Dunlop Treads Cautiously On Job Cuts

The Manu Chhabria-controlled tyre major, Dunlop India Ltd, is scripting a cautious strategy to prune its workforce in a bid to side-step a possible backlash from trade unions.

A source close to the Dunlop management said the company felt that neither the rights issue nor its attempts to secure external commercial borrowings (ECB) would pull the tyre major out of its present rut.

Hence the proposed rationalising of the workforce.

The source said the excess workforce would hinder the companys objective of becoming economically viable even if the rights issue and the ECB finally come through.

Dunlop registered a Rs 19.20 crore net loss in the first half of 1997-98. The companys bottomline suffered a setback due to under-utilisation of capacity at less than 25 per cent, under-absorption of overheads, and non-availability of requisite bank finance.

 

The bank finance is stuck at Rs 38 crore, which is grossly inadequate to support an annual business of over Rs 600 crore.

The company is also trying to mop up Rs 100 crore through the sale of its properties in Mumbai and Calcutta. The companys property in Mumbai property is worth Rs 100 crore.

The funds are bound to get exhausted very soon, unless the company gets financially viable, he said.

He further elaborated that the conversion cost of one kg. of rubber in Dunlop is Rs 15.50. This is more than three times the cost in other companies.

The excess manpower involved in production is one of the reasons behind such high costs, he said. He further said that the average expense that the company faces in paying salaries to its employers comes to Rs 6 crore a month Rs 5 crore to the workers, and Rs 1 crore to the executives. But for the past three months the company has not been able to pay timely wages to its workers.

Though the source says that the cut in workforce would be sharp, the company still has not arrived at a final figure. Dunlops total workforce currently stands at about 7,700.

Dunlop has only two options: It can either save itself or pacify its unions, he said.

Apart from rationalising manpower, two other issues that are foremost in the minds of the management are reducing the cost of operations and upgrading its technology. Though production has stopped at the Sahaganj unit in West Bengal, sources in the union said the management is investing Rs one crore in modernising its existing boiler.

On the companys planned rights issue, sources said that Chhabrias Jumbo Group will be taking up its entitlement. But the financial institutions, who hold more than 30 per cent in the company, remain non-committal.

Regarding ECB, the company is ready with collaterals and is currently holding talks with several international financial institutions and banks.