Maruti is facing a crisis at its Manesar Plant in Haryana. Unhappy workers have found out a new way to disrupt ongoing work at the plant by creating serious defects in quality of the cars, so they would fail the compulsory vehicle inspection (VI) quality test. The vehicles are instead pushed to the holdup unit in the factory premises and not being shipped to dealers.
In the previous weeks, workers aged 27 to 28 years are up to some crazy stuff. They are cutting off wire harnesses from fresh cars which are in the assembly line, loosening or removing door hinges making the entire door fall off at the time of quality checks.
There are instances like deliberately trying to sabotage by employing methods like denting a new car. This would hold the car from reaching the dealer for an extended time as these cars would need fresh repairs. There are also instances like fitting parts from one model to another.
On a specific day of the previous week, reports indicated that only ninety six cars came out of the assembly line after vehicle inspection and quality checks whereas there were about 1200 cars rolling out daily from production.
Considering the depth of the issue to be seriously affecting the quality of their products, Maruti Suzuki, this Monday morning, sealed the facility temporarily.
Production stoppage like these in Manesar plant have happened thrice before where they produce cars like A-Star, SX4 and Swift models.
Insiders belonging to Maruti Suzuki told that the staff had been undertaking the ‘go-slow’ policy for many weeks currently and production was obviously down in the plant, but Maruti Suzuki only sealed the premises on Monday, which was a slight delay.
On the other side, production at Gurgaon, the company’s 2nd facility, had to be cut down this month because of a slowdown in demand.
A components supplier and a vendor, who is a single source tier I for many models, told productions of Alto F8 and Alto K10 was a combined 36,000 in July, but was expected to go down to 26,000 in August with Alto being the highest selling product in India.
In the same way, production of Ritz’s down at 6,900 units (previously 8000 units) in August. Production of WagonR is at 9000 units (previously 15,000 units). Likewise, productions of all the other models have also been cut down due to a decline in demand.
A components supplier says every other car sold is a Maruti Suzuki car in India, but when they cut down production of cars when facing issues like labour or rising inventory that meant sales of almost half of the passenger cars is down. He also told the company’s growth last year was 28% to 30%, and he feared at this rate it would go down to 5% to 6%, and would be certainly affecting their business as well.
There are reports that car manufacturers also have cut down their production.
A vendor says that Tata had resumed its production of Nano at Sanand when they temporarily did suspend production for a fortnight. He says this was undertaken for maintenance purposes and also to align and rationalise inventory.
Going by what vendors had to say, they report about a hundred Nano cars are produced there where the installed capacity was 800 daily, but Tata haven’t given an indication as to when they would be raising the production.
Even the production of Tata cars namely Vista, Indigo and Indica are down.
There is an overall slowdown in production predicted by vendors. They say the production of all these cars combined together would go down in Sept and Oct 2011, i.e., 11,500 units and 13,300. They feel, in November, it could go up to 15,000, but dipping further in December to 12,000.
Maruti Suzuki and Tata Motors account for a big market share in the car market when it comes to passenger cars. The ongoing dip in production in their respective plants would impact the supply chain entirely.
Car analysts report that utilisation of capacity by car manufacturers generally was expected to further decline by 6% in the coming 2 years even if they increase their capacities.
However, Akshay Saxena and Jatin Chawla of Credit Suisse Equity Research, are seeing a 30% expansion in capacity in the coming 2 years.