Aug 10, 2012, 09.43 PM IST

Manesar woes: Vendors, dealers on the edge

Though chairman RC Bhargava today said that Maruti could look at resuming partial production within this month it could still be a huge challenge to clear the backlog of orders.

India Business Hour at 09:00 pm

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Though chairman RC Bhargava today said that Maruti could look at resuming partial production within this month it could still be a huge challenge to clear the backlog of orders. This uncertainty is causing the company's dealers and vendors to wait and watch. But how long can the company's dealers and vendors hold up at the backdrop of mounting sales pressure? Here's a report.

It has been a long and arduous wait for Maruti Suzuki's key dealers and vendors - stakeholders who have enjoyed a long relationship even before the company was acquired by Japanese Suzuki Motors. Maruti's top dealers told CNBC-TV18 that their sales have crashed by over one-fifth in the last three weeks. They fear that if production does not resume soon the festive season that kickstarts in less than a month could be a very lean one for them.

The Manesar lockout is definitely negatively impact the dealers because almost 40% of the retail comprises of the Swift and DZire and which were the models which were being manufactured in Manesar.

Nikunj Sanghi, President, Federation of Automobile Dealers Association says, "The Manesar lockout is definitely negatively impacting the dealers because almost 40% of the retail comprises of the Swift and DZire manufactured in Manesar."

Another Mumbai based Maruti dealer says though the company has asked for bookings of the Swift and DZire to be continued, the dealers would have no option but to unilaterally stop taking fresh orders if production remains at a standstill.

The story is much the same for the auto component industry as well. After leading manufacturers cut production of parts that go into the SX4, Swift and DZire -from Rico Auto, Lumax Industries, Anand Automotive, Motherson Sumi systems - the fear is now of possible large scale layoffs.

The CITU, which has a strong presence in the Gurgaon-Manesar belt, has already warned that if the lock-out is not lifted then nearly 25,000-30,000 jobs could be at risk. Industry experts say the on-ground situation is not good but not as bad as some doomsayers would like us to believe.

Arvind Kapur, MD, Rico Auto & President, Automotive Components Manufacturers Association adds, "If not job loss people would be asked to go on leave for a long time that sort of cost cutting would happen. Everyone would be looking at those options. Maruti's decision to employ more permanent workers will surely set a trend in the industry.

Analysts say Maruti Suzuki stands to take a 15-20% profit hit in the second quarter if the lockout stretches for another month and unless immediate measures are taken to resume work, things could from bad to worse.

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