Suzuki Motor Corp. (7269)’s Indian unit, which sells almost half the cars in the country, said second- quarter profit dropped the most since December 2008 as a workers strike at a factory disrupted production.
Maruti Suzuki India Ltd. (MSIL)’s net income fell 60 percent to 2.4 billion rupees ($49 million) in the three months ended Sept. 30 from 5.98 billion rupees a year earlier, the New Delhi-based company said in a statement today. That is the smallest profit since the quarter ended December, 2008, missing the 4.1 billion- rupee median of 24 analyst estimates compiled by Bloomberg. Sales fell 16 percent to 75.4 billion rupees.
A 33-day strike at the company’s Manesar factory near New Delhi halted output of Swift compact cars, while Chairman R.C. Bhargava said on Oct. 19 that each day of the protests resulted in a production loss of about 570 million rupees. Higher interest rates and fuel prices have increased the cost of ownership by as much as 4 percent, damping demand for automobiles, he told reporters in New Delhi today.
“This has not been a good quarter for Maruti,” Bhargava said. The increase in costs “is a substantial burden on our customers. The labor dispute also caused a loss of production,” he said.
Looking Elsewhere
The board of directors today approved buying as much as 1,400 acres of land for future expansion in the western state of Gujarat, where General Motors Co. (GM), Tata Motors Ltd. (TTMT) and Ford Motor Co. have plants, according to the statement. Vehicle sales at the company fell 21 percent in September.
The Manesar factory resumed production this month. Separately, workers at Suzuki Powertrain India Ltd., which supplies engines and transmissions to Maruti Suzuki walked off their jobs in September at a plant in Gurgaon, near New Delhi, for two days.
The strike at Maruti came as Indian carmakers in Asia’s third-largest automobile market cut their sales forecasts for a second time this year. The Reserve Bank of India has raised rates 13 times since mid-March 2010 in a country where about 80 percent of purchases are funded by loans. Sales of Maruti’s best-selling Alto small car dropped 20 percent in the quarter.
“Until interest rates are high, new buyers will be averse to spending money on cars,” said Umesh Karne, an analyst with Brics Securities Ltd. in Mumbai. “When rates start coming down, we will see demand picking up.”
The Society of Indian Automobile Manufacturers lowered its growth forecast to as low as 2 percent in the year ending March 31, S. Sandilya, president of the industry group, said in New Delhi on Oct. 10. In July, the Society said it expected sales to rise 10 percent to 12 percent.
Shares of Maruti fell 2 percent to 1,126 rupees in Mumbai yesterday. They have declined 21 percent this year, compared with a 13 percent drop in the BSE’s benchmark Sensitive Index.
To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
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