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Old 24th July 2013, 06:58   #1
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Default Maruti Suzuki threatens to shut down Manesar Plant

Maruti Suzuki has threatened to shut its key Manesar plant in Haryana as it faces the prospect of paying additional compensation — worth over Rs 500 crore —for the 600-odd acres of land where the plant sits. The threat is significant as Maruti makes blockbuster models like the Swift hatchback and Dzire sedan at Manesar, which is also its sole base for making diesel engines.

Manesar is one of the most crucial facilities for Maruti, as well as for the global operations of Japanese parent Suzuki. Against the carmaker's first factory premises in India which came up at Gurgaon in the early eighties, the Manesar facility is relatively new and adopts modern processes for making cars. Maruti currently churns out 5 lakh cars annually from the Manesar set-up, which is set to eventually rise to 7.5 lakh.

What could be troubling for Maruti is the fact that the Supreme Court found "merit" in the landowners' plea that they should be paid a compensation even higher than the Rs 37.40 lakh awarded by the High Court in 2011.

The counsel for the landowners had said that the High Court judge had committed "serious error" by not considering various facts that could have seen the compensation amount go much higher —even more than double — to the Rs 37.40 lakh amount awarded. "By making deduction of 50% towards development cost and granting annual increase of 12/15% (cumulative), market value of the land will be much higher than Rs 37.40 lakh per acre."

More details on the following link:
http://timesofindia.indiatimes.com/b...w/21292868.cms

This can be quite a concern both for the company and the employees of the company!! Wonder what can Maruti do in short term? And is the demand from Landowner legitimate?
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Old 24th July 2013, 07:32   #2
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Default re: Maruti Suzuki threatens to shut down Manesar Plant

This is bad news, takes you back to the Tata Nano plant in West Bengal, Tata had to take a huge hit because of choosing to relocate to Gujarat, it delayed the Nano launch, they had to set up a make-shift facility in Pant Nagar and it pushed up the price of the car, they also had to use a lot of innovative methods to move the plant and machinery from West Bengal to Gujarat

Manesar is the bread and butter and the future of Maruti, either the Company is deeply hurt by the developments of this is one of them black mail tactics they are using to get a better deal for themselves
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Old 24th July 2013, 07:47   #3
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If the Supreme Court has found merit, then there should be something to it.

Maruti has been the most successful auto company since a long time and can surely afford the compensation demanded many times over.

'Why should or shouldn't Maruti pay?' Is for the SC to decide. Maruti should create a separate reserve from their revenues specially for this contingency. Need more details to opine if landowners are justified in asking a better price.
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Old 24th July 2013, 08:03   #4
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Default re: Maruti Suzuki threatens to shut down Manesar Plant

Moving the factory elsewhere or shutting down the factory will cost lot more to the company than mere 500 crores. I think it is a bluff.
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Old 24th July 2013, 08:48   #5
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Default re: Maruti Suzuki threatens to shut down Manesar Plant

Corporate saber-rattling. It's probably counterproductive contemplating which side is right in such cases. Ideally, such situations are rare in more mature economies.
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Old 24th July 2013, 13:03   #6
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Default re: Maruti Suzuki threatens to shut down Manesar Plant

Well I am not well versed with the details of the case, however, I certainly feel that -
  1. For the Supreme court to find merit in the landowners' claim is reason enough to pay
  2. The Landowners themselves are driven by greed - but who would not want to make a few extra bucks if the supreme court of India agrees that this is the right thing to do - actually, most would not mind even if the SC thought otherwise
  3. The kind of policy decisions taken by the current government such as doubling CNG prices effective Apr2014 is atrocious and does not do any favors to the existing business climate in the country
  4. lack of vision and ability to think about any aspect that would not result in electoral or corrupt monetary benefits seems to be the order of the day and there is little the ordinary citizens can do to change this other than exercising franchise next year
  5. should Maruti persist with the bluster, I am not sure if SC or the government would be able to contain or manage the fallout of the thousands that would be rendered jobless not only directly, but indirect as well through ancillaries and other services.
  6. It would be in the best interests of all parties concerned to settle this out of court in an amicable manner quickly with minimal disruption to business

Last edited by INNOVATOR : 24th July 2013 at 13:07. Reason: spell corrections
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Old 24th July 2013, 18:37   #7
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Default re: Maruti Suzuki threatens to shut down Manesar Plant

If Maruti says that they will have to close the Manesar plant, who will be at loss? It wont be only Maruti , but there'll be so many job losses which might affect the coming 2014 elections. So, its the govt that they are targeting. They cant blackmail the apex court as it'll do what's correct and will not care about job losses or anything which comes as a by-product of the case.

And land acquisition is not always clean, just think of the money involved, 600 acres*30 lakh/acre. Its too much for any organization and Maruti is one such organization. Any private/public company is not for the welfare of people but for making money. They provide service for which they charge and make money, its as simple as that. For providing service, they need people , so they create jobs, but in the end, they have to make money.

Probably what might happen is out of court settlement of the supreme court gives verdict against Maruti.
I don't think that Maruti can even think of shutting down there bread and butter.
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Old 24th July 2013, 18:55   #8
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Default re: Maruti Suzuki threatens to shut down Manesar Plant

Quote:
Originally Posted by GrammarNazi View Post
Maruti has been the most successful auto company since a long time and can surely afford the compensation demanded many times over.
I'm sure that's why its being targeted.

I don't know the details of the agreement but the numbers look really high! Does not seem fair to me.

http://machinist.in/?id=2319&Itemid=...tent&task=view
- the plant opened in 2007. Clearly maruti must've had the land acquired atleast 3-4 years prior. right? 37.4 lakhs for land acquired then.

Mind you, even in 2011, Gurgaon district (much better location) got 55 lakh/acre - so a retrospective settlement for 37.4 looks okay prima facie to me. http://articles.timesofindia.indiati...z-ka-meo-mewat
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Old 24th July 2013, 20:58   #9
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Default re: Maruti Suzuki threatens to shut down Manesar Plant

The last couple of years have seen Maruti facing lots of problems in Haryana, whether it is HR related or production issues. Most importantly opting for a new plant in a separate place is even more costlier and requires massive investment which will throw their balance sheet in disarray in the short term.
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Old 24th July 2013, 22:55   #10
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Default re: Maruti Suzuki threatens to shut down Manesar Plant

Quote:
Originally Posted by phamilyman View Post
I'm sure that's why its being targeted.

I don't know the details of the agreement but the numbers look really high! Does not seem fair to me.
Another possible side of story is that elections are nearing and parties need money for their campaigns. No denying that most of the times the real story is never known to common man!

It looks like Maruti is trying its first line of defence by means of threatening Plant call off to see if that has an impact on the decision else if not then they will be better off paying the additional amount indicated by Supreme Court.

That said it should not be also a practice as emerging economy like India has lots of loopholes and now government at times are waking up a bit too late and want to impose retrospective taxation/real land price for a land acquisition done long back.

We can only wait and watch at the moment and indeed hope there are no extreme steps (for employees)
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Old 25th July 2013, 10:57   #11
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Default re: Maruti Suzuki threatens to shut down Manesar Plant

Is the Maruti plant already shutdown ?

I have booked my car and waiting and just came to know from my SA that the plant has stopped production but my car has been already dispatched so not much of a impact.

I was thinking Maruti is only threatening to close !!
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Old 25th July 2013, 12:05   #12
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Default re: Maruti Suzuki threatens to shut down Manesar Plant

This seems to be a clear case of public posturing and with the threat looming at large, the government of the land would hopefully act and quell any potential standoffs between the company and the land owners.

Also if they plan to move it would be only after the Gujarat plant opens up since the car production cannot storp. We have to see who will blink first in this issue.
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Old 25th July 2013, 12:48   #13
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Default re: Maruti Suzuki threatens to shut down Manesar Plant

Quote:
Originally Posted by GrammarNazi View Post
If the Supreme Court has found merit, then there should be something to it.
Supreme Court is also run by humans. Not by God. And no human on this planet is hundred per cent clean.
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Old 25th July 2013, 13:17   #14
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Quote:
Originally Posted by pgsagar View Post
Supreme Court is also run by humans. Not by God. And no human on this planet is hundred per cent clean.
Please don't misunderstand my view. If the SC has found some merit, they are well qualified to take a relook at the case. Anyway, going by the same logic as you stated, wouldn't you agree that the HC could've overlooked/not considered some part of the case wrt the legal interpretations that would've justified the land owners stand better?

(Clean? Are you suggesting we question the integrity of the SC judge?)

Last edited by GrammarNazi : 25th July 2013 at 13:29.
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Old 25th July 2013, 13:59   #15
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Default re: Maruti Suzuki threatens to shut down Manesar Plant

Quote:
Originally Posted by GrammarNazi View Post
Please don't misunderstand my view. If the SC has found some merit, they are well qualified to take a relook at the case. Anyway, going by the same logic as you stated, wouldn't you agree that the HC could've overlooked/not considered some part of the case wrt the legal interpretations that would've justified the land owners stand better?

(Clean? Are you suggesting we question the integrity of the SC judge?)

Well, I have heard of some skewed judgements. I don't know what is at play there. Integrity or bias or favoritism or plain misjudgement. Coming to landlords, most of them are extremely greedy bunch. Today they sell you land at a price and if tommorrow the price increases, they demand more. I thought once you sell, it is over between you and buyer.
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