Pune: Some 3,500 small-scale ancillary units in the industrial belt of Pimpri-Chinchwad near this city, which supply components largely to auto companies including Tata Motors Ltd and Bajaj Auto Ltd, are shutting shop for three days to cope with reduced demand from their clients
The three-day closure coincides with at least one of their largest clients, Tata Motors, shutting its commercial vehicles plant for three days starting 29 December.
This is the second time in December that Tata Motors has shut operations at that factory in Pune. Tata’s Jamshedpur plant has been shut for a total of 17 days during November and December, while the Pune plant has been closed for 12 days so far.
“Production schedules for most auto OEMs (original equipment manufacturers) in the region are down by almost 50-60% and some 50,000-60,000 temporary contract workers at auto ancillary companies here have already lost their jobs,” says Suresh Mhetre, president of the Pimpri Chinchwad Small Scale Industries Association. “With 60% of our business coming from the auto industry, we fear the situation could worsen, if demand does not pick up soon. We have no alternative but to shut down our plants so that we can cut down our costs too.”
The association is estimating a daily loss of up to Rs4 crore from the shutdown.
The region’s 7,000 ancillary units, which employ some 150,000, are hurting from higher raw material and operational costs even as the demand for finished products has plunged. Many of them were set up to serve Bajaj Auto Ltd, Tata Motors and Force Motors Ltd and have expanded significantly as a line-up of new manufacturers, including General Motors Corp., Volkswagen AG and Daimler AG, announced plans to set up manufacturing plants in the region.
Force Motors closed its plants at Pune and Pithampur for six days in December to prevent an inventory pile-up. Two-wheeler manufacturer Bajaj Auto is keeping its Waluj, Aurangabad, plant, which manufactures the Platina and XCD models, closed from 27 December to 1 January, while General Motors India, which has a plant manufacturing the Spark at Talegaon near Pune, is shut from 16-31 December.
Auto ancillary units in the region have faced the brunt of the economic downturn, with many smaller units laying off temporary workers and reducing work hours to four from eight. The larger ancillary units in the region are down to a single shift. Many of the larger units are also responding to the situation by temporarily closing their factories.
Two-wheeler crank shafts and transmission gear manufacturer Amforge Industries Ltd kept its Chinchwad plant shut between December 1-17 while others, such as Vanaz Engineers Ltd, have production by 15% since October.