Amid prolonged slowdown, auto sector witnesses massive job losses
4 min read . Updated: 08 Aug 2019, 06:40 AM IST
Premium- Around 40,000-50,000 workers in the Gurugram-Manesar auto belt have been retrenched
- The downtrend has trickled down to the logistics sector as lower vehicle production has drastically hit the utilization of trucks
New Delhi/Mumbai: A prolonged sales slowdown has plunged India, the world’s fourth-largest automobile market, into a labour crisis with tens of thousands of workers losing their jobs in the past few months across automakers and their parts suppliers.
Almost 40,000-50,000 workers have been retrenched at Gurugram and Manesar in Haryana, the country’s biggest automotive hub, as original equipment manufacturers and vendors have reduced their contract labour force, said several people aware of the developments. The situation is also severe in the automotive hubs of Chakan in Pune and Chennai, the people said.
With the slowdown showing little or no signs of bottoming out, hiring from local engineering colleges in the region has also taken a beating.
The Gurugram-Manesar hub houses two factories of Maruti Suzuki India Ltd, the country’s largest carmaker, and one each of Honda Motorcycle and Scooters India Pvt. Ltd (HMSI) and Hero MotoCorp. Ltd (HMC).
The downtrend has also trickled down to the logistics sector as lower vehicle production has drastically hit the utilization of trucks, leading to an increase in non-performing loans in the sector.
The domestic passenger vehicle industry has recorded its worst performance in the past two decades in July, continuing the downward trend for nearly a year. Sales of commercial vehicles and two-wheelers have also been hit. A series of factors including higher insurance costs, volatile stock markets and a liquidity squeeze in a slowing economy have slammed demand for new vehicles.
Maruti’s base of more than 300 tier I vendors have laid off 100-150 people on an average. Prominent vendors, who have multiple facilities such as Lumax Technologies and JBM group, have laid off around 500 or more employees. HMSI, India’s largest scooter maker, has asked 1,200-1,400 of its level I or technical contract workers to proceed on leave, while a third of the total contractual workforce with the vendors has been made redundant, said the people cited earlier.
None of the automakers disclosed the number of level II or non-technical workers who have been asked to go on leave.
“HMSI has removed 1,200-1,400 jobs since November last year as daily production has been reduced to 3,500 vehicles from 5,500 vehicles. Also, a third of our tier I suppliers have removed a third of their contractual workers in the last six months," said a worker at the Manesar plant of HMSI. “Post October, job losses are expected to rise even more as introduction of Bharat Stage VI norms would lead to a slowdown for a couple of quarters."
Pawan Goenka, managing director of Mahindra and Mahindra Ltd (M&M), said job losses are taking place at the level of automakers, dealers, suppliers and other unorganized levels. “Given the current challenging global and domestic growth environment, a concerted policy effort will be required to prop up sentiment, put a floor under consumption and revive growth," he said.
Level I contract workers in the companies work on the shop floor, while level II work in places such as employee canteens and stockyards. Maruti has asked 300-400 of its contractual workers at its Gurugram facility to proceed on “rest". The figure is almost double at its factory in Manesar.
Kuldeep Janghu, general secretary of Maruti Udyog Kamgar Union, said 10-15% of the total workforce in the Gurugram and Manesar region have been shown the door as sales have fallen drastically in the past year.
“Maruti has stopped hiring in the Manesar plant and recruitment of students from colleges has also been significantly low. Hiring is not expected to improve next year. Maruti is still better than other automobile manufacturers when it comes to balancing its workforces in such trying times," said Janghu.
Dilip Pawar, a union leader who represents Vishwa Kalyan Kamgar Sanghatana in Pune, said the ongoing slowdown has “directly resulted in massive production cuts at the manufacturing units in and around Pune".
“While we don’t have accurate number of job losses at the moment, I estimate that more than 10,000 daily wage workers have become unemployed over the past months as plants that were running three shifts a day are now operating only a single shift," he said.
Pawar said most of the job cuts were made by vehicle manufacturers such as Tata Motors Ltd, M&M and Volkswagen India.
He said all the retrenched workers were temporary and full-time employees have not been fired so far.
A person from SIPCOT Irungattukottai Manufacturers Association near Chennai, who did not want to be named, echoed a similar sentiment. He, however, did not disclose the number of job losses in that region.
Although most automakers have decided to reduce workers, Bajaj Auto Ltd and HMC have been the outliers.
“Though production of vehicles has declined a bit, we haven’t seen many job losses as yet. Hero has not reduced production to the extent of Maruti and HMSI. We use to manufacture around 6,000 units daily, but now it has been reduced to 5,500 units," said a worker at the Manesar factory of HMC.
Mahindra Group chairman Anand Mahindra said, “The most obvious and welcome first aid would be some temporary relief on the GST front, either by modifying the slabs, or, if that is not possible, by removing the cess".
