India's Maruti shares sink after deadly riot shuts car factory

MANESAR, India Thu Jul 19, 2012 7:46am EDT

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MANESAR, India (Reuters) - A deadly riot at one of Indian carmaker Maruti Suzuki's (MRTI.NS) factories in the north of the country shut the plant on Thursday, and inflicted on its share price the biggest drop in almost two years.

Hundreds of police have secured the 550,000-vehicle per year factory in Manesar, and have arrested 90 people after a mob tore through the plant on Wednesday, smashing property and burning parts of the facility beyond repair.

On Thursday, police combed through CCTV footage and interviewed witnesses as they searched for people they want to detain in connection with the violence in which a manager was killed, and scores of employees injured.

Labor unrest at the factory, where the union has accused India's biggest car manufacturer of anti-worker and anti-union activities, cost the company more than $500 million in lost production in 2011.

Wednesday's trouble flared after a disciplinary incident against one employee. Company officials say workers began to attack senior management during discussions, while the workers' union said its representatives were attacked first.

Human resources manager Awanish Kumar Dev was burned to death during the riot, and the Japanese manager of the factory was also attacked, the company said.

"Armed with iron rods and door beams of cars, the mob spread out in groups in the factory area and targeted supervisors, managers and executives... rendering many of their victims bleeding and unconscious," Maruti said in a statement.

"They also ransacked offices, broke glass panes and wantonly damaged property. Finally, they set the offices on fire," the company said, adding that it was cooperating with police and government authorities in the investigation.

The state government of Haryana, where the plant is located, has formed a special investigation team to probe the riot, with officers trawling through footage from the factory and interviewing managers and workers' representatives.

"There will be a thorough investigation. It is a very serious matter," Haryana police spokesman S.A.S. Zaidi told Reuters. "The investigation circle is very big."

Ei Mochizuki, a Tokyo-based spokesman for Suzuki Motor Corp (7269.T), which controls the Indian carmaker, said two Japanese employees had been hospitalized after the unrest.

The factory, which accounts for around a third of Maruti's total output, would remain closed on Thursday, the company said.

Shares in Maruti, which saw its sales fall 11 percent in the fiscal year to March, partly due to the protracted Labor strikes, fell 8.9 percent on Thursday, their biggest daily percentage drop since July 26, 2010.

Suzuki's shares closed down 3.8 percent in Tokyo to their lowest price since February 2009.

MURDER CHARGES

Iron rods and other sharp tools lay scattered outside the factory gate on Thursday, next to a burned out security building, as 1,200 police officers secured the site, around 40 km (25 miles) south of New Delhi.

Fifty management personnel and 9 police officers were injured during the clashes, said Maheshwar Dayal, deputy commissioner of police in Gurgaon. "We will make more arrests soon," he told reporters outside the factory.

Those arrested could be charged with murder, attempt to murder and arson, said K.K. Sindhu, commissioner of police in Gurgaon.

Maruti and the Maruti Suzuki Workers Union (MSWU) said the violence stemmed from a disciplinary incident involving one employee.

"To resolve the issue amicably, members of the senior management met the union. During the talks, the workers attacked the members of the senior management, executives and managers," Maruti said in a statement late on Wednesday.

MSWU president Ram Meher accused the company of "anti-worker and anti-union activities" in a statement on Thursday.

"The gates were closed by the security on behest of the management and the bouncers brutally attacked the workers with sharp weapons and arms," Ram Meher said in the statement.

"They, joined by some of the managerial staff and police later, beat up a number of workers who have had to be hospitalized with serious injuries. The bouncers, who are anti-social elements on hire, also destroyed company property and set fire to a portion of the factory," Meher said.

The union is keen to talk with the company and government officials to resolve the dispute, Meher added.

Late last year, Maruti brokered a deal with workers that ended weeks of strikes and protests which cut into its sales and market share.

Maruti said on Thursday that it would "shortly" announce a decision on resuming operations at the Manesar factory.

"This incident shows that the management have also not learned anything from the last three strikes ... in 2011," D.L. Sachdev, national secretary of the All India Trade Union Congress, told reporters.

Charan Lal Sharma, Labor minister for the state of Haryana, where the factory is located, told ET Now television channel that he was travelling to the site to discuss the issue.

(Writing and reporting by Henry Foy in MUMBAI; Additional reporting by Kentaro Sugiyama in TOKYO; Editing by Tony Munroe and Daniel Magnowski)

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