India's largest carmaker Maruti Suzuki has ruled out any lay-off or salary cut for its employees while also offering to help financially distressed component suppliers and dealers. "We are not looking at laying anybody off or reducing salaries," said R C Bhargava, chairman, MSIL. "We have also not received any specific request for help from either any vendor or dealer yet, but we are open to helping them out on a case by case basis. We have given some advances to vendors against supplies."
The company registered a 25 per cent decline in profit in fiscal 2020 and a steeper 28 per cent decline in the fourth quarter as sales declined by over 16 per cent during last fiscal. Its operating margin for the full year went down to 5.3 per cent and for the last quarter at just 4.2 per cent. The start to the new fiscal has not been very good with the company registering zero sales in the first month due to the lockdown. After more than 40 days, it restarted operations partially at its Manesar factory only on Tuesday.
"We hope to start the second line of production at the Manesar factory in the next few days while the production at Gurgaon should resume by 18-19th of this month. Production in Gujarat remains suspended as there are a few areas nearby which are red zones but we are in no hurry as the demand is also weak," Bhargava said. "So far, a third of our dealers are operational with 60 per cent of them in rural areas and we have been able to deliver about 2300 cars and received new bookings for 5000 cars."
The industry has been asking for a GST cut for the sector to lower prices and spur demand for vehicles. Cars and two-wheelers are in the highest tax bracket of 28 per cent while a surcharge of 15 per cent and above is applicable on bigger cars and SUVs. Bhargava, however, said reducing rates right now would serve no purpose and should be done only after production resumes in full swing.
"There is no point in speculating when we will get back to levels of 2018-19 or 2019-20. Car sales in big numbers cannot happen in a situation when the overall GDP is only growing by 1-2 per cent," he said. "A GST cut is needed but the timing has to be considered by the government. Right now production is stifled so even if prices come down it does not mean much because you do not have enough vehicles to sell. It will only make sense when production is in full swing and demand can be revived properly."