2012 NCR Special: Maruti to restore full normalcy by end October

Maruti Suzuki’s Manesar factory, which re-opened over a month ago, after a one-month lockout, is slowly returning to normalcy. After the lockout was lifted, daily production kicked off with 150 cars and a manpower of 300 people. Since then, Maruti has ramped up capacity to 1,000 units per day. Full production, running at about 1,700 to 1,800 cars daily, is expected to be restored by the third week of October when the plant will be running in two shifts for all its operations. At present, some operations are running in two shifts such as the bodyshop while the paint and assembly operations run a single shift.

Manpower has similarly been stepped up to 2,450 employees including managerial staff. Of this, 986 are the old regular workers and 750 are temporary workers for whom recruitment recently started.

Maruti had earlier sacked 500 of its regular workers out of the 1,528-odd permanent workers deployed at Manesar and who were allegedly responsible for the vandalism at the plant. Recruitment to regular positions from the remaining 1,869 contract workers commenced from September 2 and is being done directly by the company for the first time, and not through contract agencies as had been the case so far. Some supervisors and technicians have also been shifted from the Gurgaon factory to Manesar to strengthen production.

Fast forward

After losing production of the Swift and Dzire models that are manufactured at Manesar besides the A-star and SX4 models, the backlog for the Dzire stands at 65,000 units and for the Swift, 55,000 units, says Mayank Pareek, managing executive officer – sales and marketing. Both models sold about 30,000 units a month before the strike.

Out of the current daily output, the Dzire’s contribution is 450 units, of which 150 are manufactured at Manesar and the balance at Gurgaon. The capability for building car bodies is available only at Manesar and from here they are sent to Gurgaon for assembly. But production of the Swift has, so far, been taken up only at Manesar as assembly operations cannot be done at Gurgaon, says M M Singh, managing executive officer – production.

Meanwhile, manufacturing of the A-star and SX4 has since come on track with about 150 A-stars being produced daily, mainly for the export markets. As far as the SX4 is concerned, the numbers average about 500 cars per month. The balance is made up of the Swift.

Maruti's wage-r

After the labour issue, Maruti had been investigating the reasons for the unexpected violence and one fact that stood out was the disparities in salaries between contract and regular workers and the subsequent brewing discontent. Finally, last week the carmaker arrived at a wage settlement agreement which has led to an average increase in wages of 49 percent per person per month over three years. The wage increment will involve an increase of Rs 15,100 per person over a three-year period. Constituents include a Rs 14,800 increment in gross salary apart from an additional Rs 1,000 in an ad hoc payment of Rs 2,000 that the company gives to workers every month. This is expected to raise the salary of the entry-level worker to over Rs 37,000 per month over the next three years.

The last wage hike undertaken by Maruti was in 2008-09 involving a 39 percent raise in wages, which means that this time around the OEM has given an additional increment of 10 percent in view of spiralling inflation and cost of living.

To be enforced with restrospective effect from April 2012, 75 percent of the incremental wage package will be implemented in the first year, 12.5 percent in the second year with the next 12.5 percent in the third year.

S Y Siddiqui, chief operating officer – administration and HR, says the wage hike will cost Maruti approximately Rs 55 crore over a three-year period with labour costs pegged at around 4.2 percent of the sales revenue. Besides, the company has also streamlined other benefits to the workers, extending a liberal medical scheme for parents of the workers who live in villages and whose annual earning is less than Rs 60,000. For every Rs 100,000 spent on hospitalisation expenses for parents, 90 percent will be paid by Maruti and 10 percent by the employee. For hospitalisation expenses of above Rs 100,000, the employee will spend 20 percent for hospital expenses and the balance will be paid by the carmaker. The earlier medical scheme mandated that parents should stay with the employee to avail these medical benefits. Further, the period for technical training of workers has been reduced from three to two years, which will enable them to become qualified technicians in less time. In another bounty to workers, the wage structure will have a variable dearness allowance linked to inflation instead of the fixed DA to keep pace with rising cost of living.

Coming as a bonus before the festive season for workers, the wage settlement agreement has received the thumbs up from the worker fraternity. Maruti has inked the wage settlement with the trade union. The settlement was arrived at by a committee comprising the management representatives as well as members of the trade union. The wage settlement will apply to around 2,800 workers in the Gurgaon factory besides workers in the Manesar plant. For now, Maruti’s focus is to ramp up car production at the Manesar factory to reduce the waiting period for its popular models. Maruti has no plans as of now to offer discounts to potential customers this festive season but is banking on the brand pull to boost sales.

As customers wait for their vehicles, especially the popular Swift and Dzire, Pareek says that despite being briefed about the uncertainties in production, the booking rush surprisingly did not dwindle even during the lockout period. About 14 of the 16 models at dealerships have adequate stocks. The Ertiga has been selling in significant numbers with sales averaging 6,000 units a month.

Rural markets are doing well for Maruti recording an 18 percent growth since April and despite the flat growth in the car market, Maruti is optimistic that in the long run, the car market will post a CAGR of 12 to 13 percent that will necessitate new locations for dealerships. The company’s long-term marketing strategy is to cover all districts with dealers and touchpoints by 2015.

SHOBHA MATHUR