Marutis 3rd plant at Manesar to be delayed due to labour & sales woes

Written by Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Sep 6 2011, 09:23am hrs
Continuing labour troubles and an overall slowdown in car sales could force the countrys largest carmaker Maruti Suzuki to postpone the commissioning of its third plant at Manesar. Chairman of the company RC Bhargava told FE that a final decision to this effect would be taken at the end of the third quarter of this financial year.

Scheduled to be up and running by 2013 the plant is being built with an investment of R1,700 crore.

We could have to postpone the commissioning of the third plant at Manesar by a few months. The slowdown in car sales (needs to be factored in) and the continuous labour troubles are the main reasons. We would take a call around December or January, he said. This comes less than a week after Maruti announced bringing forward the date for the commissioning of its second plant by almost a month in the backdrop of the labour stir.

Envisioned on the lines of its Gurgaon facility which has three assembly plants producing close to a million cars a year, the total production capacity of the Manesar facility is going to be over 8 lakh cars with an eventual target to reach 1 million units. While the first assembly lines capacity is 3 lakh units, the company is employing various de-bottlenecking techniques to ramp up by an additional 50,000 units. The second and third plants at Manesar would have a total capacity of 2.5 lakh vehicles each.

Bhargava reiterated that the company would not compromise with workers on the principles of what is right and what is wrong. We are clear that while the workers can form a union it should not have any political backing. What is wrong in this Suzuki (Marutis parent firm which owns over 54% of the company) also supports our view, he said.

He added that the Manesar facility currently contributed a little over 25% of the companys total production. He said that that by the end of the calendar year when Maruti would take a final call on whether to postpone the commissioning of the third plant the labour issues would have been resolved.

Constant labour troubles at its newest manufacturing unit of Manesar is putting a spanner in the companys growth plans. In June Maruti suffered a strike lasting almost two weeks when the workers demanded recognition to a new representative body Maruti Suzuki Employees Union. While the company agreed to allowing the Manesar workers have their own trade body, it refused to let one-third of its office bearers be from outside the union.

Owing to rising fuel costs and interest rates Maruti has projected a single digit growth of around 6% this fiscal. Bhargava had earlier said that while the festive season could ramp up sales it would still not be enough to reach the apex auto body Society of Indian Automobile Manufacturers (Siam) projection of 10-12% growth for passenger vehicles. Brokerage houses like Prabhudas Lilladher feel that Maruti could face downward pressures owing to dampening macro economic factors. Auto analyst Surjit Arora feels that Maruti could clock a growth of just 3-4% almost half of the industrys growth.