The mayhem and pandemonium that occurred at Maruti Suzuki Manesar plant on July 18th and which lead to the company declaring a lockout has now completed twenty days. This has caused the company a 20% decline in profits. These losses are not only due to lack of production at Manesar but have been compounding for the past four quarters during which the company bore straight losses.
Manesar plant sees production of Swift hatchback and Dzire sedan. The plant is capable of production of 1,200 to 1,400 cars per day. Due to lockout, production is now at a standstill and this is costing the company a loss to the tune of Rs.75 crores. Output losses will directly affect company’s profitability. Even two weeks of closure would affect profit margins by 2% for a quarter.
Maruti Suzuki India also has to contend with higher costs due to increased security which will add to their losses. The company is in the midst of working out the financial implications of the recent outburst at their Manesar plant. Property was damaged, plant and machinery has been smashed not to mention the damage to life and limb.
All this will impact company profits and will cause a major setback for the company specially since there is no hope of reaching any conclusion in the near future. The current lock out will mean production loss of over 40,000 to 60,000 units or Rs.2,000 crores in revenue. Speaking about the damages suffered, Maruti Suzuki official said, “We are still assessing the total damage to property and facilities from the acts of arson.”