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Manesar plant lockout could result in 20 per cent loss in profit

Dark clouds are hovering over the India’s largest car maker, Maruti Suzuki India once again. Maruti India has incurred 15 per cent to 20 per cent loss in the profit due to the loss of production at the company’s Manesar plant. The company’s profit slid for the fourth quarter in the month of July and with an added loss of 15 per cent to 20 per cent it is estimated to slump further.

Auto pundits opine that this estimated amount is based on the loss of production that happened due to lockout since last two weeks. The accrued loss at the company’s assembly line, paint shop and other units located in Haryana facility stand at Rs 525 crore. Maruti works in conjunction with its Japanese partner Suzuki Motors, the Japanese auto maker has a share of 54.2 per cent in this JV. The Manesar unit has been shut after the violence at the company’s plant in Manesar last month. The workers at the plant assaulted the management and one manager was even killed in this violent act. Apart from this some of the managers were thrashed brutally and were even hospitalized.

The Manesar plant is extremely crucial for the Japanese auto maker as its best selling models, Maruti Swift hatchback and Maruti Swift Dzire notchback are manufactured at the Manesar unit. Around 1,200 units of Swift hatchback and 1,400 units of Swift Dzire are produced on daily basis at this unit resulting in loss of Rs 75 crore everyday.

The company is dreading that the loss in production at the Manesar plant could cost a heavy amount to the company, it will also affect the total profit of MSI.

One of the company officials stated that the company is yet to calculate the financial losses that incurred to MSI due to the violence at the Manesar plant. It includes the damage occurred at the Manesar facility along with other units.

Auto experts also suggest that MSI would not be able to reach the profit figure that it registered last year. The three labour strikes at the Manesar unit last year also resulted in heavy loss, which the company had thought that it would recoup this year. Maruti proclaimed recently that the first quarter profit has skid 23 per cent. The sagging sales of petrol powered cars of Maruti might require the company to roll out lucrative discounts to encourage sales of petrol powered cars.According to IHS Global Insight consultancy, one month long lockout implies a production loss of 40,000 to 60,000 units which equals to a loss of more than Rs 2,000 crore.