Maruti Suzuki labour deadlock at Manesar plant may cause investment crisis

The standoff at the Maruti Suzuki Manesar plant is expected to hit the investment climate in India as the periodic incidents of worker’s unrest and deadlock is ought to affect the country’s image as the safe destination for investors.

Further, if the deadlock continues to prevail for a longer time then it sure will affect the existing slow growth in the domestic car industry by affecting the component manufacturers to a larger extent.

Director General of Society Indian of Automobile manufacturers (SIAM) said that the crisis is not only bad for the Investment climate in the Haryana region but also for the entire country. The periodic strikes and work deadlocks by the workers at the big Auto firms are seen as bigger news in the global market and thus it is alarming for the companies considering investment in the sub-continent.

Maruti Suzuki labour deadlock at Manesar plant may cause investment crisis

He also added that if the respective state governments are not active enough to resolve these issues then it might affect the investment in the sector.

MD at HIS Automotive Deepesh Mathur said that this is a bad message for anyone who is planning to invest in India. These news posts unfriendly image of India amongst investors. It is now seen as unfriendly country with complex labor issues.

The recent problem at Maruti is also expected to contort struggling car industry. Many officials believe that this issue will be creating negative sentiments in the market which could bring down the sales figures further as Maruti accounts for about 45%of the sales of the industry.

Maruti is itself experiencing a loss of about Rs. 90 crores per day due to the current standoff. The worst part is that the firm makes its bestselling models like Swift hatchback and Dzire sedan at this plant.

Rising Import Costs might force Maruti Suzuki to increase prices

The till-date dominant carmaker of India, Maruti Suzuki, might just have to scale up the prices of its vehicles early in 2012, officials said this Thursday. The weakened Rupee has caused an escalation in the costs of imports, whereas there has been no change in the market demand in recent times, forcing the company to take this decision of price-hike.

The Indian market has seen a reduction in car sales following high increase in the interest rates, continuous rising fuel prices as well as a slowdown of the economy. This was a vastly different picture from the previous year when the auto sales rose by 30% making India the second-fastest growing auto market.

Maruti sales had slumped by 18.5% in November, compared to 2010’s same period figures, following labor strike at their Manesar plant. However, they had recorded better sales than October.

The Head, Marketing & Sales, Mayank Pareek, in an interaction with media said that the company had identified some stress points in the recent future, though they would continue to perform with competence in the Indian auto market over medium to longer terms.

Rising Import Costs might force Maruti Suzuki to increase prices

Pareek also said that the joint-venture company, in which Suzuki of Japan held 54.2% stake, could raise the prices of their vehicles post December as the sharp decline of the Rupee in International trading had drastically affected their import costs.

Prices of the diesel variants of Maruti had already been raised in November. The Chairman of the Company, R.C. Bhargava said that the company faced double jeopardy because as the Rupee was decreasing, the Yen was getting stronger. This increased costs further for the Yen-dominated imports. In fact, the Yen, in just the previous year, has appreciated 28% against the Indian currency.

The Rupee experienced its worst fall in 16 years this November, falling 6.7% against the Dollar.

Bhargava expected the Manesar plant that had been recently hit by labour strikes, to be fully operational by January, producing 800 vehicles daily. It is to be noted that the recent strike had cost Maruti to lose out on 83,000 cars, cumulating to $500 million in output.

The RBI, having raised the rates of interest 13 times since 2010 for controlling inflation, has directly affected growth across all sectors.

With the slowdown of the Indian economy to its weakest growth in the last 2 years, along with Maruti Suzuki output being the slowest in the previous 3 years, the company had to face a lot of losses.

Sales figures of the Company are expected to experience a decline in the current financial year ending March, said Bhargava recently.

A-Star production resumed despite labour unrest

A resolution is secondary, but production must go on is the mantra Maruti Suzuki’s adhering to at the moment. On Wednesday, India’s largest car manufacturer, Maruti Suzuki, told they have begun the 2nd shift production in its Manesar plant even though there’s been no substantial improvement in the talks between workers’ representatives and the management for an effective resolution regarding the ongoing labour conflicts at its various plants.

So far, all the discussions between company officials who represent Maruti’s management and various representatives of MUKU (Maruti Udyog Kamgar Union) who seem to represent the Manesar unit employees have failed, and more recently today when workers demanded all the 62 suspended and dismissed workers to be taken back, but Maruti’s management refusing to do so.

An outsider says the management did accept taking back 18 employees and decided severe disciplinary actions regarding the rest that wasn’t accepted by the workers’ representatives who wished all the 62 workers be taken back.

Maruti Suzuki A-StarIt may be noted that the management refused to recognise the MSEU (Maruti Suzuki Employees Union) thus objecting to talk to Manesar unit workers hence necessitating the intervention of MUKU (Maruti Udyog Kamgar Union) for negotiations on MSEU’s behalf.

Going back, Maruti had dismissed 33 and suspended 29 workers charging them of deliberately sabotaging new cars meant for dispatch so they could be re-worked in the assembly lines thus delaying the product’s timely delivery to customers.

The workers finally have some help through CITU (Centre of Indian Trade Unions) who are protesting in behalf of the irate workers at the Manesar premises.

CITU State President, Haryana, Satvir Singh iterated that it was wrong tactics from the management’s standpoint to be forcibly making the employees sign the ‘good conduct bond’ and wanted the State Government to take up the issue actively in resolving the case.

As mentioned previously, Maruti did state they had begun the 2nd shift production at Manesar. They also told they had begun A-Star production at Manesar. This decision comes at a time where Maruti’s planning to up the production of its other models and resume manufacturing them effectively at Manesar. They did resume production of SX4 sedan yesterday and also rolled 700 Swifts today. This is an increase in the Swift’s production to 10,000 units since August 31st.

To recap on the events, the rift between workers and management did spark off when Maruti did not permit the workers to enter factory premises as they objected to sign the ‘good conduct bond.’ The company says they had to take these measures as workers were deliberately sabotaging components of new cars and they had no choice, but to take make them sign the bond. The workers, however, say Maruti took these steps when they did go on strike for 13 days demanding recognition of the MSEU (Maruti Suzuki Employees Union).

Crisis stiffens as talks break down between workers and management at Maruti

The scheduled meeting between the management of Maruti Suzuki and the contract workers at their Manesar plant assisted by the intervention of Haryana Government in hopes of ending the strike which lasted for 21 days now have broken down with 3 workers being detained so far by the police.

Police reported to have detained 3 workers’ representatives namely Shiv Kumar, Sonu Gujjar and Ravinder Kumar when talks broke down on Friday failing to come up with any resolution.

President of Kamgar Union, Maruti Udyog, Kuldeep Janghu, voiced that all negotiations had been cut down and was unsure when talks would resume again.

Kamgar Union of Maruti Udyog, as earlier seen, did represent the workers working at the Manesar plant as part of the negotiations when management did refuse direct talks with the union that is the Employees Union of Maruti Suzuki. The 3 workers that were detained belonged to the MSEU.

Crisis stiffens as talks break down between workers and management at MarutiS.C. Lal Sharma, Minister for Employment and Labour, Haryana State, did intervene and spoke with the workers at Manesar plant and Maruti’s management. Representatives of Maruti’s Union (MUKU) were also present on Friday, but failed to arrive at a definite conclusion yet.

Today, the proceedings did continue with officials of Haryana Labour Department present, but nothing was conclusive.

The ongoing tussle between Maruti’s management and contract workers erupted on August 29th. Maruti had to prevent workers’ entry into the factory when workers did not sign the ‘good conduct bond’ that Maruti had forcefully enforced on its workers to sign thus creating ruckus in production when workers deliberately tried to sabotage parts of new cars and avoided it being shipped to dealerships and made them stay at the assembly unit for a longer period of time.

Supporting their colleagues at Manesar were Maruti’s Suzuki Motorcycle India Private Limited and Suzuki Powertrain that boycotted work on Wednesday, but the strike was cut short on Friday.

The bond made to forcibly sign were not completely acceptable to workers who were adamant about not signing bonds that were illegal hence creating confusion for quite some time now necessitating in stopping production of cars and delay in cars actually getting to dealerships when cars were either sabotaged or not boarded for dealerships. Maruti is already losing its new Swift’s sales due to wait periods being long and customers rushing in to Honda dealerships for purchase of cars in the upcoming festive season. Festive seasons are considered auspicious for a buy hence people neglecting Swift’s late delivery and going for cars with less wait period. The situation, at the moment, looks bleak from Maruti’s standpoint with top officials failing to come to a conclusion regarding the ongoing situation.