Maruti Suzuki's advises vendors to sell non-core businesses to improve cash flow: Report

Hit hard by the economic slowdown triggered by the pandemic, Maruti Suzuki India has been advising its component vendors and suppliers to improve their cash flow and ramp up production.

In its latest move, the company has advised vendors of its highly-leveraged components to sell some of their non-core businesses and increase promoter stakes to improve cash flow and financial stability of their firms, according to a report by the Mint.

“The current situation is exceptional, and Maruti wants its suppliers to stay financially sound since its fortunes are linked to suppliers’ performances. So, promoters of some of the overall leveraged suppliers have been advised to increase stakes as that will improve the capital position of the firm. Maruti has also been focusing on the non-core businesses of vendors for some time now," a source told the publication.

Also read — Bullish on long-term growth story of domestic auto industry despite hiccups: Maruti Suzuki

Earlier, the carmaker had asked suppliers to build a sizeable inventory of components to prevent any disruption in production.

It has also suggested that parts makers cut fixed administrative costs in every department to reduce any adverse impact on financials in case of a sharp drop in volumes in the coming months, sources told the publication.

On June 18, Suzuki Motor Corp’s Chairman Osamu Suzuki had written to all parts suppliers of its Indian unit to boost output and build a sizeable inventory to meet demand from the carmaker even if coronavirus infections disrupt production.