labels: passenger cars, maruti udyog
MUL for improving profitabilitynews
Our Correspondent
01 October 2001

New Delhi: Maruti Udyogs loss for the year 2001 has now been confirmed. The company has declared a loss of Rs 269 crore on a turnover of Rs 9,523 crore for the fiscal year 2001.

MULs chief concern this year has been on improving profitability. Though in the past two years its concern has been much the same, it has been trying to attain profitability by increasing revenue. This has been through a number of new product launches, like four new car models in a span of two years.

While the companys policy will be no different in the future regarding new launches - more cars can be expected from the Maruti stable every year, according to a senior Suzuki official - the company is now also trying to control costs.

Maruti has attacked the cost problem in two ways.
While the latest is the announcement of a voluntary retirement scheme, which will prune its 5,700-strong workforce by around 20 per cent, earlier this year the company had made some drastic changes in its human resources policy.

It decided to link pay packets of all executives and managers to their performance. The company did this in the hope that this would lead to enhanced performance and improvements in productivity, ultimately leading to reduced costs.

Performance-linked pay packets
Early this year, as part of its stress on cost cutting and improving employee productivity, MUL made certain changes in its new human resources policy. It decided to link pay packets of all executives and managers to their performance.

Earlier, though the company had a performance-based factor of about 30 per cent in the compensation package for executives, the company had decided that in addition to the hike in individual perquisites, increments to even the basic salary would depend on the employees performance during the year.

The new compensation system affects over 1,000 employees - executives and senior- and middle-level managers.

Preceding the setting up of the new remuneration system, the company has developed a new performance measurement and development method along with the well-known consultant M B Athreya. The performance measurement process is meant to complement the new remuneration system.

Sources at the company said rather than appraise employees through confidential reports, the new performance measurement system involves an interactive process of goal setting, review and counselling by managers throughout the year. It incorporates qualitative aspects, along with quantitative targets.

The new system, which will take effect from this year, is expected to help enhance managerial performance and skills, while making the organisation more capable of assessing its costs and returns. The move is also indicative of the company's renewed stress on increasing per employee productivity.

Earlier this week, MUL announced its first-ever VRS, aimed at pruning about 1,000 employees - shop-floor workmen and office staff. The VRS will be open for a month. About 40 people are reported to have opted for the VRS on the day it opened.

While it is undoubtedly a cost cutting exercise, many also view it as MULs first step towards divestment of the governments shareholding. The government holds around 49 per cent share in Maruti Udyog, while Suzuki Motor Corporation of Japan owns 50 per cent. An employees trust holds the remaining stake.

The company hopes that the VRS will reduce the workforce made redundant by computerisation and introduction of robots.

Maruti has not given any targets about how many employees it expects would take the VRS, but estimates are that if 500 of Maruti's 6,500-odd-strong workforce take up the VRS, the company will have to pay about Rs 30-40 crore, translating to about Rs 6-8 lakh per employee.

Maruti is estimating that the VRS will start to pay back in three-to-four years on the company's wage bill, currently estimated at about Rs 220 crore per year.

The company mooted the VRS on the back of last October's strike by workers who demanded better wages and incentives.


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MUL for improving profitability