The Telegraph
Since 1st March, 1999
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Maruti brakes hard to cut bloated wage bill

New Delhi, Nov. 6: Maruti Udyog, the country’s largest car maker, today capped its wage bill by signing a new wage settlement package with its workers’ union.

The new wage package would cut the annual salary increase to 3.5 per cent from 9 per cent earlier. It will separate the dearness allowance currently linked with the basic wages and the consumer price index.

“With this wage settlement, Maruti’s normally high wage bill will be aligned closer to the market,” said the car-maker and added the dearness allowance will grow by a fixed amount every year.

The new wage structure also includes a one-time salary increase of 5.9 per cent, down from a 27.18 per cent one-time jump signed during the last wage agreement in 1996.

Maruti, held 54.2 per cent by Japan’s Suzuki Motor Corp, currently has an employee strength of 4,590. In the last financial year to March 2003, the car-maker had spent Rs 214 crore, or 2.36 per cent, of its operating income on wages and benefits.

The car-maker, which has a 50 per cent share of the car market, sold 3,62,253 units last year. It has embarked on a cost cutting exercise to increase profitability and beat back competition from recent entrants into the car market.

Maruti’s sales have zoomed since March after the budget cut excise duty or production tax on cars and utility vehicles to 24 per cent from 32, allowing car makers to reduce prices by over five per cent.

In the month of October sales rose 24.2 per cent to 33,455 vehicles while exports more than trebled to 5,260 units. For the first seven months of the current financial year, sales rose 31.6 per cent to 251,183 units from 190,940 in the corresponding period last financial year.

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