Amtek Auto to slash workforce, combine several operations to cut costs

Amtek Auto has total workforce of 16,000 in India, which includes employees at its various subsidiary firms.

amtek auto
Over the medium to long term, growth in the auto component industry will be higher than the underlying automotive industry growth, given the increasing localisation by OEMs, higher component content per vehicle and rising exports from India, said ICRA in its latest update note on auto component industry. (Reuters)

Debt-ridden, troubled auto component manufacturer Amtek Auto, which is looking at deleveraging to raise funds to reduce its debt, is likely to prune its workforce by combining several of its operations.

The company has total workforce of 16,000 in India, which includes employees at its various subsidiary firms. Since around 50% of its domestic capacity is lying idle the company said it makes sense to reduce the headcount by combining some of its operations. “We had planned these facilities back in 2011 when the growth forecasts for the automobile and other sectors were very promising. Unfortunately, the growth did not come in,” John Flintham, vice-chairman and managing director Amtek Auto told Financial Express, while confirming about the move.

However, he declined to share details as to how much of the staff strength will be curtailed and by when.

“We are in the process of analysing, we are in the process of moving some units together. I would think over the next two quarters we will start to see the benefit of that coming through,” he said.

The Auto parts maker, which has a consolidated debt of around Rs 14,000 crore, is looking at monetising its overseas assets to eliminate almost half of the debt over the next 12-18 months. For instance, Flintham says, the company is looking at selling either a minority stake in its overall overseas business or sell off a separate entity entirely. The company has got “tremendous response” for Tekfor, the German forging company Amtek had acquired in 2013 and is now profit-making. Amtek has appointed Morgan Stanley to advise it on debt reduction and identify buyers for its overseas assets.

Moreover, measures are also being taken to cut costs at the domestic level. “First of all, we have stopped any capex, cash spend is entirely controlled. On headcount, we have done some rationalisation. On manufacturing facilities, we have done some contraction of facilities. If we have got two facilities running at 50% capacity, we have put them together, to save costs,” Flintham said. The rationale behind the moves is to make the domestic business healthier. Earlier the share of domestic business in Amtek’s total revenue was 50%, which has now fallen to less than 30%.
“The overseas business is masking the problems that we are facing in India. The Indian business is significantly down. Just about all the sectors are sluggish. We are seeing some green shoots, but it is very sluggish. The volumes are pretty poor,” Flintham said, referring to the tractors, construction equipment, two-wheelers segments.

“My feeling is we are not going to see any recovery in the Indian market in over two quarters. Probably by middle of 2016, we will see revival happening,” he said.

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First published on: 02-12-2015 at 00:43 IST