http://www.moneycontrol.

com/news/results/maruti-q2-net-skids-60-co-to-build-new-
plantgujarat607261.html

India's largest passenger car maker Maruti Suzuki , hit by a labour unrest at its plant in Manesar
and a slowdown in auto sales, saw its second quarter net proIit slump 60 year-on-year to
lower-than-expected Rs 240.44 crore.
Net sales Ior the July-September quarter slipped 16 Irom a year ago to Rs 7,537.45 crore.
Analysts on average had expected Maruti to report a net proIit oI Rs 410 crore on revenue oI Rs
7,688 crore, according to a CNBC-TV18 poll.
"During the quarter, the domestic auto industry remained sluggish on account oI increase in Iuel
prices and hardening interest rates, leading to higher sales promotion expense. The company`s
bottomline was also impacted due to adverse Ioreign exchange rates," Maruti Suzuki said in a
statement on Saturday.
It lost production oI 28,539 units during the three-month period due to the employee strike at
Manesar plant. Maruti Suzuki manuIactures one oI its most selling SwiIt hatchback among other
vehicles at Manesar, and the labour unrest, in demand oI recognition to a new union among other
things, sent production schedule Ior a toss.
Overall in the second quarter, Maruti Suzuki sold 2,52,307 units, down 20 year-on-year.
Domestic sales Iell 20 to 2,22,406 units, and exports were down 16 at 29,901 units.
On Saturday, Maruti Suzuki said its board has granted approval to purchase land in Gujarat`s
Mehsana district Ior Iuture expansion oI manuIacturing Iacilities. The purchase will be subject to
Iinal negotiations on price and all legal Iormalities being completed, it said.
The new plant will reduce Maruti's dependence on the Gurgaon-Manesar belt, and also bring it
closer to ports, thus enabling speeder exports.
However, the overall sentiment in the auto industry remains dull since customers have postponed
purchases as loans have become expensive and petrol prices have risen sharply. Earlier this
month, industry body SIAM (Society oI Indian Auto ManuIacturers) slashed its Iorecast Ior
passenger car sales growth this Iiscal to 2-4 Irom 10-12 earlier.
CLSA Asia PaciIic Markets had on Friday noted that rivals General Motors and Ford seemed to
be beneIiting Irom the prolonged strike at Maruti Suzuki`s Manesar plant.
"With the waiting list Ior the SwiIt stretching to six months or more, customers are moving to
other diesel small cars like GM Beat and Ford Figo," it had said.
Maruti dealers were the least optimistic on sequential sales improvement, despite October seeing
peak Iestive demand, it said. CLSA has a "underperIorm" rating on Maruti Suzuki.
Maruti Suzuki shares ended down 2 at Rs 1,126 on Friday. The stock has Iallen near 7 over
the last three months, even as the broader CNX Auto Index has gained 8.5, underlining
investors' concerns over Maruti's earnings in the near-term.
lnfo 8elaLed Lo llnances ( L8l1uA marglns )
India's largest passenger car maker Maruti Suzuki's second quarter net proIit slumped 60 year-
on-year to lower-than-expected Rs 240.44 crore on the back oI labour strike at its Manesar plant
and slowdown in auto sales .
Net sales Ior the July-September quarter slipped 16 Irom a year ago to Rs 7,537.45 crore.
Its EBITDA margin was at 6.6 and operating margin was at 3 in this quarter. Ajay Seth,
chieI Iinancial oIIicer, Maruti Suzuki speaking to CNBC-TV18 about the dismal Iinancial
perIormance oI the company said, "We are not at all happy with this situation. We will surely
like to better EBITDA and be at least in double digit."
Below is the edited transcript of Seth's interview with Udayan Mukherjee and Mitali
Mukherjee of CABC-1J18. Also watch the accompanying video.
Q: What factors led to the disappointing numbers first?
A: This quarter has been a bit extraordinary. There was an impact on account oI the labour strike
in Manesar. In terms oI volumes, our sales were down 20 and in terms oI value it was down
about 16. In terms oI proIits beIore tax we are down about 59.5. There have been varieties oI
reasons which account Ior the steep Iall. Too many negatives were built into this quarter and
there are some exceptional items as well.
The Ioreign exchange loss, which was with regard to the mark to market provisions that we make
Ior six months and we actually pay in November, was a signiIicant number. It was about Rs 100
crore. Some commodity hedges were also taken in this period where we had to do mark to
market. Because commodity prices Iell steeply towards end oI the second quarter there was
commodity hedging mark to market loss oI Rs 126 crore.
Other than that, volumes went down partially because oI market and partially because oI strike.
Sales promotion cost were all time high in this quarter, this was the highest in last 3-4 years in
this quarter that had a bearing on our margins.
The spend on advertisement went up. Some overheads which are Iixed in nature tend to peak up
because sales numbers and net sales were down. So thereIore as a percentage oI net sales Irom
these overheads are higher than what they were either in the Iirst quarter oI last year.
Q: The margin performance was disappointing as well this quarter. What is it that Maruti
hopes to do in terms of holding margins for the rest of the year?
A: Our EBITDA margin were at 6.6 and our operating margins were at 3 in this quarter, they
were down compared to last year as well as the Iirst quarter sequentially. We are not at all happy
with this situation. We will surely like to better them and be at least in double digit.
However we have to see that more closely in the 3rd and 4th quarter. We don`t see too much
improvement happening immediately but our endeavor to improve margins in the long run.
Q: The big problem has been volumes and you have lost quite a bit of market share in the
current quarter when do you see a resurrection of your market situation?
A: One reason was the Manesar strike and the loss that we had is behind us now. Although there
was some loss in October so in this quarter as well there will be some loss on account oI strike.
But once strike is behind, volumes production should stabilise and there should be improvement
as Iar as overall numbers are concerned.
But the markets are still slow there are lot oI negatives in the short run. We are optimistic about
the long run but not too optimistic about the short runs. We will have to see how every month
pans out so lets watch the next two months very closely and see what the numbers look like.


Maruti Q2 PAT seen down 31.5 at Rs 410
cr


Country's largest car maker Maruti Suzuki is expected to report a proIit aIter tax oI Rs 410 crore
in the second quarter oI FY12, a Iall oI 31.5 as compared to Rs 598 crore in the corresponding
quarter oI last Iiscal.
Revenues are seen going down by 16 to Rs 7,688 crore Irom Rs 9,147 crore during the same
period. Operating proIit margin is likely to be at 7.6 versus 10.5 year-on-year.
On quarter-on-quarter basis, revenues are expected to go down 10 and PAT is seen going down
by 25.
What to watch out for:
* 20 degrowth in volumes due to production loss at Manesar plant on labour issue (25500 units
loss), shiIting oI Dezire production Irom Manesar to Gurgaon (5500 unit loss) and
discontinuation oI old swiIt (12000 unit loss)
* Maruti's market share dropped by 450 basis points YoY to 43.6 in the domestic passenger car
market YTD in FY2012.
Toyota and Volkswagen gained market share, due to launch oI Etios, Liva and Vento.
Margins to be impacted by :
* Rupee depreciation as its JPY (Japanese Yen) exposure remains unhedged June onwards
(2HCY11)
JPY imports are around 21 oI net revenues and EURO exports are around 5 oI net revenues.
For every 5 JPY movement, FY13 EBITDA margins would see around 130 bps swing and EPS
impact oI around 17
* Increased commodity prices
* Higher expenses Ior new launches due to rising incentives and discounts

Volumes Q2FY12 YoY
*Total volumes down 20 at 2.52 lakh units versus 3.13 lakh
*Domestic volumes down 20 at 2.22 lakh units versus 2.77 lakh
~Exports down 16.2 at 29901 versus 35718 units



$& G&AR is unprepossessing. Small, slender, boyish. No Iire and brimstone union leader,
this. In our age oI email and anger, a 24-year-old Indian worker leader preIers to Iind his
advantages in wit and paradox.

It is already Day 14 oI the Maruti Suzuki workers` agitation Ior their right to unionise. Under the
pink tent across the street Irom the company`s plant in Manesar, Haryana, when Sonu begins
speaking to the group oI around 1,000 permanent and 2,000 contract workers, he is soIt spoken.
It takes a while beIore you realise the challenge his rhetoric poses. Going over the blandishments
and threats that have come their way since the young workers Iirst began their Iight Ior
representation, he has a way oI making them sound ridiculous. When told that the workers can
come back to work iI they agree that several others stay terminated, he suggests 'Haan theek
hai`, perhaps the management can arbitrarily Iire some executives as well. Just to level the
playing ground. Whenever a politician or Maruti Suzuki executive tries to claim to be like his
grandIather`, he smilingly welcomes the epithet. He says when it was suggested that good
conduct means workers should not talk to each other, he replied 'Bhai theek hai` he`s game
iI his superiors agree not to talk to each other too. Just to keep things on par.
A subsidiary oI Japan`s Suzuki Motor Corporation, Maruti Suzuki India Limited is India`s
largest automobile company with a major share oI the country`s car market. Since trouble began
in June, most media reports have only discussed labour militancy, the unIortunate` delays in the
production oI the new Maruti SwiIt, and the happy but slim resumptions oI production.
Meanwhile, the workers talk oI their urban cattle liIe, a livelihood most oI us would Iind
unacceptable iI applied to us.
Here is what a Maruti Suzuki worker says his average day at the Manesar plant is like. You catch
a bus at 5 am Ior the Iactory. Arriving a second late to punch in your card means a pay cut, but
you can`t leave the premises once you`ve entered. At 6.30 am, you exercise and supervisors give
you Ieedback on your previous output. Start work at 7 sharp. Everyone does his one task
assembling, welding, Iixing Ior a minimum oI 8 continuous hours. A car rolls oII the line
every 38 seconds, which means you can`t budge Irom your position, ever. You get two breathless
breaks during the day. At 9 am, a 7-minute break to drink tea or go to the loo, or both. AIter a
while you might, like many oI your Iriends here, end up taking your hot tea and kachori to the
bathroom with you. Then a lunch break oI 30 minutes, in which you walk about a halI kilometre
to the canteen, wait in line with everyone, eat and walk back. Returning even a minute late Irom
any break, or leaving the assembly line Ior any reason even Ior a minute, means halI a day`s pay
cut. Older systems used to include an overseer Ior every small group oI workers who could step
All zindabad Sonu Gujjar (standing Iar leIt) and Sonu Nehar (Iar right) rallying the workers


AL$ READ

Maruti want s t o pay Rs 185 cr more t o
Suzuki as royalt y
Second To None
Burn Iat, earn money




in iI someone needed to take a breather. But, the cost logic oI production is perennially at odds
with workers` rights.
Sonu`s rhetoric pierces our mute acceptance that the world can Iunction as it does only iI some
unIortunates are treated like this. II we don`t blink at seeing a man climbing down to unblock a
sewer Ior a Iew hundred a month, it`s likely we think oI a Rs 16,000 Iactory job with a uniIorm
as clean and comIortable. But even the salary is an illusion, as the workers` salary slips show. A
baseline oI Rs 8,000 is all most are guaranteed. Take a day Irom your legally granted casual
leave or sick leave, Ior any reason, and lose Rs 1,500. Take two and lose Rs 3,000, and so on up
till halI your salary disappears. When TEHELKA emailed Maruti Suzuki asking about
conditions like break durations and pay cuts, their oIIicial spokesperson responded: 'II
attendance is below a certain level, perIormance incentive is less to that extent. The terms and
conditions oI all workers, including duration oI breaks, are uniIorm Ior employees in Gurgaon
and Manesar.
DECEMBER 2010, the Manesar workers began discussing how to Iield their own candidates
Ior a new union instead oI being Iolded into the Maruti Udyog Kamgar Union (MUKU), the only
recognised company union. MUKU is viewed as a management- controlled union mainly Ior the
Gurgaon plant workers, whose spirits were crushed during their own agitations in 2000. MUKU
has traditionally not held elections. Workers know that the time-honoured management tactic is
to Iire their leaders. Since December, the Manesar workers and management have played a game
oI hide and seek.
Sonu Gujjar was deliberately an unlikely choice. He has pride in his work ethic and has won the
best operator award and the MD`s award Ior best employee. Over Iive years, his attendance has
averaged at 98- 99 percent. No trouble was expected Irom him. He is a maniIestation oI what the
workers say their MBA-toting seniors are unable to conceive: a unionised workIorce that has
rights and is also interested in raising outputs in the hope oI prosperity. AIter word leaked that
Sonu was going to stand Ior elections Ior a new union, he says he spent entire days in the
company`s HR oIIice being counselled and cajoled. Bribes, threats, dire predictions, a
conversation with the MD the company only managed to convince its workers that it is not on
their side and they`d better watch out.
On 3 June, the Manesar workers Iormally applied to Iorm a separate union called Maruti Suzuki
Employees Union (MSEU). They say the company responded by suspending 11 workers and
sending bouncers to Iorce them to sign blank pieces oI paper. The workers struck work on 4 June
and held a sit-in inside the plant Ior 13 days till their 11 colleagues were reinstated, though the
main issue oI unionisation remained unresolved. They allege the management next resorted to
things like putting cockroaches and dead Ilies in their canteen Iood Iact or angry rhetoric,
there`s little way oI veriIying.
Meanwhile, the Iile to register MSEU in the labour oIIice was cancelled. Reasons: the employees
resorted to an illegal strike; among those who`d signed Ior a new union, many still retained
MUKU membership; some signatures didn`t match with the registered ones. The revolting
workers say they`d all resigned Irom the old union and these technical reasons merely indicate
how hand-in-glove the Haryana government is with Maruti Suzuki.
The Trade Union Act says the union should be oI the workers` choice and should have annual
elections, else the labour commissioner can disband it. AIter the June agitations, MUKU perhaps
Ielt compelled to hold its Iirst elections in almost a decade in July 2011. The Manesar workers
say they`d have abstained anyway Irom voting Ior this 'pocket union but the elections were
designed to happen without their participation. Maruti Suzuki`s oIIicial spokesperson told
TEHELKA that since MUKU is a company-recognised 'representative body oI the workers,
'all workers can channelise their suggestions and grievances through this body. In a
conversation with TEHELKA, the recently elected MUKU General Secretary Kuldeep, who
works at the Gurgaon plant, remained vague about previous MUKU elections, saying that they
happened by a show oI hands, while the spokesperson said, 'We cannot comment on internal
matters oI the union.
The dirty agendas and chequered record oI many unions may create suspicion but shouldn`t
negate workers` right to organise. The spokesperson told TEHELKA that 'outside control oI
unions by nonemployees is an unhealthy practice and the company does not permit it, and that it
wants only 'one single union with no political aIIiliation. When pressed on how the new union
would have political aIIiliation, outside control or non-employee participation, the spokesperson
only said, 'We have stated the principle. We have not commented on any speciIic outIit.
There`s a darker back story oI Maruti Suzuki unions. BeIore MUKU there was the Maruti Udyog
Employees Union (MUEA). In 2001, Suzuki took over the company and won a case to appoint
its own MD, and the Gurgaon workIorce protested subsequent salary cuts and work
intensiIication. There was a grim three-month battle with water cannons, mounted police and
hunger strikes ending in MUEA leaders` arrests. The management recognised a new union called
MUKU and insisted as it is doing now that all workers sign a good conduct bond. Many
MUEA sympathisers were terminated. MUEA was derecognised by the government on charges
that still lie in court. Over the next year, around 1,000 workers were oIIered a Hobson`s choice
oI voluntary retirement or termination.
Throughout the current crisis, the company has had on its side the police, the labour
commissioner, the politicians, its bouncers as well as most oI the media. On 28 August, Maruti
Suzuki called a large police backup inside its Manesar plant and suspended 21 workers on
charges oI 'sabotaging production and deliberately causing quality problems, and terminated or
suspended some others too. The alleged sabotage is oI 'vehicle door not properly clamped
leading to doors Ialling during production, cutting wiring harnesses, dents on the body and
critical components not Iitted on vehicles, but the spokesperson presented no evidence to
TEHELKA oI these charges except pointing to declining production and Quality OK` numbers
on 23, 24 and 25 August. The spokesperson wouldn`t conIirm iI there`s any video evidence Irom
the numerous surveillance cameras but did claim to have photographs.
In the Iollowing days, there was a plant lockout with the company saying only those who signed
a Good Conduct Bond` could work, so that it gets the legal right to Iire anyone who indulges in
'go-slow, intermittent stoppage oI work, stay-instrike, work-to-rule, sabotage or any other
activity having the eIIect oI hampering normal production. Plus a double whammy iI they
The MBAs can`t conceive unionised workers who also want to raise production outputs

didn`t sign, they`d be considered on strike. The workers have reIused, demanded their 49
colleagues` reinstatement and held regular demonstrations.
WRKER$ REC&T how strikes have hit the Haryana automobile belt over the years.
There was a police action on a Honda workers` demonstration in 2005. Hero Honda saw 3,000
workers doing a Iive-day occupation the next year. Rico Auto Iaced a 43-day strike in 2009 that
also hit General Motors` production in the US.
Most observers say that the conditions in Maruti Suzuki are not that diIIerent Irom other
companies. But the Manesar workIorce is an anomaly. The plant started in 2006, so most oI the
labour is still new in its servitude. Almost all the men are under 25, unmarried and recent
graduates Irom an Industrial Training Institute (ITI) in their part oI India. Facts they hold up
Irequently with the line: 'We can`t be pushed to go back to work because we`re not worried
about children or house loans.
As importantly, the wedge between permanent and contract workers hasn`t solidiIied here as it
has in older plants, where both groups work together Ior massively disparate pay Ior the same
work. Hence the unique scene in Manesar where both groups are agitating in solidarity. Says J
John, a Delhi-based expert on labour issues, 'What is oI concern is that 60-70 percent oI this
sector`s workers are labelled contract workers, trainees and apprentices. Companies use the
Ireedom oI contract labour to continuously replace workers through the system. They are
bringing in a new culture where negotiations are with individual workers, not collectives.
Most oI the workers are like Bittu, still a bit astonished that this is his youth. Bittu grew up in a
Iarming Iamily in Narwana, Haryana. He and his two Iriends wanted to be teachers but he
couldn`t aIIord the training course and opted Ior the one-year ITI course. At ITI, everyone
dreamt oI companies like Honda and Maruti Suzuki. 'II only someone had told me what it`s
really like, he now rues. 'I persuaded two cousins recently against Iollowing me. I made them
go into other courses. Or take Sonu Nehar, an assured rebel who`s worked here Ior Iive years
and says, 'My wiIe is the principal oI a private school in Gurgaon. We can Iight Ior a better
Iuture.
Why are these Sonus and Bittus standing so determinedly against the mighty Maruti Suzuki`s
record oI dealing with worker unrest? Sonu Gujjar shrugs. 'I grew up 20 km Irom here, he says.
'My parents are small Iarmers. My uncle is a major in the army. Another is Iairly high-up in
Delhi airport security. I talked it over with all oI them. They said: II thousands are willing to
trust you, don`t let them down.' You get a better hint Irom Joginder Singh, a 28-year-old and
one oI the Iew workers with children, who says, 'My wiIe and I talked it over. We decided we`re
young enough to Iight this. What do we have to lose? II we win, we don`t have to be slaves any
anymore. II we lose, I`ll Iind work somewhere else. This is the nub that nobody outside the
protestors` tent seems to see. The workers will Iind other work, perhaps even change industries.
Many secretly welcome the prospect. But even iI Maruti Suzuki replaces its Manesar workIorce
with a new one, as it is threatening to do, how will it ensure that its new workers also young,
educated, unmarried and with nothing much to lose will not also eventually agitate Ior a
separate union? The Iight will be determined by who caves in Iirst. For now, the workers say
they are ready Ior the long haul. They invoke Gandhi Irequently, oI how young Bhagat Singh
was when he died. And suddenly you get a glimpse oI India`s Iamed demographic dividend.
Young people who have enough selIworth to decide that the Maruti Suzuki Way oI LiIe` is
subhuman.
Why is the company reIusing to even acknowledge the need Ior a structural solution
improving worker conditions and admitting their right to organise? Maruti Suzuki Chairman RC
Bhargava reassured the company`s AGM this month: 'The Manesar labour problem is
essentially a political issue and not a problem which involves any signiIicant demand Irom the
workers. Similarly, Suzuki Motor Corporation Chairman Osamu Suzuki, on an India trip this
month, told MUKU representatives: 'Indiscipline is not tolerated. not in Japan, not in India. It
is never in the interest oI any company and its people. From top down, the entire corporation is
now parroting its emperor`s brush-oII about indisciplined` workers.
As this goes to press, the Suzuki Powertrain plant and the motorcycle plant have also struck
work in solidarity Ior their assembly line comrades in Manesar. The company`s core crisis team
is scrambling to manage these unanticipated eruptions. J John comments, 'We should ask iI the
person producing a product is denied living wages and human rights. Who is producing this car
that I`m buying, and at what cost? This is the structural corruption oI companies that squeeze
heavy margins by keeping their workers unorganised and unempowered, by keeping them
inIormal hostages. It makes us all who work in and consume these companies` products
complicit with their decay.