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UPDATE 1-India's Maruti to offer early retirement to workers

(Adds details, background)

NEW DELHI, Sept 18 (Reuters) - India's largest carmaker, Maruti Udyog Ltd , a unit of Japan's Suzuki Motor Corp, will offer an early retirement plan to employees this fiscal year to improve competitiveness, the company said on Thursday.

The automaker, which has a dominant 50.7 percent share of India's domestic new car market with its small, low price cars, said in December it planned to cut production costs by half over the next three years to boost profits and battle competition.

The New Delhi-based firm said in a statement its board had approved the proposal to introduce the voluntary retirement scheme on September 17.

The scheme will be offered in two phases in the current fiscal year to March, 2004 to all permanent employees.

"The company has formulated an attractive scheme and the payback period is expected to be a little over two years," it said.

Even though Maruti dominates India's new car market it has faced fierce competition in the past five years from the Indian units of Hyundai , Fiat , and Ford as well as local firm Tata Motors Ltd .

Three years ago, it sank to its first ever loss in its 20-year history, owing to rising costs and falling sales but rebounded to post a profit the following year helped by sharp cost cuts and huge productivity gains.

Maruti last offered a voluntary retirement plan in October 2001, for which 1,050 employees or 19 percent of its total work force had opted.

The statement said that scheme, on which the company spent 736 million rupees ($16 million), helped improve productivity.

The firm, which makes 10 models in India and imports one fully built, had 4,590 employees at the end of the past fiscal year to March, 2003.

It sold 362,253 vehicles that year, up 2.9 percent from the previous period.

Its sales in the first five months of this year were up 40.6 percent to 177,925 vehicles, spurred by a tax cut more than six months ago and falling interest rates. ($1 = 45.975 rupees)