Maruti doubts making profit this year

Faced with increasing competition, Maruti Udyog Limited managing director Jagdish Khattar on Monday conceded that the company is finding it difficult to even make profits this year.

''This year we are working very hard to even make profit. There is no getting away from the fact that the next couple of years are going to be extremely difficult,'' Khattar said in a circular issued to MUL employees.

He further stated that implementation of the union's demands would make the company vulnerable to further erosion in marketshare.

Terming the union's demands for improved benefits as not in the long-term interest of the company, Khattar said, ''The company can ill-afford a commitment of huge financial implication ranging from Rs 510 million to Rs 600 million per year.''

Based on the proposed increase of incentives, the cost of employee per year will increase from the present Rs 272,000 to Rs 458,000 at 2 per cent productivity improvement and to Rs 476,000 with 6 per cent productivity improvement. This, he said, does not include the annual increase and the wage agreement on the anvil.

Stating that such a huge increase was unheard of in the industry, Khattar said, ''In the present market scenario, we would become vulnerable and weak and the major international players would find it easier to take away more of our marketshare and threaten our leadership as out ability to further invest in modernisation and new models would become extremely difficult.''

This is the first time that the managing director of the country's largest carmaker has openly admitted the fact that competition was eating into its marketshare and the company was finding it difficult to record profits.

MUL has already invested in expanding capacities and even borrowed from the market, which together are casting a shadow on the company's bottomline.

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