Unlike nearly 5 lakh units produced every month, the company manufactured only 1.77 lakh units in March as demand for scooters remained tepid.
By Pritish Raj
Honda Motocycle & Scooter India (HMSI) has let go of about 700 contract workers at its manufacturing plant in Manesar, Haryana, in the past few months, Suresh Gaur, president, HMSI Employees Labour Union, told FE.
Gaur said the company has been cutting production since December last year and as a result workers have been asked to leave. “Over 700 contractual staff are out of work currently,” Gaur said. People aware of the development said the layoffs followed a cut in production due to the continued slowdown in sales and high inventory with the dealers.
HMSI did not reply to an email sent till the time of going to the press. Gaur said among the workers laid off were some who have worked with the manufacturer for 7-10 years.
“Ahead of the festive season production should increase and some of the retrenched workers may be called back,” he said.
Contract workers are usually hired for jobs like loading and unloading, transferring goods from one place to another, deploying material on the assembly lines and driving service vehicles. People aware of the development said the layoffs followed a cut in production due to the continued slowdown in sales and high inventory with the dealers.
The auto industry has been in the slow lane for nearly a year now. Two-wheeler sales have been sluggish since October-November 2018, due to hike in insurance premium and costlier finance post the NBFC crisis triggered by defaults by IL&FS and DHFL. As manufacturers did not control despatches to dealers in anticipation of high festive demand, inventory at dealers rose to levels higher than normal, prompting manufacturers to cut output.
The country’s second largest two-wheeler maker by market share currently has a total of around 4,200 workers at its Manesar plant; of these 1,900 are permanent and the rest work on a contract. Before the layoffs that started early February, the plant had around 5,000 workers. While contract workers are paid anywhere between `18,000 to `22,000, permanent staff earn a salary of between `50,000 and `65,000 per month.
The union is understood to be in discussions with the management to get it to agree to allow the sacked workers to work by rotation. “In this case, a few workers will work for two months, and then they are removed while the other lot will get work for the next two months,” one of the person said, adding the management has not agreed to the proposal yet.
Siam President Rajan Wadhera last month warned of job losses if the slowdown in auto sale persists. “This is the worst phase of the industry. We have not seen such kind of a prolonged slowdown ever,” Wadhera had said, adding that if the de-growth continues, there will be no new jobs and the current jobs will also suffer.
Amid slowdown since September last year, the worst hit is HMSI, whose inventory at several dealers is the highest at around 60 days. While the company has been cutting production since December 2018, the month of March saw a massive 67% y-o-y cut in production and even then the inventory levels with dealers in West and North India are elevated.
Unlike nearly 5 lakh units produced every month, the company manufactured only 1.77 lakh units in March as demand for scooters remained tepid. This was reportedly HMSI’s sharpest reduction since it started operations in 2001-2002. During other months, before and after March, output cuts were in the range of 10-30% y-o-y till June 2019. The company’s sales have been falling virtually every month since December 2018 in the range of 12-45% y-o-y till June.
The job losses has penetrated in the entire supply chain of the auto industry. Last month, auto component manufacturers association (Acma) announced a job loss of 8,000-10,000 people due to low demand from the manufacturers. Federation of Automobile Dealers Association (FADA) too highlighted closure of over 210 dealerships in the last 12-15 months, and an estimated job loss of over 25,000 people.
Maruti Suzuki India last week said it had cut the number of its temporary workers by 6% to cope with a slowdown in auto sales. Reuters reported the company employed 18,845 temporary workers on average in the six months ended June 30, down 6%, or 1,181, from the same period last year.