Maruti says human resources biggest block to car industry

Shinzo Nakanishi feels the biggest bottleneck to growth for India’s passenger car industry may be human resources.

The managing director of Maruti Suzuki India has made the observation even as his company battled unprecedented labour unrest at Manesar. A 13-day strike in June here led to production loss of 12,600 units and revenue loss of Rs720 crore.

In a market where capacity constraint is widespread, deft handling of manpower issues is gradually becoming critical for the entire automobile industry. Maruti is anyway looking to set up a new manufacturing plant, which will require large numbers of workers, so that manpower issues are expected to remain at the forefront of company strategy in the near future.

“Good talent is critical for technology absorption, quality manufacturing, cost management and customer-friendly practices,” Nakanishi wrote, addressing shareholders in the annual report for 2010-11.

Referring to the recent strike, chairman RC Bhargava reiterated the company’s commitment to developing the potential of its manpower resource “as that really creates a win-win situation not only for the employees and the company but for all the other stakeholders. We did have an unfortunate situation developing in Manesar in June 2011, and are determined to learn from this and re-double our efforts to create a mutually productive and beneficial relationship with our workers there”.

Meanwhile, Nakanishi went on to pinpoint the unpredictability of the passenger car market and how, unlike in the past, merely achieving economies of scale and improving productivity may not suffice to deal with a cyclical market.

“Though there are projections of good growth of the Indian car market in the medium to long term....there are challenges for the industry also. The market will be subject to economic cycles, and knowing its sensitivity to fuel prices and interest rates, can have huge fluctuations. Competition will intensify and predictability of volumes and product mix will be increasingly challenged,” he said.

Recognising the threat of inflation, Nakanishi has warned against input cost hikes as well as increase in land, manpower, technology and energy costs. He also has a word of advice for his component suppliers: “A large section of the component industry, particularly the second and third-tier suppliers, has to improve scalability, robustness in manufacturing and quality systems along with management bandwidth and R&D. This may require raising capital at reasonable cost.”

The managing director has also extended a helping hand to suppliers, saying his company will help the component industry in developing a reliable and robust manufacturing foundation for growth.

Insisting on increased localisation, Nakanishi has pointed towards increased costs on importing components from other markets.