Wednesday, 2 November 2011

Maruti Suzuki to help vendors overcome rising yen problem




Maruti Suzuki India Limited has decided to set up the discussions with its vendors so as to reduce their exposure to rising yen. The company along with its vendors will decide upon the suggestive measure to indigenize the production of auto components.

Maruti Suzuki Chairman, Mr. RC Bhargava says “Our production is 95%-96% however our vendors are working on 75%-80% Local content, rest 20%-25% components is imported”. This effect of fluctuation in currency is later on passed to Maruti Suzuki and this Increases the total payout from Maruti’s basket.  Apart from Increase, Maruti also needs to pay the royalty, which is 6% for Q2 of FY11-12. The Royalty paid by Maruti for Q2 FY10-11 is 5.5%. These Increases add on to the total payout by Maruti which leads to decrease in profitability of Maruti.

Meanwhile, “Maruti has also started hedging the Japanese currency”, says Mr. Ajay Seth, Chief Financial Officer, Maruti Suzuki India Limited. 

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