Survival forces auto cos to lay off workers, push capacity

With the passenger-vehicle industry showing little signs of revival, a slew of manufacturers have gone in for mass layoffs. The country's three leading manufacturers — Maruti Suzuki, M&M and Tata Motors — have let go of around 2,000 contract workers over the past few months. CNBC-TV18's Ronojoy Banerjee reports on how India's auto firms are trying to trim costs and survive.

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Rising commodity prices, weakening rupee and tepid sales: That's the triple whammy facing the car industry today. The challenge now is to keep running costs down and strengthen margins, especially when poor sales have led to unprecedented discounts.

Market leader Maruti Suzuki has introduced an internal cost-saving programme which invites suggestions from its workforce on paring overheads. In the last 12 months, Maruti's 12,000 employees sent in 3,18,000 suggestions that resulted in initiatives that resulted in savings of Rs 350 crore in FY13. Maruti is also trimming costs by increasing localisation of key components.

Mayank Pareek, managing executive officer, Maruti Suzuki, says, "We realised while our own localisation levels are as high as 95 percent, that of our vendors is comparatively lower. They were importing about 21-22 percent of their total raw material which has now come down to about 19 percent. We are going to keep this exercise going."

Maruti is also trying to optimally use its production capacity to further bring costs down.

"Instead of using part of the capacity of the plant we are looking at using full capacity but we would operate on lesser number of days," adds Mayank Pareek.

Though in July, Maruti Suzuki benched over 200 contract workers analysts say measures such as these could actually help save jobs in the long run. For instance, Rs 350 crore that Maruti saved in FY13 as part of its cost-saving exercise accounts to one-third of its total employee cost for the year which stood at Rs 1,069 crore.