Maruti Making Its Way Towards Recovery

The more than a month long facility lockdown has cost the company a boatload but Maruti is slowly making its way towards getting back on track. “By October end we will try to regain our lost production,” said a senior official of Maruti Suzuki India Limited (MSIL) yesterday, a month and a half after the outburst at the company’s Manesar plant. The effect of the occurrences on July 18, 2012 lasted more than a month in terms of a production halt and a few thousand crore rupees in terms of losses.

All that over and done with, the management decided to commence production starting August 21, 2012 with enhanced security measures and severe policy changes. This initiation of production anew started off on a small note with a workforce of 300 working on rolling out 150 units per day (a tenth of the production capacity of the facility). This was to be scaled up gradually as the company had sacked a third of the permanent workforce and had made policy changes to ensure ruling out the use of contract workers.

This brutally affected production cycle resulted in the company’s inventory drying out and sales dipping to lows in the month of August 2012. The YoY sales volume growth figures of MSIL for August 2012 suggest an overall drop of 40.78 per cent in total sales. The scenario is now returning to one of normalcy in a gradual manner and according to a senior official, “Almost all the remaining permanent workers have resumed duties and the production is scaling up accordingly.”

Commenting on the process of the regularisation of contract workers, MSIL’s chief operating officer for supply chain, S Maitra, said, “The regularisation of contract workers and new recruitments are going on and this will be over in the next 10 days. By the last week of September, our total manpower will be in place at the Manesar plant.”

With things taking their pace as before and the demand for automobiles expected to pick up with the festive season, the company may be geared up to cope with what Q3 has to offer the market. Though the profitability of the company would be hit due to increased employee costs and repairs and refurbishment, at least the sales would bounce back. It would also be interesting to see how MSIL copes with the increased waiting periods resulting out of the company accepting orders regardless of the inventory getting phased out.