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Maruti Suzuki India directors have agreed to the purchase of land in District Mehsana, Gujarat state, “for future expansion of manufacturing facilities”, the automaker said. The purchase is subject to final negotiations on price and usual legal formalities.

Maruti has long been expected to start building an additional plant in Gujarat and recent industrial action at its exisiting plants in Manesar, Haryana state, had led to local speculation the automaker was reconsidering its investments in Haryana in favour of Gujarat.

But the company insisted fresh investment in Gujarat for a new factory was independent of the labour unrest – now largely resolved – in Haryana.

The board of directors had been expected to green light the new Gujarat plant at a meeting on 29 October.

“It is not correct to link the current labour problem in Manesar with our investment in Gujarat,” RC Bhargava, chairman, Maruti Suzuki India, told the Hindustan Times in October. “There is no question of us pulling out investments from Haryana. We could not have invested any more there as it was completely exhausted. The decision to invest in Gujarat was anyway taken before the strike.”

Last September, Maruti told Reuters it would spend nearly US$1.3bn to set up a new plant, likely in western Gujarat state which had attracted Ford and PSA Peugeot Citroen to announce plans to build plants there in the preceding few months.

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By GlobalData

The Maruti Suzuki will have capacity for 1m vehicles a year, supplementing two factories – Gurgaon and Manesar – in Haryana state and a separate powertrain plant, Suzuki Powertrain India.

Maruti, 54.2% owned by Suzuki, takes 50% of the Indian new car market but is facing intensifying competition from Hyundai, the second-largest car maker in India, as well as domestic rivals.

The strikes at Manesar hurt production of the recently redesigned, popular Swift model, raising doubts about the firm’s ability to maintain sales growth.

Manesar workers walked out demanding that the company recognise a separate independent union and reinstate 44 workers dismissed on disciplinary grounds.

The bitter dispute – that has seen strikes and sit-ins take place sporadically since June this year – hinged on a combination of union recognition and alleged sabotage but, for now at least, peace appears to have broken out with around 7,000 workers returning to duty.

“Everyone has gone back to work, but in the main plant 30 workers have been kept under suspension,” All India Trade Union Congress (AITUC) national secretary Darshan Sachdev told just-auto from India on 24 October. “Under Indian suspension, they are employees but they can not come on duty.

“If they are taken back, generally peace will prevail, but if their services are terminated, this will send a negative signal. We disagree with the charges – management is trying [an] unnecessary hue and cry.”

Local reports last month also noted that Gujarat has seen industrial relations problems at automakers already established there: General Motors saw a prolonged strike at Halol earlier this year. There were other strikes and lockouts in 2010-11 as well.