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The auto industry is going through what is possibly the worst lean phase in decades. Low demands and poor sales across the country have cause excess inventory. One if the country's largest four wheel manufacturers, Maruti Suzuki, is planning to operate just one shift at all its production plants.
According to The Economic Times Auto, the automaker that sells one in every two cars on the roads is thinking of operating a single shift even at it's Manesar plant, which is likely join the Gurugram and Gujarat facilities in operating below capacity.
The Manesar plant has a yearly capacity of 7.5 lakh units and produces the Ertiga, the Wagon-R, the Swift, the Dzire and the Baleno models of cars.
Production cuts and reduced operations have resulted in hundreds of job losses for contractual staff. At this point, more jobs are at risk with all production facilities moving to a single shift.
Maruti Suzuki did not make a statement about realignment of production schedules at its plants that will negatively impact sale volumes and jobs.
Nissan announced a global layoff affecting 12,500 jobs last month, and about 1,786 of these positions are India based.
Passenger car sales in India have reduced continuously, and July witnessed the worst drop in figures in over two decades. Monthly car sales have dropped for nine months in a row, dropping in 12 of the previous 13 consecutive months.
Kotak Institutional Equities dropped the earnings forecast for Maruti Suzuki by 10 to 18 per cent over the financial year 2020-21, driven by 6 to 9 per cent cuts in volume estimates. The firm believes that volume growth for the industry is likely to remain challenging in FY20 due to the larger slowdown.
They also feel that significant increase in car prices from regulatory changes like new safety and emission norms has a crucial role to play. Similarly, Credit Suisse cut volume and margin estimates for financial years 2020 and 2021 resulting in 15 per cent and 9 per cent EPS cuts, respectively.
Maruti Suzuki has been making periodic shutdowns at different plants to adjust production. The company has planned a three days of shutdowns during August this year. Sources say that these cuts were not in the original output schedule. In addition, Maruti Suzuki has cut production by 10 per cent for the current financial year.
Thoughts About Maruti Suzuki Planning To Operate One Shift Across All Facilities
This is bad news. Not for the manufacture per say but for the common man. Any slowdown is a result of government idocracy - something the India government is rather great at. New rules and regulations being implemented at the pace they are being done at the moment was at some point going to come back to bite. We hope things sort themselves out soon and that working folk don't have to lose jobs over this.