Maruti, Hero Honda On Cost Control

By By: Vicky.in

Published: Friday, February 18, 2011, 17:54 [IST]

The auto industry is facing lot of hardships in maintaining the price of its ranges, as a result of high input costs and commodity prices. The chief makers Maruti are said to have suffered a lot in their margins forcing them to go for alternative sources of compensation. They claim that they have incurred 20% fall in margin on year-on-year profit phase during the last quarter. They feel that they are under tremendous pressure to rise the prices effected by the cost rise in raw materials like copper, rubber, steel and plastic. Maruti"s managing executive officer of supply chain claimed that the company had to employ overdrive measures to manage the input costs. As a result, there are series of programs with the alliance from its dealers of 250 in number as well its plants. One of them is 'wuda" a Japanese equivalent for wastage linked to lean manufacturing, shaping the company to reduce wastages.

Another program is 'gemba" ensuring better handholding with the suppliers, when they are apprised of the wastage effect on production. The company identifies a group of such suppliers and teaches them the measures to save wastage in their own plants. In addition Maruti is focusing on yield management in a better manner. Maruti believes in the form of saving raw materials by reducing the wastage, under 1 component 1 gram concept. By this each supplier has to stick on to this method of reducing 1 gm in production. Maruti had effected the price rise to its ranges by 2.4% barring its fast selling Alto and justified its rise to meet the rise in input costs. Another hike though on the cards is yet to be announced. The need arises due to the inflation rates and increase in competition, said its CEO.

The same sort of measures are on witness in the camps of Hero Honda, said its CEO, who said the situation is so acute forcing the company to effect another hike to compensate the rise in inputs. With the rise of price in steel by 20-25%, he said, the company is on the scale of reduced profit margins. In order to get relieve this effect, the company is taking enhancement programs on action. As of now, he added, the company has just two options, that is to sustain the less margin or to pass the rise to the market directly. Hero Honda hiked the prices in December last and the ensuing rise may be on the same lines, he pointed out.

Article Published On: Friday, February 18, 2011, 17:45 [IST]

Read more on: #automobile market #cars #maruti suzuki

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