Coming out strongly against the lockdown, Bajaj Auto MD and CEO Rajiv Bajaj told a TV channel it did not make sense to resume production with arbitrary and draconian measures in place. “Don’t know what the government is thinking. It has buried itself in a hole. The solution was unclocking the country and not imposing draconian measures,” he said, adding the need of the hour was to act sensibly and logically and not out of fear. While the new guidelines permit certain activities to restart from April 20, the auto sector is choosing not to restart operations as the finished vehicles will find it hard to reach markets as the dealerships are not open. Even in the green zones, the situation is so arbitrary and erratic that people are afraid to open up and there is complete chaos, Bajaj said. According to him, the conditions put by the central and state governments are preposterous.
If a company starts operations and if a single positive case is detected, then the unit will have to cease operations for three months. If such a sword is held on people’s neck, no manufacturing unit will open up. Bajaj Auto had resumed production at its Rudrapur plant but it was difficult to get people and supplies to the plant. Things are opaque and until dealership and transport opens there is no point producing, Bajaj added. If a vaccine is two years away, immunity is the only option. Locking people at home is not necessarily the answer to this crisis. “This problem is being propagated by government inaction,” said Bajaj.
Attacking the government, Bajaj said, “We are just locking up people hoping the virus will disappear,” Bajaj said. The sweeping lockdown is not going to be a long term answer to the medical crisis or the economic crisis, he said. Bajaj said he knew of companies that had started were forced to shut and things were arbitrary and the government’s left hand did not know what the right hand is doing.
Bajaj said the lockdown was making things worse and he warned that job losses were already happening at the supplier end and at dealerships, which accounted for 90% of the headcount. “Job losses are already significant and already affected. The government is just not acting. It is pretending that there are no salary cuts or job losses,” Bajaj said. He drew attention to actions by governments across the globe to help people and companies. In Austria, the government was paying 85% of KTM’s employees wages, in the US every household was getting $3,000, Japan was giving citizens $1,000 per person every month, even Indonesia and Kenya were giving tax exemption to people, while India was not doing anything other than the lockdown.
Bajaj said the obvious exit strategy would be to allow practically all industries in the green and yellow zones to go to work and even the working population in the red zones should be allowed to return to work. “I think there are several reasons that demand would come rushing back and there would be some structural changes. In Europe, 40-50% higher demand is expected for motorcycles as a lot more people want to move away from public transport,” Bajaj added.
Going forward, Bajaj said they will not be affecting job cuts at Bajaj Auto but they would be looking at salary and wage cuts and a spectrum of benefits associated with employees and wages, which would save `100 crore to `150 crore annually. Bajaj Auto employees and workers have already volunteered to have a 10% cut for the lockdown period from April 15 to May 3. Other cost reduction planned at Bajaj Auto includes cutting marketing budget, which was at around `200 crore a quarter is now has been cut to zero now. “We have frozen capex and that will remain so for the quarter and rest of the year,” Bajaj said.
On demand prospects, Bajaj said demand was going to come rushing back after two months of suppressed demand and half their markets were exports, which could begin if the ports opened up. “We don’t have a demand problem. We have a governance problem,” he said. The young and healthy need to go back to work and only the old and vulnerable need to be secure, he said. Bajaj said the only solution was to develop herd immunity as the vaccine was two years away.
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