NEW DELHI, Dec 20 (Reuters) - India's largest carmaker, Maruti Udyog Ltd, a unit of Japan's Suzuki Motor Corp , plans to cut production costs by half over the next three years to boost profits and battle growing competition.
The automaker, held 45.54 percent by the Indian government and poised for an IPO later this fiscal year, fought back to profits in 2001/02 (April-March) from its first ever loss in the previous year caused by falling sales and rising costs.
"Your company has drawn up a blueprint for action after benchmarking itself against the most competitive car companies worldwide," Maruti said in its 2001/02 (April-March) annual report obtained by Reuters on Friday.
"The objective of this exercise is to reduce manufacturing cost per vehicle by 50 percent over the next three years up to March 2005".
Even though Maruti still has a 49 percent slice of the car market owing to its dominance of the small car segment, this is down from over 80 percent four years ago due to competition from new entrants -- Hyundai and Fiat and domestic firm TELCO.
Slowing sales and higher costs pushed it to a loss of 2.69 billion rupees ($56.1 million) in the year to March 2001 but it rebounded to a 1.045-billion net profit the following year helped by sharp cost cutting and big productivity gains.
The New Delhi-based firm, which makes 10 models in India, said overall warranty cost fell 13 percent in 2001/02 from the previous year and the average defects per vehicle by 80 percent.
The annual report also showed its operating profit margin, a key measure of efficiency, improved to 3.4 percent in 2001/02 from minus 2.7 percent in the previous year.
But sales of some of its older models have been hurt by new model launches by competitors.
Its sales in April-November, the first eight months of this financial year, dropped 0.83 percent to 221,811 vehicles, recovering in the past four months after it cut the price of its largest-selling car by up to nine percent in July.
The government plans to sell 20 percent of the carmaker's stake to the public as part of its privatisation drive before April 2003.
Suzuki holds 54.2 percent stake in the carmaker which competes with 10 others in a market that is forecast to grow 10 percent annually this decade. ($1 = 48 rupees)