Ailing Indian Auto Makers Shed 5,000 Temporary Jobs

MUMBAI – India’s slumping automobile industry sheds about 5,000 temporary jobs as production-capacity utilization plunges to 63%.

Auto makers fear utilization may slide to 50% as inventories accumulate and many dealers report having 6- to 8-week supplies of unsold vehicles.

The 5,000 temporary jobs have been lost not only in auto plants but also in the supply and distribution chains. An equal number of temporary workers fear being terminated or sent on long unpaid leave with no assurance when they might be recalled.

Under both Indian law and their contract terms, temporary workers can be dismissed on the spot without notice. They receive no employment compensation.

Maruti Suzuki was the first auto maker to discharge temporary employees on a large scale, dismissing them during the past two years in response to worker agitation in the Manesar and Gurgaon plants.

Tata followed Maruti Suzuki as its sales dwindled rapidly. Mahindra & Mahindra then shed workers as market demand shifted from light trucks and utilities to cars. Honda India also has made cutbacks.

But these layoffs do not save much money. A new regular employee is paid more than Rs30,000 ($450) a month, a temporary worker receives one-tenth of that amount.

While it is easy and legal to terminate temporary workers, permanent employees cannot be touched. But the slumping market affects them as well: One auto maker has stopped or delayed pay raises, and nearly all manufacturers have halted recruitment as they suspend or abandon investment plans.

Maruti Suzuki was expected to complete its Gujarat plant by the end of 2016 and recruit more than 12,000 workers. But the date for commissioning the plant now is uncertain, and the new jobs may not materialize.

P Balendran, vice president-General Motors India, says the auto maker has curtailed production 15%. Other auto makers are trying to jump-start demand changing their product mix, as illustrated by the emergence of premium hatchbacks, compact sedans and SUVs. Even the luxury brands are launching compact sedans.

Auto makers also are extending their marketing networks into rural areas. Maruti Suzuki says rural markets now account for 30% of its sales. Senior executives who have toured the interior regions have located artisans, craftsmen, farmers, merchants and local officials who could be potential buyers of cars or multipurpose vehicles.

Rakesh Srivastava, vice president-Hyundai India, says the auto maker has increased its dealerships in Class III towns (20,000 to 50,000 residents) from 270 to 350. It is estimated that half of new buyers are farmers, 15% are construction workers and 11% are involved in rural trades and activities.

Exports are important sales outlets for Hyundai, Ford India and Honda India, giving the auto makers a cushion against the loss of domestic revenue.

Despite this variety of efforts, auto makers are unable to reverse declining sales and generate enough money to meet their costs, let alone turn a profit. The Society of Indian Automobile Manufacturers continues pressing the government for tax concessions similar to those granted in 2008, when excise duties were lowered to a flat 8%.

But the overall slowdown in the economy has left the government with huge deficits, and it is not in a position to help the auto makers. Thus, there is little hope the lost temporary automotive jobs will be restored.