Maruti falls as rivals gain this festive season

Maruti Suzuki India Limited (MSIL) did halt their operations due to industrial conflicts in its factories. As a result, the company found itself at risk for not being able to take proper advantage during the upcoming festive season in India to try and make some profits in substantial sales hence prevent perturbed buyers from not switching to rivals for options when buying a new car.

The latest scenario at Maruti was around 350 workers on contract on an indefinite strike. These workers did load automobiles on transporters to be shipped to all the dealerships in the country.

Mahesh Kumar, who’s thought to be the group’s leader, told they had their own issues and were unsure if Maruti would be addressing them or their contractor. He told they couldn’t trust either the contractor or the company. Mahesh Kumar also told that, on Thursday, none of the cars were loaded.

Maruti Suzuki India LimitedThe situation got so intense that some of the Maruti supervisors were attacked by irate workers. Maruti thus is continuing to struggle in car manufacturing because of the ongoing labour issues that began on August 29th at numerous plants in Manesar and Gurgaon in Haryana.

In the meantime, Shiv Charan Lal Sharma, Labour Minister of Haryana, told through PTI that he will be seeking to negotiate peace within the agitated workers and Maruti management and was hopeful to see the ongoing tussle end on Friday.

The manufacturer to have benefited from the ongoing strike in Maruti is HSCI (Honda Siel Cars India Limited). Honda says the demand for their hatchback Jazz is up with a minimum of four months of wait period for their Jazz. It may be noted that Jazz was re-launched by cutting its price since the older version of the Jazz didn’t sell well.

Another Honda spokesperson told they were not able to meet the demand for the coming 3 months, and that they’ve only met demands up to 55% that Jazz has created so far. He told production cannot be increased since there’s persisting concern regarding supply of parts from Japan. He was, however, hopeful things would normalize from November of this year.

Nikhil Deshpande, Research Analyst, says the labour unrest would hamper Maruti Suzuki’s sales, margins and market shares.

Nikhil iterated things were getting worse from bad for Maruti. He feels the ongoing issues are something more than profits and money and looks like a long-term trouble for Maruti Suzuki. He also feels the current issue would be hampering them for some time and would at least take 3 to 4 years to heal completely.

Maruti’s shares are falling down currently even as Sensex rose considerably on Thursday.

The current situation in Maruti would be allowing arch rivals namely Toyota Kirloskar, Volkswagen and Hyundai to up their sales as consumers are really looking for other routes during festive season here in India. Traditionally, the festive season usually sees a surprising bump when it comes to people spending due to it being an auspicious time for buying something new. At the moment, auto manufacturers are hoping this would reverse the current decline in overall car sales, which took a fall at 10.1% to 1,44,516 units in August. This report is based on analysis by SIAM (Society of Indian Automobile Manufacturers).

Nikhil Deshpande feels the time is appropriate for Hyundai to go ahead and launch its small car Eon that would be seen competing with the Alto.

Dealers at Maruti are now being forced not to take orders for Swift, a new version launched on August 17th. This launch was made just after a day Honda relaunched their new Jazz.

A Maruti Suzuki dealer from Delhi told they’d stopped taking orders for the new Swift. He told the new Swift’s wait period was 6 to 8 months and that consumers are heading to Honda showrooms for alternatives.

It’s been just 13 days when Honda relaunched their Jazz and has been successful in selling 600 cars of Jazz as opposed to sales of just 200 Jazz cars per month from February.

An unnamed senior official at Maruti cited the unavailability of products would only worsen the situation when customers would be looking for other alternatives, and with the current strike in the company, the wait period would also be going up for all models. The senior official also told the hike in petrol prices on Thursday would likely be attracting customers to go for diesel cars instead, and in conditions such as these, they simply can’t think of doing anything.

Maruti strikeThis would be helping sales at General Motors and Toyota who both have launched small cars in diesel versions. The cost of a litre of Diesel currently is Rs. 41.29 in Delhi against Rs. 66.84 per litre of petrol after the recent hike.

Out of a total of 1 lakh Swift cars booked, diesel versions booked were around 80,000 even before recent hike in petrol. Manufacturers like Volkswagen, Hyundai, Skoda, Tata Motors and Fiat have small diesel cars in their armoury. The study also says 56% of the compact cars that were sold ran on diesel in August. There’s a steady rise seen at 39% recorded (July 2010); 45% (January 2011); 51% now in June 2011. Small cars had the highest sales at 70%.

Suzuki Powertrain has an employment capacity of 2000 or more at their Manesar unit where the manufacturing of transmissions and diesel engines is undertaken for Maruti Suzuki. The yearly production capacity at Manesar is 3,00,000 units.

Maruti told the week’s operations had been halted as there was a disruption in supply chain, and now September 17th (Saturday) being an official Indian holiday, company’s closed on Sunday too.

The company told followed by the recent strike at Suzuki Powertrain, there was disruption in supply of important components to MSIL facilities, and the components included transmissions and diesel engines for some petrol engine variants.

Another Maruti spokesperson did deny saying the workers on contract that loaded vehicles were not on strike and dispatches were being made.

Workers who were not associated with any unions moved cars from assembly line onto the parking area and later loading them on sixteen wheel trucks.

An unnamed worker told they were called as ‘parkers’ in the company and their association with Maruti was for 5 to 6 years now. They get paid Rs. 4,200 per month, and the company deducts 30% to 35% if taken an off. These concerns look similar to those being expressed by other contract workers that are agitated at various Maruti Suzuki plants.

The workers told around 35,000 cars were lying in the company’s parking lot at Manesar. Another worker says the parking lot could hold only 15,000 vehicles.

There is no parking lot at Maruti’s Gurgaon unit, which is the company’s main facility. Cars manufactured at Gurgaon are immediately dispatched to Manesar, a 20-km drive.

Company says irate workers did attack a supervisors’ group that belonged to the plant at Manesar. The workers injured around 11 people and a single worker has been detained so far.

Problems at Maruti Suzuki’s Manesar facility started in August 2011 when Maruti made the workers sign a compulsory “good conduct bond,” which created indiscipline among workers who even sabotaged some new cars preventing its exit from the plant and getting it back to the assembly line for more repairs. The issue’s been ongoing for the last 2 months through strikes in June 2011. Workers opposed to not signing the bond and never wanted to adhere to illegal bonds.

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