Tata Motors to offer VRS to 1,600 staff as slowdown bites
NEWDELHI/MUMBAI:Tata Motors is working on a voluntary retirement scheme (VRS), said four people aware of the matter, as India’s largest vehicle maker bears the brunt of a prolonged slowdown in the domestic market. The scheme will be offered to employees of different departments, across its businesses of passenger and commercial vehicles, said one of the four people, requesting anonymity.
“This year, Tata Motors’ employee cost-cutting plans are more aggressive than the previous times. Besides removing surplus staff at JLR in recent months, the company is now seeking voluntary retirements from more than 1,600 people across all locations and hierarchies,” said the person.
Tata’s move would follow other vehicle makers such as Hero MotoCorp Ltd, Ashok Leyland Ltd and Toyota Kirloskar Motors Pvt. Ltd that have introduced similar schemes this fiscal. Tata’s woes have been compounded by stringent emission norms that are set to kick in from April as well as possessing one of the largest workforce in the industry.
The company’s employee cost as a percentage of net sales during the September quarter swelled to 10.7% from 5.9% in the year earlier. During the quarter, Tata Motors’ stand-alone net sales fell 44% from a year earlier, while it plunged to a net loss of ₹1,281.97 crore from a year-earlier profit of ₹109.14 crore.
In comparison, employee cost as a percentage of net sales at the country’s largest passenger vehicle manufacturer, Maruti Suzuki India Ltd, stood at 4.9%, compared to 3.5% in the year-ago period.
Tata Motors has been trying to reduce its employee cost over the last few years and in 2017 had launched a similar offer, but most of the permanent employees stayed away from the severance package.
Responding to emailed queries, a spokesperson for Tata Motors said, “At the moment, there is no such plan.”
Fortunes of Tata Motors’ India operations have been dwindling over the last few quarters. In the September quarter, sales of heavy and medium commercial vehicles fell 59%, while overall sales for the company in the segment declined 41.2%. After the introduction of Bharat Stage VI (BS VI) norms, demand of heavy and medium commercial vehicles is likely to shrink further, posing more challenges in the next fiscal.
The second person cited earlier said permanent employees across departments will be considered for VRS, but the focus will be on reducing the number of staff on the engineering side of operations. Contracts of some senior employees, retained as consultants post retirement, may not get renewed, said the person. “On the engineering side, the staff count is quite heavy compared to other firms. Given the challenges ahead, the firm will not be able to run efficiently with such a high employee cost,” the person added.