There may be no clear answers on what led to the violence at Maruti Suzuki’s Manesar plant last month, but this has not prevented the company from announcing it plans to restart operations from Tuesday (August 21). The announcement surprised the Street, which expected the lock-out to last at least another month. The decision to reopen the plant before the festival season kicked in came as music to the ears of analysts, now factoring in a negligible loss in total volumes for the company.
Initially, the company would produce only 150 cars a day, 10 per cent of the plant’s total capacity. The company has stated production would be scaled up in phases. Analysts say the company plans to start manufacturing the Swift and Swift Dzire models from Manesar’s B plant, as this process was automated and required less manpower. Antique Stock Broking believes since the diesel engine plant has been functioning normally, the volume loss would be negligible. A total of 300 workers would resume work on Tuesday. And, as the company reinstates others and hires more regular employees, production would return to 1,600 cars a day.
Nomura, too, believes the company would be able to cover the lost production days in about a month. Therefore, it hasn’t cut its estimate of Maruti’s volume. “If everything goes smoothly, we believe the company may take another month to achieve full production. In our view, the company may be able to largely make up for lower production later during the year,” say Nomura analysts.
Maruti Suzuki would take some time to rework its human resource strategy. Till last month, the company’s total workforce at the Manesar facility stood at 3,400. It is expected most of the 1,869 contract workers would be offered employment as regular employees. Since the company has indicated it would bring most workers onto its rolls, it would require more time to screen and rehire all these employees.
The Haryana government has provided all the security support the company had sought to protect its staff at the plant. A team of 500 Rapid Action Force police personnel has been allocated for security at the plant. Of this, 200 would be stationed inside the plant, while the remaining would be stationed close to it. Also, security cover has been provided to managers and families that may be at risk.
Given Maruti’s popularity among car buyers, analysts continue to be bullish on the company.