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Jul 15, 2013, 03.37 PM IST | Source: CNBC-TV18

M&M lays off 500 temporary workers; puts freeze on hiring

Home-grown auto maker Mahindra and Mahindra has laid off 500 temporary workers at its Chakan plant and put a freeze on hiring for now, says president automotive sector Pawan Goenka. This follows a slowdown in vehicle sales, which has led to rising inventory levels over the past few months across company stockyards and dealers.

There is some damage that has been done and the momentum has slowed down. So, it is going to take some time for it to pick up.

Pawan Goenka

President Automotive Sector

M&M

Home-grown auto maker Mahindra and Mahindra has laid off 500 temporary workers at its Chakan plant and put a freeze on hiring for now, says president automotive sector Pawan Goenka. This follows a slowdown in vehicle sales, which has led to rising inventory levels over the past few months across company stockyards and dealers.

Also read: Mahindra & Mahindra to cut output as SUV demand slows

"I don't think any company expected that we would have this kind of slowdown going into Q2 of the year. In fact, we were looking at this year being better than last year in terms of growth," Goenka told CNBC-TV18.

Earlier this month, car market leader Maruti Suzuki said that production at its Gurgaon and Manesar plants in June 2013 was lower by 25 percent (2,466 units per day) compared to the same month last year. Maruti, which has in fact asked about 400 workers to go on leave, is producing about 40 percent less than its maximum capacity of 4,400 units a day across both its facilities.

Similarly, lower demand has led Tata Motors to also cut production of the Nano at the Sanand plant by over 80 percent this year, and for other vehicles at the Pune plant by 30-40 percent.

Goenka says: "The biggest thing for M&M, specifically is a 30 percent excise duty because most of our passenger vehicle segment, in fact the big volume segment like Bolero, Xylo, Scorpio, XUV, are affected by that and we have to find a solution for it. We already have done that for XUV now where we have reduced the down clearance and now we fall in 27 percent excise duty. We are looking right now whether we should do it for other products also. So, that will at least take us to the pre-budget level."

However, he says: "There is some damage that has been done and the momentum has slowed down. So, it is going to take some time for it to pick up. For us we were counting on good growth going into this year and that is the reason why we have to have no production days in many of our plants in the month of July. We have declared that Chakan plant will be shut for eight days, which is a very big blow in the sense that out of 25 days, eight days the plant won't be running.

Right now the passenger vehicle industry in the month of June was running at 52 percent capacity. And commercial vehicle is running at 25 percent capacity. Now this is a major sign of worry that the industry is running at 50 and 25 percent capacity, something bad will happen in terms of employment and local economy."

M&M stock price

On November 27, 2014, Mahindra and Mahindra closed at Rs 1291.05, up Rs 20.20, or 1.59 percent. The 52-week high of the share was Rs 1421.00 and the 52-week low was Rs 847.00.


The company's trailing 12-month (TTM) EPS was at Rs 58.92 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 21.91. The latest book value of the company is Rs 270.60 per share. At current value, the price-to-book value of the company is 4.77.

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