Bloomberg News

Maruti Suzuki Says Labor Issue at Manesar Plant Resolved

October 01, 2011

(Updates with September sales in third paragraph.)

Oct. 1 (Bloomberg) -- Maruti Suzuki India Ltd., the maker of almost half the cars sold in India, said it resolved a labor dispute that disrupted production at one of its factories.

The Indian unit of Suzuki Motor Corp. signed an agreement with workers at the plant in Manesar near New Delhi who will resume duties on Oct. 3, the company said in a statement today.

The carmaker’s sales fell 21 percent to 85,565 vehicles in September from a year earlier because of the disruption at Manesar, Maruti Suzuki said in a separate statement today. Domestic sales declined 17 percent to 78,816 vehicles, while exports dropped 48 percent to 6,749 units.

All workers will sign a “good-conduct bond,” according to the statement. The bond was proposed by Maruti on Aug. 29 after five employees were dismissed and 10 suspended for “deliberately causing quality problems.”

The company based in New Delhi unveiled a new version of its Swift model in August as competition from Honda Motor Co., Toyota Motor Corp. and Volkswagen AG intensifies. The Indian carmaker had 108,000 orders for the model, it said Sept. 27.

Maruti reported sales fell for the third straight month in August after demand slowed and production was reduced.

The company expects the central bank’s decision to raise interest rates to damp demand for automobiles, Ajay Seth, Maruti’s chief financial officer, said on Sept. 16. The Reserve Bank of India has raised interest rates 12 times since mid-March 2010 to rein in inflation, driving down demand for cars in a country where about 80 percent of purchases are funded by loans.

Maruti fell 2 percent to 1,083 rupees in Mumbai yesterday. The shares have declined 24 percent this year, compared with a 20 percent drop in the benchmark Sensitive Index.

--Editors: John Chacko, Mike Harrison

To contact the reporters on this story: Tushar Dhara in New Delhi at tdhara1@bloomberg.net; Siddharth Philip in Mumbai at sphilip3@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net


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