Labour trouble has become a recurrring problem for the Indian automotive sector over the last few years. A mismatch between workers’ expectations of fair wages and what companies are willing to shell out ? while trying to keep margins intact in a slowing economy ? has led to many a face-off between workers and managements at several Indian auto firms.
One such firm that has seen two episodes of labour trouble at its manufacturing site in the span of a year is Bajaj Auto, India’s second-largest two-wheeler maker. The auto firm’s 850-odd permanent workers at its Chakan facility in Pune announced an indefinite strike from 28 April demanding higher salaries and shares in the company. Between June and August 2013, workers at the Chakan plant had gone on strike on similar grounds.
An analysis of the employee costs of three large listed two-wheeler makers ? Bajaj Auto, TVS Motors and Hero Motocorp ? shows that the expenses incurred by Bajaj over the five-year period between FY08 and FY13 have risen at the slowest pace while output per employee growth has been the highest.
Bajaj Auto’s employee costs grew 13.4% annually in the five years through FY13 to R650 crore. At the same time, Hero Motocorp’s employee costs rose at a compounded annual growth rate of 18.5% to R821 crore, and that of TVS Motors rose 16.5% to R473.80 crore.
To be sure, Bajaj Auto has incurred an additional expense of R468 crore, between 2008 and 2010, towards paying employees opting for voluntary retirement. This figure is over and above what the company accounted for as employee expense in its income statement.
While managing to keep the increase in employee costs lowest among peers, Bajaj Auto has ensured maximum productivity. Output per employee for Bajaj Auto rose 12.7% annually in these five years to 473.3 units. For TVS Motors, it rose 8.5% annually to 447.4 units and, for Hero Motocorp, it rose 6.3% to 1,045.1 units.
?The increase in output per employee is a result of intelligent automation, aggressive outsourcing and comprehensive adoption of TPM philosophy in the factories and the resultant elimination of various losses. All these, along with employee productivity, contribute to the index you have referred to,? said S Ravikumar, president (Business Development & Assurance), Bajaj Auto.
The lower growth in employee costs for Bajaj Auto can be partly attributed to reduction in its workforce by almost 600, or 6%, to 8,913 employees between FY08 and FY13. Bajaj Auto is the only one among the three whose employee strength has reduced over these five years. Hero MotoCorp, on the other hand, saw 34% growth annually between 2008 and 2013 in employee strength to 5,800 people. TVS Motors’ manpower rose 6.3% to 4,556 people.