Maruti Suzuki shares fall after factory lockout
Maruti says it won't import cars to make up for the loss of production at its Manesar factory, where rioting last week led to the death of a manager.
MUMBAI (Bloomberg) -- Maruti Suzuki India Ltd., the country's largest carmaker, fell in Mumbai trading after the company said it's locking out a factory near New Delhi, pending the conclusion of a probe into a deadly riot last week.
The shares dropped as much as 5.4 percent to 1,085.90 rupees, leading India's Sensitive Index lower.
Suzuki Motor Corp., which owns a majority stake in Maruti Suzuki, declined as much as 2.9 percent to 1,381 yen in Tokyo trading.
Chairman R.C. Bhargava on July 21 ruled out an early resumption of the factory, which accounts for about 40 percent of the company's manufacturing capacity, though he didn't give an estimate as to how long the stoppage will last.
Last week's violence, which resulted in the death of a Maruti Suzuki general manager and at least 70 injuries, has led one of the nation's biggest business lobbies to say the incident has undermined India's reputation as an investment destination.
"It's a matter of deep concern for a country that seeks to project itself as offering an environment that is business-friendly," R.V. Kanoria, president of the Federation of Indian Chambers of Commerce and Industry, said in an e-mailed statement July 21, calling for authorities to deal "firmly" with the situation.
The automaker won't import cars to make up for the loss of production at its Manesar factory, Bhargava told reporters in New Delhi July 21. The latest production stoppage is the fourth in the past year at Manesar factory.
All 3,000 union workers at the plant will be charged with murder and attempted murder for the mob attack that caused the death of Awanish Kumar Dev, a human resources general manager, Indian police said July 19.
Maruti has no plans to relocate the plant out of Manesar in northern Haryana state, Bhargava said.
A factory at Gurgaon, about 12 miles northeast of Manesar, is operating at full capacity, he said.
Suzuki has said production facilities weren't damaged by the unrest.
"This is bad news for Maruti as it may take as little as five days or as long as 50 days to identify the rogue elements in the workers who did this," said Mahantesh Sabarad, an analyst at Fortune Equity Brokers India Ltd. in Mumbai. "It also shows the trust deficit between the management and the workers. This lockout comes at a very efficient factory that produces some of Maruti's most popular models."
The lockout comes amid a slowdown in car sales in India as high gasoline prices and interest rates deter buyers. The Society of Indian Automobile Manufacturers on July 10 cut its forecast for growth to a range of 9 percent to 11 percent for the year ending March 31, 2013, from an estimate of 10 percent to 12 percent given in April.
India's economic growth slowed to the weakest in almost a decade in the quarter ended March and the rupee slumped to a record low amid a paralysis in policy making that has hurt efforts to spur investment as a global recovery falters.
Narendra Modi, chief minister of India's Gujarat state, who's on a visit to Japan, will meet Suzuki officials at Hamamatsu on July 25, according to an e-mailed statement. Modi's visit has fueled speculation that he would convince Maruti Suzuki to consider a bigger plant than the 250,000-unit it has announced in the state, the Press Trust of India reported July 20.
Shinzo Nakanishi, managing director of Maruti, said July 21 that Suzuki is expanding in Gujarat, not shifting production there. Maruti's board in October approved buying as much as 1,400 acres (567 hectares) of land for future expansion in Gujarat, where General Motors Co., Tata Motors Ltd. and Ford Motor Co. either have plants or are building factories.
Gujarat's Minister of State for Industries Saurabh Patel said media reports that Maruti may shift parts of its Manesar plant to the state was "far from truth and a figment of imagination." Maruti's decision to invest in Gujarat was made long ago, he said in a statement on government's website.
Maruti and the workers' union have blamed each other for the Manesar incident. According to Maruti, the dispute began July 18 after a worker beat up a supervisor on the shop floor.
The union then prevented management from taking disciplinary action, blocking managers from leaving the factory after work, Maruti Suzuki said.
Workers attacked managers after talks to resolve the dispute failed, with employees setting property on fire and ransacking offices, according to the company.
The union has said it was keen to have a dialogue with the company to resolve the matter and that workers were attacked by bouncers working for Maruti while discussions were ongoing with guild leaders.
"Following the incidents of violence and arson at the Manesar facility, the management believes that if employees are asked to report for work at the facility, their lives will be endangered," Maruti said in an e-mailed statement on July 21.
Ram Meher Singh, president of the Maruti Suzuki Workers Union, and Sarabjeet Singh, the general secretary, could not be reached for comments Sunday as their mobile phones were switched off.
Contact Automotive News