Production at Honda Motorcycle & Scooter India’s (HMSI) Manesar plant is expected to resume this week following a settlement between the management and its permanent workers. However, no settlement has been arrived at with the 2,500 contractual staff who have been on strike since November 5 and are protesting the sacking of over 300 contractual workers. Their strike was supported by the permanent staff. People familiar with the developments said around 300 workers were allowed inside the plant on Monday — the first of four groups of permanent staff totalling 1,900. The workers are understood to have signed a “good conduct undertaking” before they entered the facilities. The remaining workers will be allowed into the factory over the next three days. In a statement, HMSI said the decision to resume production at the Manesar plant was initiated on November 22.
It added that all permanent staff had been informed they should join duty between November 25 and November 28 in four batches. “The process of joining back work has started as per schedule and we look forward to normalcy of operation after this process is completed,” the company statement said. A three-week long strike by workers, starting November 5, had brought production at the unit to a halt. HMSI cited low demand and production for two-wheelers as the reason for the layoffs. It wrote to the union members on November 11, saying normal operations will be suspended and further notice regarding resumption of operations will be given.
“The company has shown the intent to start with a minimum production with the permanent staff as demand is low and output at other plants has been increased,” one of the persons mentioned above said. HMSI’s estimated production loss since the labour unrest on November 5 is over 70,000 units. Over 5,000 units per day can be produced at Manesar with the total workforce — comprising permanent and temporary workers — of around 4,500 persons. If only the permanent workers are employed, production will be in around 2,000 units per day. FE had on November 13 reported that the company has increased production at its plants in Rajasthan and Gujarat to make up for the output loss at the Manesar unit. The Manesar plant has a capacity of 1.5 million units per annum while the other two plants have a total capacity of 1.2 million units each.
While most manufacturers, including Maruti Suzuki and Mahindra & Mahindra (M&M), have let go off a few contractual staff in the last six months due to a slowdown in vehicle sales, none of that has resulted in operations being discontinued. A poor festive season demand in 2018 led to a pile-up of excess inventory at the dealers as manufacturers did not lower despatches adequately in anticipation of high demand. HMSI has been among the worst hit with inventory at some dealers still higher than the normal of below 30 days. The company has been cutting production since December 2018 and March saw a massive 67% y-o-y cut when it produced only 1.77 lakh units compared with the monthly average of nearly five lakh units. This was reportedly HMSI’s sharpest reduction since it started operations in 2001-2002.
In the April-October 2019 period, HMSI’s production was down by around 20% y-o-y at 33.02 lakh units. The company’s sales have been falling by 12-45% y-o-y every month since December 2018. Two-wheeler sales growth has been in the negative territory since November 2018, impacted by an increase in insurance premium, costlier finance and price hikes taken by manufacturers on account of features provided to comply with the new safety norms early this year.
