Maruti Suzuki likely to increase prices due to increased wage bill

Maruti Suzuki likely to increase prices due to increased wage bill

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Indian auto giant Maruti Suzuki’s trouble at the Manesar plant might out a direct effect on its customers. The analysts are expecting that the company might increase the prices of the cars so as to meet the rising wage bill.

The plant at Manesar partially reopened on August 21, 2012 and is planning to retain just the fifth of its workforce on contract. Maruti Suzuki has already sacked 500 workers saying that many of them could face criminal proceedings.

It is also expected to refuse employment to another 500 contractual workers once the process of regularising them begins on September 2, 2012. The plant at Manesar manufactures the best selling cars of the company like the Swift, Dzire, A Star and SX4 models.

So if 80 % of the work force of around 3,400 workers would be made permanent then it is obvious that the wage bill of the company would go up. Umesh Karne, the BRICS securities said, “We believe that the rise in costs due to hiring of permanent workers in place of contractual workers will be passed on to consumers”. There is also an increment expected at Manesar since wage negotiations was the cause of the deadly violence at the plant on July 18, 2012.The violence had led to a month long lockout at the plant leading to losses for the company.