trying to solve a severe industrial unrest
problem in Manesar for more than a year now. Three strikes last year lopped off nearly Rs 2,500 crore in revenue as
production fell and popular models such as Swift could not be delivered to customers. On Thursday, Maruti's shares
crashed 9%, its steepest fall since July 26 last year, to Rs 1,117.
"Maruti's 11% dip last year brought the entire passenger car segment to its knees and this abrupt halt at its plant
would have a deep impact on this fiscal's sales," said Deepesh Rahore, MD (India), of IHS Global Insight. However,
most brokerages have issued a 'hold' advisory on its shares in view of the long-term perspective.
Maruti Suzuki MD S Nakanishi did not comment on the matter. An interim report on Wednesday's incident has been
sent to Suzuki Motor Corporation and a high-level team comprising senior managers would visit India to assess the
damage. The daily financial loss for the company from the Manesar plant is pegged at Rs 75 crore with an output loss
of around 1,200 cars a day.
Police Have Taken Over the Factory
The factory, which has the capacity to produce 5 lakh cars a year and accounts for about a third of Maruti's total
output, remained closed on Thursday.

According to a senior official in the Haryana government, the lockout of the facility would be announced soon, as the
police have taken over the factory and will only hand it back after completing investigations.
The Haryana Labour Department has sent a report to the Haryana government saying it was a law and order issue
and a lockout of the plant should be announced till investigations are completed.
The report would also be shared with the Centre and the chief labour commissioner as Japan is the largest investor in
India and Suzuki Motor Corp-which owns 54.4% in the country's largest carmaker-has lined up fresh investments of
over Rs 12,000 crore across its facilities in Haryana and in a proposed plant in Gujarat. The investments are
budgeted till 2015-16.
Maruti Suzuki has also decided to transfer the entire stock of finished cars from the Manesar plant over the next twothree days as it convenes a strategy to restart operations at the factory, where the assembly line was partially
damaged in the fire allegedly started by agitating workers on Wednesday. The company also plans to shift production
of its bestsellers, such as Swift and DZire, to its Gurgaon plant.
On Thursday, the Manesar plant, Maruti's most modern facility that rolls out cars such as Swift, DZire, SX4 and AStar, resembled a police barrack, with the Gurgaon administration taking over the premises and posting over 2,000
policemen. Haryana government officials, led by the DGP and SDM, visited the factory during the day.
The latest outbreak of worker protests has left Maruti's partners-such as components makers, dealers and other
business associates-worried as the carmaker consumes 30% of the components sold in the country and has a 38%
share of the domestic passenger car market.
Analysts tracking the automotive industry say the temporary setback for Maruti will alter the fortunes of the Indian car
industry for the current fiscal year.
The company, which did not issue any statement on future strategy, said its top management, including Nakanishi,
had visited the injured employees in various hospitals, including two Japanese expatriates.
"We are still assessing the total damage to property and facilities from the acts of arson. What is clear is that the
office facilities have been burnt beyond repair, as have the main gate, security office and the fire safety section," the
company said in a statement.
The Haryana government has taken a tough stand and rounded off 99 people suspected of being involved in the
incident. It has also formed a special team to expedite the investigation. The government has registered cases under
Section 302 of the Indian Penal Code against unidentified persons and 55 identified persons.
However, the prime suspects in the case, Maruti Suzuki Workers Union president Ram Meher and general secretary
Sarabjeet Singh, are still to be arrested. Ram Meher issued a statement claiming the union had the workers' and
company's welfare in mind.
"We have worked towards mutual benefit of the workers and the company and to blame the current violence on us is
unjust. We are still keen to have a dialogue with the company and want to sit down with the management and the
government labour department to amicably resolve the matter and restore peace in the factory," he said in a
statement on Thursday.