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Maruti Suzuki India (MRTI.BO) Rs1,092.30
Equity Research
Maruti Suzuki - another agreement with striking workers, Neutral
News
On Friday Maruti Suzuki management announced a fresh tripartite
agreement between the Company management; Haryana Government and
the striking workers at Manesar. The company also said that normal
operations will resume at the Manesar plant on October 22.
Analysis
We make the following observations: (1) The announcement makes no
mention of the worker’s demands of forming a new Union but does
mention the setting up of a Labor Welfare Committee and Grievance
Redressal Committee comprising members of Maruti Suzuki management
and workers. (2) Management has agreed to take back 64 suspended
employees, while 30 can be suspended for disciplinary reasons under the
revised agreement.
Implications
As highlighted in our September 16, 2011 note, Labor concerns with
weaker demand and competition; stay Neutral, we believe recent labor
issues mark a new low in industrial relations at the company. Given the
volatile employee situation at Maruti Suzuki’s Manesar operations over last
few months, we believe that the risk of further labor disruptions cannot be
completely ruled out in the near term. We would look for more stable
production at the Manesar facility and at the vendor Suzuki Power Train
India facility over the next few months, before turning more positive on the
company’s production outlook in FY12E. Our earnings estimates, rating
and target price are unchanged. Key risks – higher/lower than expected
competitive pressure on pricing, inflation-rate cycle and commodity costs.
INVESTMENT LIST MEMBERSHIP
Neutral
Coverage View: Neutral
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Maruti Suzuki India (MRTI.BO) Rs1,092.30
Equity Research
Maruti Suzuki - another agreement with striking workers, Neutral
News
On Friday Maruti Suzuki management announced a fresh tripartite
agreement between the Company management; Haryana Government and
the striking workers at Manesar. The company also said that normal
operations will resume at the Manesar plant on October 22.
Analysis
We make the following observations: (1) The announcement makes no
mention of the worker’s demands of forming a new Union but does
mention the setting up of a Labor Welfare Committee and Grievance
Redressal Committee comprising members of Maruti Suzuki management
and workers. (2) Management has agreed to take back 64 suspended
employees, while 30 can be suspended for disciplinary reasons under the
revised agreement.
Implications
As highlighted in our September 16, 2011 note, Labor concerns with
weaker demand and competition; stay Neutral, we believe recent labor
issues mark a new low in industrial relations at the company. Given the
volatile employee situation at Maruti Suzuki’s Manesar operations over last
few months, we believe that the risk of further labor disruptions cannot be
completely ruled out in the near term. We would look for more stable
production at the Manesar facility and at the vendor Suzuki Power Train
India facility over the next few months, before turning more positive on the
company’s production outlook in FY12E. Our earnings estimates, rating
and target price are unchanged. Key risks – higher/lower than expected
competitive pressure on pricing, inflation-rate cycle and commodity costs.
INVESTMENT LIST MEMBERSHIP
Neutral
Coverage View: Neutral
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