Maruti Suzuki unrest: History repeating

Investors have knocked 700 million off the value of India8217;s largest car maker and shares in parent Suzuki Motor Corp are down over 10 percent since a riot at the factory last Wednesday killed one manager,injured scores more and landed more than 90 people in jail.

Maruti is expected to post its fourth consecutive quarter of profit falls on Saturday,hit by a weak rupee and sluggish demand. While the latest lockout will not affect the results,which cover the three months to June,it creates another headache for the struggling company.

If it takes around a month or so,then the volumes going into the festival season will be impacted,which could bring down the overall volumes for the company 8230; which was the case last year as well,said Yaresh Kothari,auto analyst at Angel Broking in Mumbai.

Sales of cars and other big-ticket items typically surge during the annual Indian festival period in October,which is traditionally seen as an auspicious time for consumers to splurge.

They cannot achieve full production immediately once restarting the plant,Kothari added.

The slide in quarterly profit was sparked by shutdowns at the Manesar factory last summer,when weeks of intermittent strikes led to seven straight months of declining sales in 2011. For the fiscal year to March,its sales fell 11 percent and its annual profit dropped almost 30 percent.

LOST PRODUCTION

Maruti8217;s share of the passenger car market fell 8 percentage points to 40 percent by the time the strikes ended. That had recovered to 44 percent in the April-June period of this year,but a similar slide looms.

We really don8217;t know when resumption of operations will be,Suzuki Chairman Osamu Suzuki told reporters at a seminar in Hamamatsu,Japan,on Wednesday. Suzuki plans to send 10 employees from Japan to Manesar to help it reopen.

Manesar8217;s closure is especially painful because it is the only plant that makes the company8217;s hugely popular Swift hatchback,which already had a waiting list of two months and in April was India8217;s most popular car,outselling even Maruti8217;s cheapest model,the Alto,which is usually the market leader.

Maruti has said it will not be able to import cars or shift production elsewhere to meet the shortfall in production at the plant,which accounts for just over a third of the company8217;s total vehicle output.

While the recent stock correction might have captured most of the financial impact that could arise from the lockout,we expect the stock to languish till the issue is completely resolved,Antique Stock Broking wrote in a recent report.

Maruti is expected to report net profit of 4.87 billion rupees 86.71 million for the quarter that ended on June 30,down 11 percent from a year earlier,according to analysts polled by Thomson Reuters I/B/E/S.

Around 100 of the 150 companies in Manesar that supply parts to Maruti have seen their business affected by the shutdown,said Manmohan Gaind,general secretary of the Manesar Industries Welfare Association MIWA,a lobby group.

The economy of the place runs on Maruti 8230; A lot of people are very,very worried,said Gaind. We are closely in touch with Maruti 8230; I think they will be closed for at least one month.

A spokesman for Fiat SpA8217;s Indian unit,which manufactures diesel engines for Maruti8217;s cars built at Manesar,declined to comment when asked if it had suspended supplies.

Maruti,which has not provided a timeframe for reopening the plant,says workers attacked managers after a disciplinary incident. The factory8217;s workers8217; union says its representatives were attacked first. Police have launched an investigation. 1 = 56.1650 Indian rupees

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