Auto industry braces for more job cuts amid slowdown

There seems to be no end to the woes of the auto industry. After registering consecutive month-on-month decline in sales for over a year (except for the month of October), the industry is now looking at huge job cuts and production shutdowns. 

According to estimates, the industry has already seen over three lakh job cuts. Over two lakh professionals have been shown the door as hundreds of dealer showrooms have shutdown due to poor demand last year, while production control exercise by original equipment manufacturers (OEMs) and component makers have left temporary workers with no work in major automotive hubs. 

India’s largest carmaker Maruti Suzuki in a regulatory filing on Wednesday said it has cut its production in July by 25.15 per cent, making it the sixth month in a row that Maruti has reduced its output. It produced a total of 1,33,625 units in July, compared to 1,78,533 units in the year-ago month. In the same month, the firm registered over 36 per cent decline in sales, its worst in about two decades.

Leading component manufacturer Bosch Ltd said it will temporarily stop production at its two plants separately in August for a total of 13 days to avoid unnecessary build up of inventory. Production at the Gangaikondan plant in Tamil Nadu will be suspended for a total of 5 days on August 10, 16, 17, 24 and 31, Bosch said. Besides, production at Nashik in Maharashtra will be suspended for 8 days on August 16 and 17, and between 26 and 31.

Earlier, major parts maker Wabco India announced production cut across its plants in India for a number of days. OEMs like Ashok Leyland and Tata Motors have also announced production cuts at their plants amid continued weak demand. All these have forced many makers to let go of some or most of its temporary workers at least for now. 

Even utility major Mahindra & Mahindra has started feeling the heat and has warned of job cuts. Pawan Goenka, MD, M&M, said job cuts are taking place at the level of automakers, dealers, suppliers and unorganised levels. He warned that only a concerted policy effort could help prop up market sentiments and revive sales.

Labour union bodies in the Gurgaon-Manesar belt which has factories of Maruti Suzuki, Hero MotoCorp and Honda Motorcycle and Scooters India and of many part makers, estimates that about 50,000 casual labourers in the region have been asked to rest. A labour union leader who did not wish to be named said the situation is grim in Maruti, Honda and their component makers as they have asked casual labourers to come only when asked to. Similarly, job cuts have been seen in the Pune and Chennai automotive belt. 

According to a Reuters report, the number of temporary workers engaged by Maruti Suzuki fell 6 per cent to 18,845 on average in January-June period with the firm accelerating job cuts since April. Recently, Automotive Component Manufacturers Association of India has said about 1 lakh jobs have been lost since the slowdown and another 10 lakh may be lost if the slowdown continued.

Wednesday saw all auto industry leaders collectively asking the government to provide an immediate growth stimulus to the sector in the form of lower GST, rolling back of proposed hike in registration fees and help in providing finance to the sector. A prolonged  slowdown raising fears of future cash flow among buyers, tightening of credit rules by financial institutions and poor rainfall has dampened the demand.