Honda Motorcycle & Scooter India (HMSI) has increased production at its plants in Rajasthan and Gujarat, as labour unrest at the Manesar facility has led to zero production for the eighth consecutive day on Tuesday. People aware of the development said workers at the other plants have been doing double shifts to make up for the output loss at the Manesar unit. Production is suspended since November 5 at the Manesar plant, which has a capacity of 1.5 million units per annum, as around 2,500 contract workers have gone on an indefinite strike. The strike was called to protest against retrenchment of over 200 contractual workers last week and the company cited low production and demand for two-wheelers as the reason for the layoffs. Even the 1,900 permanent workers are supporting the strike by the contractual workers. The other two plants have a production capacity of 1.2 million units each.
FE had first reported in August that the two-wheeler maker had let go off 700 contract workers, following a significant output cut due to the ongoing slowdown in sales and high inventory at the dealers. The latest lay offs is in addition to the previous one, Suresh Gaur, president at HMSI employees labour union, said. While workers refrained from working since November 5, the company on November 10 wrote to the union members stating the normal operations will be suspended from November 11 and further notice regarding resumption of operations will be given. Workers have also been demanding Rs. 1 lakh compensation for every year of service till the time of retrenchment.
Emails sent to HMSI did not elicit a response. A company official, however, said since the demand is subdued, a few days of production loss would not have much impact as dealers and company stockyard are flushed with stocks and other plants are fully operational. “The call taken to shut production is to convey that contract staff are hired for a specific period based on demand and cannot be given similar treatment like the permanent workers,” the official said.
Gaur said the Rajasthan plant is just 25 km away from the Manesar unit and daily production numbers have increased there since last week. “While the company has cited slowdown in demand as the reason for such large scale layoffs, that could not be the only reason as other plants are functioning as usual,” Gaur said, adding the management has refused to have settlement talks on the matter.
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. While most manufacturers including Maruti Suzuki, Mahindra & Mahindra (M&M) had let go off a few contractual staff in the last six months due to slowdown in vehicle sales, none of that led to labour unrest of this scale. A poor festive season demand in 2018 led to pile up of excess inventory at the dealers as manufacturers did not control despatches in anticipation of high demand.
The worst hit is HMSI, whose inventory at several dealers is still higher than a normal of below 30 days. The company has been cutting production since December 2018 and the month of March saw a massive 67% y-o-y cut in production. 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.
In the April-October 2019 period, HMSI’s production was down by around 20% y-o-y. The company’s sales have been falling virtually every month since December 2018 in the range of 12-45% y-o-y. The country’s second largest two-wheeler maker by market share currently has a total of around 4,400 workers at its Manesar plant; of these 1,900 are permanent and the rest work on a contract. While contract workers are paid anywhere between Rs 18,000 to Rs 22,000, permanent staff earn a salary of anywhere between Rs 50,000 and Rs 65,000 per month.
