Six reasons why labour unrest at Maruti this time is more worrisome

Business

oi-Sunil

By Sunil Fernandes

Updated: Thursday, July 19, 2012, 16:42 [IST]

The trend of strikes at Maruti Suzuki is now reaching worrisome proportions. Unless the company begins to resolve labour issues in a fiercely competitive market, it could lose market share, erode brand value and die a slow death. Here are a few reasons why labour unrest at Maruti could spell disaster.

* The passenger car segments is already passing through a difficult phase. There is a paradigm shift from petrol cars to diesel cars. Petrol cars have been the mainstay for Maruti over the years and a strike at this stage, when individuals are increasingly looking at diesel cars could cause grave problems for the company.

* Maruti shares have dropped 7% today, and there is a likelihood that investors may lose faith in the management of the company to solve labour disputes. Continuous erosion of market captalization is not in the company's interest.

* The company, has seen its market share in the Indian market decline below 40% in 2011-12 for the first time in its history. The automobile sector is fiercely competitive, prolonged period of unrest could lead to further erosion of market share, loss of brand equity and eventual losses.

* This is a fourth successive strike within a year. The company's plant at Manesar has already had strikes in June, August and October last year and there seems to be an inability of the management to stem the rot.

* Domestically, a pro longed period of strike has caused companies to go bankrupt. Ask Premier about it. Strikes are now becoming a trend at Maruti.

* This time the strike has assumed worrisome proportions with the death of an employee and injuries to as many as 40 employees. It seems the present strike is likely to be more prolonged.

GoodReturns.in