Adversity makes strange bedfellows. With high steel prices pinching, car market leader Maruti Suzuki and its two-wheeler-making cousin Suzuki Motorcycles India have joined hands to buy steel in a bid to save costs. That could blaze a trail in other companies and sectors.
Joining them are their 200-odd vendors for whom steel is a major raw material. The process started in January this year after steel prices moved north late last year.
“It is similar to buying in bulk at wholesale prices,” said S Maitra, managing executive officer, supply chain, Maruti Suzuki India Ltd.
Raw materials account for over 77 per cent of Maruti's overall expenditure. Raw material costs jumped by 12.53 per cent in the first half of 2008-09 over last year.
“We are in negotiations with suppliers for fresh contracts and they have indicated another price increase. Hence, we expect slight increase in steel prices for the second half of this fiscal,” Maitra said.
Half of Maruti's steel requirement is imported from Japan and Korea while the balance is met through domestic producers.
Steel prices have gone up by over 50 per cent in the last six months and despite global prices showing a downward trend in August and September, Maruti said it is yet to see a price correction in auto-grade steel.
Hit by input costs, Maruti last week announced a Rs 2000 to Rs. 6000 price increase across all its models.