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Maruti Parts Suppliers Face the Risk of Being Dropped

By Motortrend India Staff   |   25 August,2010

Maruti Suzuki India has said that it may cut parts makers who are unable to pay for expansion as an industry-wide components shortage damps auto production in the country.

“Without strong balance sheets and resources, it will be impossible for partsmakers to expand at the same pace as Maruti,” Chairman R.C. Bhargava said. “We have told suppliers that either they ensure that they strengthen their balance sheets or face the risk of being dropped.”

MSI and Hyundai India are among the leading carmakers who have introduced waiting lists in India as shortage of components such as tyres, bumpers and batteries affect production. Local component makers are struggling to expand as debt levels are as high as Asian suppliers. Many Indian suppliers fell in the grip of debts by making overseas acquisitions or adding capacity at local plants just before the downturn.

Maruti has waiting lists of as much as a month for Swift hatchbacks and Dzire compacts. The overall car market has expanded more than 30 percent this year.

“The inability of even one or two suppliers to deliver parts on time affects not just Maruti but the entire supply chain,” said Vaishali Jajoo, an analyst with Mumbai-based Angel Broking. “Maruti needs to work with suppliers to resolve this issue.”

MSI will cooperate with parts makers but would not offer any financial assistance.

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