Financial Daily from THE HINDU group of publications
Thursday, Mar 21, 2002
Corporate - Restructuring
Bid to rejig manufacturing processes -- Production stopped at one Maruti unit
NEW DELHI, March 20
MARUTI Udyog Ltd has stopped production at one of its three manufacturing plants and transferred most of its production facilities to the other two as part of its efforts to "reorganise manufacturing processes" in the next financial year.
A spokesman for the country's largest carmaker, however, said the Plant-III was not being closed; but instead the company was only making a reallocation to other plants as "manufacturing productivity has improved."
"This reorganisation will utilise production facilities across the three plants to achieve optimal results. With this, Maruti will take the first step towards its vision of being a world-class manufacturer by 2005," the spokesman told Business Line.
However, analysts raised questions about Rs 1,000-odd-crore investment made by Maruti in setting up this plant two-three years ago.
"The huge investment seems to have been made with an eye on the rising market conditions of that time. The depreciation and debt on account of this could be the reasons for the company turning a loss-maker last year," industry sources said.
"It now remains to be seen how Maruti would utilise these investments, whether it would utilise the plant for contract manufacturing of some Suzuki models or whether it would shut down the plant itself," they said.
The spokesman of Maruti, a joint venture between the Indian Government and Japan's Suzuki Motor Corp, however, said that the investment had not gone dud. "The paint and weld shop of the Plant-III will continue to remain operational. I am categorically stating that no plant is being closed," he said. The assembly shop is not working anymore.
Maruti was making the Baleno, Alto and the 800-cc cars in Plant-III.
After the new exercise, the Plant-I will make 800-cc, Omni, Gypsy, Versa and the Esteem while Plant-II will make the Zen, Alto, Baleno and the Wagon R.
The changes in production pattern will take effect from April and Maruti says it will result in significant cost savings to the company.
The spokesman, however, did not divulge the amount of savings that would accrue on account of this exercise. Nor would he disclose how much of the investment in plant and equipment would the company not utilise after the exercise.
Despite the changes, Maruti will still be able to produce more cars than its total installed capacity of 3.5 lakh cars per annum.
"Maruti will be able to produce more cars in 2002-03 than it produced in 2001-02," the spokesman said implying that the changes would not hurt total production.
The move was undertaken with an effort to make one model of car only at one plant, he said.
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