Friday, April 12, 2013

Oops, They Did it Again!

North India, The Country’s Biggest auto belt, has seen Spurts of Labour unrest over The Last Few Years to The Extent that Automakers are now Shying Away from Investing in The Region. Can The Stretch retain its No.1 Position?

The management of Maruti Suzuki, India’s largest passenger car manufacturer, heaved a sigh of relief as the company reported 2% sales growth in May 2011, selling 104,073 units against 102,175 units in May 2010. No doubt, the growth was negligible considering Maruti’s sales trend over the last 12 months, but in a month when car sales grew by only 7% (the slowest pace of growth in two years) and players like Tata Motors saw a fall of 8.3% in passenger vehicle sales (due to a massive 35% decline in both Indica & Indigo sales), the 2% growth gave management enough reasons to cheer. However, the party didn’t last long. Just three days after, on June 4, 2011, the New Delhi-based company was grappling with labour unrest as 800 workers at its Manesar plant (the plant produces about 1,200 vehicles a day, including the popular Swift and A-Star hatchbacks, and the DZiRE and SX4 sedans) went on strike demanding recognition of a new union specific to the plant. The days that followed saw the company sacking 11 workers accusing them of instigating the strike at the facility, which only added fuel to the fire. Although the strike was called off in just 13 days, on June 17, 2011, it had already made a Rs.4.2 billion dent in the company’s topline by then. And not just Maruti, even its vendors reportedly made losses to the tune of Rs.300 million per day taking the total revenue loss to over Rs.8.1 billion.

It’s not the first time that the northern auto belt has been affected by labour unrest. Companies like Hero Honda, Honda Motorcycle & Scooter India (HMSI), Rico Auto, Sunbeam Auto, Hyundai, et al, have reported similar problems over the last few years. For instance, in 2009, while workers at HMSI’s Gurgaon plant were on strike to protest wages and other issues, Hyundai Motor’s India plant saw a three-day labour unrest. Almost half the workers at the Indian unit of Sweden’s Volvo Bus Corp. too went on strike in 2010, protesting wages. All this has certainly dented the image of India’s leading motown and automobile manufacturers are now shying away from investing in the region.

For instance, when Nissan decided to set up its new unit in India, in alliance with its global partner Renault, it chose Chennai as its home and not NCR. The company now plans to invest Rs.45 billion in this unit by 2015. Similar has been the case with Volkswagen and Tata Motors that chose to set up their base in Chakan (near Pune) and Gujarat (as the home for Nano) respectively. In fact, Maruti Suzuki too is setting up its third facility (its first outside Haryana) in Gujarat with a production capacity of 10 lakh units per annum (expandable up to 20 lakh units). On the contrary, except HMSI (which is planning to invest Rs.8.6 billion in production capacity expansion), no other big name is willing to set up its base in the region, at least not in the near future. This certainly raises questions over how North India will preserve its auto hub status amidst rising labour unrests. For the less informed, auto majors like Maruti Suzuki, Hero Honda, Honda Siel, Hyundai, Yamaha, and Suzuki Motorcycles are operating from the northern region, which accounts for over 50% of the country’s automobile production.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles
 
Posted by at
Labels: , , , , , , , , , , ,