The virulent labour standoff at Maruti Suzuki plant in Mansesar is expected to hit investment climate in the country as the recurring incidents of workers' unrest will dent the country's image as a safe destination, according to investment advisors, according to a TOI report.
What is more, the standoff — if continues for a long time — will further impact the existing slow growth in the domestic car industry, while adversely affecting component makers, noted the report.
Vishnu Mathur, Director General,The Society of Indian Automobile Manufacturers (SIAM) said: "This is not only bad for the investment climate in the state of Haryana but also for the entire country. Recurring labour issues at leading global carmakers operating in India make big news overseas and are seen as an alarming sign by companies when they consider investments here".
The official said if respective state governments are not quick to resolve such standoffs, investments in various sectors will be impacted.
Deepesh Mathur, MD at IHS Automotive, a consulting firm, while agreeing to the sentiment said: "The message it sends to anyone planning to invest in Indian manufacturing is very negative. India seems to be an unfriendly country for investment with lots of complex labour problems".
The immediate problem at Maruti Suzuki is also expected to hit the struggling car market badly. Officials at many companies said that the issue will create 'negative sentiments' in the market while pulling growth statistics further down. 'You have to remember that Maruti accounts for nearly 45 percent of overall sales of the industry. If production at its Manesar plant is stalled as a result of this labour problem, the overall productivity of the car industry will also come down and industry will slip into negative,' a senior official of a major auto company was quoted as saying by the report, requesting anonyimity. The big impact will be on the component players, says the report.
'Maruti Suzuki India is a giant in the car industry and many vendors survive on the company. If production at Maruti goes down, the business of these players gets hit almost immediately,' a big component manufacturer operating in the area was quoted as saying by the report.
Per day production loss at MSIl alone is estimated to be around Rs 90 crore. The worrying part is that the company makes its blockbuster models like Maruti Swift hatchback and Maruti Dzire sedan at the Manesar premises, the report pointed out.
Shares hit
The violence at Maruti Suzuki's Manesar plant, took its toll on the automotive OEM's stock on Thursday with the price crashing nearly nine percent, accompanying by high volumes and wiping off nearly Rs 3,100 crore of investors' wealth. The stock opened weak and slid through the day's session to touch an intra-day low at Rs 1,112 and closed just a tad off that mark, at Rs 1,118. On Bombay Stock Exchange, 9.1 lakh Maruti shares were traded on Thursday, nearly nine times its average daily trading volume for the past two weeks, added the report.
