(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own)
By Jeff Glekin
MUMBAI, July 20 (Reuters Breakingviews) - Suzuki's Indian
flagship is beset by labour unrest. Problems at the
Japanese carmaker's Haryana plant also echo squabbles at Tata
Motors in West Bengal. But an enterprising Gujarat may
come to Suzuki's rescue as it did for Tata.
Suzuki's Indian venture should be a source of pride. The
Japanese automaker was the first foreign player to make an
impact through its 1981 joint venture with government-owned
Maruti. Suzuki now owns over 50 percent of the equity,
with the government having sold its entire stake in 2007. And
the company is the nation's market leader with its India-listed
business valued at close to $6 billion. But it has been dogged
by labour disputes.
This week a riot at its Haryana factory saw a personnel
manager die and around 100 employees, including two Japanese
nationals, injured. And the horrific episode is not a one-off.
Labour unrest cost the company more than $500 million in lost
production in 2011.
India can ill afford its automotive sector to slump. It's
one of the few success stories in Indian manufacturing. With no
caps on foreign direct investment, new entrants have spurred
competition and exports already make up 15 percent of output.
The problems for Suzuki have some parallels with a Tata
Motors saga of 2008. Two years of agitation by farmers over land
compensation halted production at the original plant in West
Bengal, and was only resolved when Gujarat's Chief Minister
Narendra Modi famously convinced Ratan Tata to shift the factory
to his state. Modi is now on a similar mission with Suzuki. He
flies to Tokyo this weekend in an effort to get then to shift
production to Gujarat.
Such competition between states is useful. It can help to
keep in check the political forces which tend to make some
sectors uncompetitive. And it may be just the fix Suzuki needs.
But there is risk that it will further fuel inequality between
India's industrial hubs and its under-developed hinterlands.
- A riot at a northern factory of Indian carmaker Maruti
Suzuki, which is majority owned by Tokyo listed Suzuki Motor
Corp, shut the plant on July 19 and inflicted the biggest loss
on its share price in almost two years.
- Labour unrest at the factory, where the trade union has
accused India's biggest car manufacturer of anti-worker and
anti-union activities, cost the company more than $500 million
in lost production in 2011. Wednesday's trouble flared after a
disciplinary incident against one employee. Company officials
say workers began to attack senior management during
discussions, while the union said its representatives were
attacked first. Human resources manager Awanish Kumar Dev was
burned to death during the riot, and the Japanese manager of the
factory was also attacked, the company said.
- Shares in Maruti Suzuki, whose sales fell 11 percent in
the fiscal year to March partly as a result of the protracted
strikes, fell 8.9 percent on July 19, their biggest daily
percentage drop since July 26, 2010. Suzuki shares closed down
3.8 percent in Tokyo, at their lowest level since February 2009.
The Chief Minister of Gujarat, Narendra Modi is leaving for
Japan on Sunday with the aim of convincing Suzuki leadership to
substantially scale production at its Gujarat plant from the
existing 250,000 cars every year, India's Business standard
reported on July 20.
- Reuters: Maruti faces costly shutdown after deadly factory
- For previous columns by the author, Reuters customers can
(Editing by Robert Cole and David Evans)