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Production at Maruti’s Manesar facility halts temporarily
Maruti has temporarily halted production at its Manesar facility due to labour problems.
Management has suspended ten workers, while five have been dismissed and another six
trainees have been discontinued from training for sabotaging the production and
deliberately causing quality problems in the vehicles produced at the plant last week.
Maruti has further enforced workers to sign a good conduct bond, promising they would
not sabotage production, resort to go-slow tactics or otherwise hamper output at the plant.
This is the third time that the production has been disrupted at the Manesar facility since
June 2011. Manesar plant which rolls out ~1,200 vehicles/day has seen the production
levels falling to 600-700 vehicles/day partly because of go-slow strategy adopted by some
workers. Management has adopted a tougher stance this time round and is looking for a
longer term resolution of the issue. We expect the near term impact of the strike to be
limited given that the channel inventories are at comfortable levels and also the demand
scenario remains subdued. However, if the strike is prolonged, it could impact the supplies
ahead of the festival season. At `1,080, the stock is trading at attractive valuations of
10.8x FY2013E earnings. Owing to the recent correction in the stock price, we recommend
Buy rating on the stock with a target price of `1,300
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Production at Maruti’s Manesar facility halts temporarily
Maruti has temporarily halted production at its Manesar facility due to labour problems.
Management has suspended ten workers, while five have been dismissed and another six
trainees have been discontinued from training for sabotaging the production and
deliberately causing quality problems in the vehicles produced at the plant last week.
Maruti has further enforced workers to sign a good conduct bond, promising they would
not sabotage production, resort to go-slow tactics or otherwise hamper output at the plant.
This is the third time that the production has been disrupted at the Manesar facility since
June 2011. Manesar plant which rolls out ~1,200 vehicles/day has seen the production
levels falling to 600-700 vehicles/day partly because of go-slow strategy adopted by some
workers. Management has adopted a tougher stance this time round and is looking for a
longer term resolution of the issue. We expect the near term impact of the strike to be
limited given that the channel inventories are at comfortable levels and also the demand
scenario remains subdued. However, if the strike is prolonged, it could impact the supplies
ahead of the festival season. At `1,080, the stock is trading at attractive valuations of
10.8x FY2013E earnings. Owing to the recent correction in the stock price, we recommend
Buy rating on the stock with a target price of `1,300
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