Automobile major Hindustan Motors is cutting its workforce further during the current financial year through a fresh voluntary early retirement scheme (VERS) being offered to the employees of its West Bengal unit.
Five months after trimming its workforce by about 5.6 per cent, the management is introducing a fresh VERS which would be offered to a wider section of employees, including factory workers, executives, managers and officers.
Eligibility would, however, be subject to the employee's age and the duration of service in the company. According to sources, the scheme will open within a few days. Besides preserving the take-home pay of every employee who opts for the scheme, the new scheme will also provide an opportunity for lumpsum compensation subject to certain ceilings.
The lumpsum compensation would be tax-free as has been approved by the income-tax authorities.
Manpower reduction tops the company's agenda for boosting performance and improving cost competitiveness, a source told Business Standard. At present, the company has approximately 11,000 employees on its payroll at the Uttarpara unit, West Bengal.
The company offloaded nearly 230 monthly rated employees through the early retirement scheme (ERS) introduced in March, 1998.
Though the management refused to disclose the early retirement scheme outgo for the last or the proposed voluntary early retirement scheme, the increase in the employee separation costs is likely to have an impact on the company's profit margins. During the first quarter of the current fiscal 1998-99, the company's net loss stood at Rs 3 crore. Income from operations, too, stood lower at Rs 212.51 crore during the period under review.
In the wake of uncertain environment, economic slowdown and liberalisation of the car industry five years ago, the process of paring workforce has become imperative to survive and grow in an intensely competitive milieu.
Sources attribute the company's dismal performance to disproportionately declining market share of the eastern region to 9.7 per cent in 1998 and infrastructure inadequacies.
In addition, the output of cars per employee at Hindustan Motors Uttarpara unit is significantly less than its competitors Maruti Udyog Ltd (MUL) and other new entrants affecting its performance. Annual output of cars per employee at MUL is estimated at 66.54 cars compared to about 2.33 cars per employee at Hindustan Motors.
During the last two-and-a-half years, the growth in sale price of cars has been slower compared to the general inflation rate and increase in average wages. The management claims the average wages have grown by about 36 per cent from June 1995 to June 1998, while the sale price of Ambassador diesel increased by only 20 per cent.
