Labour – The point!

With most of the migrant labour returning to their hometowns in the wake of the COVID-19 pandemic, restarting operations for auto manufacturers and ancillary part makers isn’t going to be easy. Are auto giants ready to take on this new challenge in these unprecedented times?

Apr 14, 2020 SHWETA BHANOT MEHROTRA No Comments Like

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MUMBAI :

Labour remobilisation is going to be an uphill task for the automotive industry in the coming months as many have already taken the road back to their hometowns. With the current pandemic posting an uncertainty that most of us are unfamiliar with, at least the ones born post the World Wars, life is not going to be the same, and neither is the manner in which contractual labour and manufacturing are looked at in the country. 

Interestingly,concerns such as safety and security but most importantly, of being alive, have taken centre stage. And hence,the need of the hour is to ensure extraordinary measures in these unprecedented times both, by the government and industry. 

"The fear of survival may not get labour back to the factories in the industry anytime soon after lockdown. It is a tough situation and business will take time to get back to normalcy," says Pankaj Dubey, MD, Polaris India. He says thatfinding labourwill be a tiresome job for the industry and even if one does, "paying them at the same levels would be a challenge as the industry stares at an almost 20% plunge in the business with higher overhead costs." 

"If this situation prolongs, not only the auto sector but the entire manufacturing sector may be forced to revisit their strategies. Health and safety of all our stakeholders is of utmost importance to us, whereas the road to economic recovery can follow," says Vikram Gulati, Country Head & Senior Vice President, Toyota Kirloskar Motor.

During this period and post pandemic, companies would be forced to look at how to reduce costs and managetheir workforce mix sparingly. While this would mean lesser pressure to get the labour back sooner, experts and industry players believe it is high time that the entire system is revisited, across sections, to be better prepared henceforth. 

"It is of paramount importance for all stakeholders to come together to extend their support to each other so that jointly we can overcome the challenges at this critical juncture and bounce back as soon as possible. It is times like these that define a company culture and demonstrate the values it stands for. We stand steadfast with India, and are confident that together as a nation, we can overcome any crisis," says Gulati. 

He added that Toyota Kirloskar Motor has undertaken several preventive measures to safeguard the physical and mental health of the employees and their families. "We have also proactively taken various initiatives to support our dealer partners through a COVID sustenance package and suppliers by settling their dues promptly. We also continue to contribute to society in the fight against COVID."

"While the lack of working capital across the value chain is a major concern, which is threatening the survival of small and medium enterprises, labour is another. While most of the migrant labour has probably gone back to their native places, restarting operations (post the lockdown) and getting them back would be a very big task," says Vinnie Mehta, Director General, Automotive Component Manufacturers Association of India (ACMA).

Typically, contractual labour is more affordable than their permanent counterparts as a lot of perks are absent in their kitty as against the latter, and it is this cost factor that makes auto players, both OEMs and ancillaries, heavily dependent on them. 

Contractual labour in India comprises a significant share of the workforce at manufacturing units. In the automotive industry, it varies from 20% to 30% for a mid-sized to large sized OEM or auto ancillary, going up to 50% to 70% for some of the smaller auto ancillaries and suppliers. Definitely not something to be overlooked.

"Tier II and Tier III suppliers are expected to take the maximum hit with many feared to be weighing business viability and looking at shutting shop for good.  These suppliers are heavily dependent on unorganized labour and would have to really evaluate business avenues to stay afloat," says V G Ramakrishnan, Founding Partner & MD, Avanteum Advisors LLP. He further says that run of the mill [component] makers will find it difficult to survive unless they are a process and solution driven company. 

This, in turn, would lead to a disruption in the supply chain for OEMs thereby putting the industry into neutral gear. The automotive industry is expected to take a setback by 3-4 years with recovery not before FY22. "This year (FY21), the industry is expected to record 10-12% lower growth over FY20," says Kaushik Madhavan. Vice President, Mobility, Frost & Sullivan.

Indicating that operations, post the lockdown, would kick start in phased manner and would depend on auto makers' schedule, Mehta says that one would have to "gauge the readiness of the supply chain and people as well." Further, Mehta says, that the entire automotive value chain is closely interconnected and integrated, and therefore "discretionary measures by states in terms of exiting lockdown will not in any way help the industry. We are unsure of how the movement of logistics would happen in such a scenario. Not just goods but even people." ACMA, he informs, has also recommended to the government to run special trains, post the lockdown, between the manufacturing hubs and states such as Bihar and Odisha that provide the industry with a large number of contractual workforce.

Echoing the sentiments, a senior official at a major auto component maker from South India, says, "Post lockdown, we are staring at nothing less than four-five months in getting the labour back to factories." Highlighting his concerns, he further says that the business model of the entire automotive industry and its dependents needs a relook and should go through a significant change now. "There will be a new order to this world." 

"The biggest lesson from the crisis is that all markets will look inwards [to explore] the need for deep localization to reduce dependency on imports from other markets," says Mehta which means that the entire supply chain needs to move up the value chain, and bank predominantly on indigenous products.

While the government has announced a few measures to ease the mounting pressure on the OEMs and auto ancillaries as they shut automotive operations to combat the pandemic, experts and industry players believe the need is to take a relook at the entire structure including taxation, policies and banking systems, and to create a collaborative ecosystem to combat this situation together. Talk about social security to workers, employees, and industries, has also been doing the rounds to combat this crisis and any more, in the future. The lobbies are also echoing the pressing need to take a relook at the labour laws in the country. 

"A lot depends upon the government; we should not get into a situation where the companies have to close down as this would lead to huge unemployment in the country. Social security is the need of the hour in the country," says Dubey. The time is ripe to get contractual labour into mainstream and treat them equally with the permanent ones adds Madhavan.  

"This is an exceptional situation and needs to be dealt accordingly," says Ramakrishnan. He says that there will be more pressure on blue and white collared labour as many companies will start layoffs in big numbers in another three-four months, as demand would plunge further.

Speaking on the overall situation, a spokesperson from Hyundai Motor India said, "The current situation is highly dynamic and we are evaluating every option available."

The automotive sector has been reeling under significant pressure,thanks to falling vehicle sales for over a year now, new axle load norms, and the transitioning from BS-IV to BS-VI.  Demand will not come back quickly because of the disruption that is happening simultaneously in the sector. Instead, everything is now enveloped under a larger blanket of this COVID-19 crisis," says Ramakrishnan.

While the automotive industry has come forward to make ventilators, masks and Personal Protective Equipment (PPE) to combat the situation, some are making do merely with a handful of people, both, for the cause and the nation.The months ahead will be a learning curve as confidence building and gathering strength will take centre stage. All eyes will be set on government measures to see the light at the end of the tunnel. 

Shweta Bhanot Mehrotra is an Independent Business Journalist. 


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