Following the shut-down since 18 July of the Manesar plant of Maruti Suzuki Industries Limited (MSIL), which has a capacity of assembling 2,500 passenger vehicles per day, the functioning of hundreds of vendors has been thrown out of gear.
Close to 300 vendors located in and around Gurgaon and Manesar provide a variety of components to MSIL. These mainly consist of sheet metal fabrication, auto lights, control panels, shafts, jack assemblies, clutches, plastic mouldings and filters.
The suspension of work at MSIL’s Manesar plant has left these small suppliers with no other option but to patiently wait for the restart of operations.
K S Rathi of ASK Industries said that his entire supplies were dependent on Maruti. So it’s a question of survival if operations do not resume soon: “Our entire production set-up relies on the original equipment manufacturer (OEM), and if they suspend production we cannot escape the heat.”
But there are some who did not put all their eggs into the same basket and thus have a cushion.
Naresh Kansal of Kansal Engineering Limited says that though business flowing from the Manesar plant has stopped, supplies to MSIL’s still-functioning Gurgaon plant were on schedule. So his company will be able to sustain itself.
Veterans of the auto parts business said such situations can be taken advantage of to set in motion cost cutting programmes involving electricity consumption and raw material purchases, training programmes for redundant workers, and repairs of idle machines.
A senior official at Horizon Industries Private Limited said his company would have to bear both fixed and variable costs right through MSIL’s shut-down.
“Labour is a scarce commodity these days. If we lay off workers, we may not get them when production resumes at the OEM. So along with fixed costs we also have to absorb labour costs in order to retain workers.”
Horizon Industries supplies sheet metal, shafts and jack assemblies. The volumes supplied have dropped to one-fourth, because the company is dispatching components to MSIL’s Gurgaon plant only.
An official of Auto Decor Private Limited explained that they had prepared a contingency plan to meet such situations. Production at MSIL had been interrupted last year too, and his company was able to cope, he added.
“The full loss cannot be recovered, but nobody can foresee such incidents and we can only pray that the stalemate is solved soon,” he summed up.
There are a few small players, catering exclusively to MSIL, which have been worse-affected than those who supply to two or more OEMs.
On the condition of anonymity, a few of Maruti’s exclusive vendors said they had begun scouting for alternative OEMs, because it is difficult to survive solely on ordersplaced by a single mother unit.
The ancillaries provide employment to an estimated 150,000 workers. They may not face an explicit threat of losing their jobs, but some layoffs may occur, said an entrepreneur.