Labour strike pulls Maruti Suzuki’s net profit down 60%

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NEW DELHI: The country’s largest carmaker Maruti Suzuki posted a 60% fall in net profit for the second quarter to end September, its worst quarterly earnings in more than a decade and wide off analyst expectations, mainly due to a prolonged labour strike that hit production.

The strike caused loss of production of 28,539 cars and pummelled profits to Rs 240 crore. Maruti had posted profits of Rs 598.2 crore in the last fiscal year.

The company now plans to set up a new facility of around 1 million cars at Mehsana of Gujarat on a 1,400-acre plot it will buy, said Maruti Chairman RC Bhargava on Saturday.

“Gujarat is part of the long-term plan to make cars for the expanding Indian market and exports for the parent Suzuki Motor Corporation. Logistics of moving cars from North India can be shortened and Gujarat is ideal location for that,” he said. The price for the land has not been decided yet.

Gujarat chief minister Narendra Modi’s government is known to be business friendly. The government has earmarked 500 acres in Mehsana for the project, said Bhargava. Maruti has said that along with vendors, it could invest up to Rs 18,000 crore in Gujarat as it aims to produce around 2 million units.

The company, which has manufacturing plants in Gurgaon and Manesar, has a cumulative capacity to make 16 lakh cars a year. Maruti, 54.2% owned by Japan’s Suzuki, said last week it had resolved the unrest at the Manesar plant, which was shut for more than 45 days in the quarter.

The strike happened at a time when the Indian automobile sector was facing a sharp fall in demand due to rising interest rates, fuel and vehicle costs. Car sales in India fell in July in their first monthly decline in nearly three years. They continued to slide in August and September.

Maruti net sales fell 15.7% to Rs 7,540 crore in the quarter with total vehicle sales declining 19.6% to 2,52,307 units from a year ago.

(Sunday Economic Times)

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