wage cut: Covid-19 lockdown woes: Auto companies wheel in wage cuts to keep motors running

Mumbai: Auto companies are set to cut salaries as they seek to reduce costs with the Covid-19 lockdown having worsened already bleak prospects, said people with knowledge of the matter, adding that they are trying to avoid sacking people.

Two-wheeler makers Bajaj Auto and TVS Motor have already resolved to cut salaries, at least temporarily. Commercial vehicle makers such as Ashok Leyland and Tata Motors, the hardest hit in FY20, may also do so shortly, said the people cited above. Bajaj Auto MD Rajiv Bajaj has said he won’t be getting a salary through the lockdown period. Apollo Tyres CMD Onkar Kanwar and vice chairman Neeraj Kanwar will take a 25% salary cut in FY21. TVS Motor Co’s top management is also expected to take a pay cut in FY21. Annual increments for other employees are set to be withdrawn for this year.

With sales at a standstill, most companies are trying to avoid layoffs by cutting fixed costs such as salaries, said the HR head of an auto company.

Auto Component Makers

Prime Minister Narendra Modi has appealed to employers to ensure that people aren’t sacked and are paid their salaries.

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TVS Motor didn’t send increment letters as it usually does on April 1. “We have to open factories, look at operations and work out the detailing on the extent of pay cuts,” said one of the persons cited above.

The government imposed a three-week lockdown starting March 25 and ending April 14. It was extended to May 3.

Bajaj Auto has reduced pay for the period between April 15 and May 3. “Effective April 15, we are therefore deliberating implementing a pay reduction in monthly fixed gross across all levels until the lockdown is lifted,” Bajaj Auto told staff. “Our managing director has taken the lead and decided that should this be implemented; he will not be taking any pay during this period.”

The lockdown and the slump that preceded it that has been hard on the ecosystem of employees, dealers, distributors, contract workers, vendors, truckers and other partner agencies, said Bajaj Auto executive director Rakesh Sharma. Moreover, the situation is expected to remain difficult for some time.

“So we are formulating a range of initiatives to cut costs and remain viable without damaging the core even during this period,” he said. “There is definitely a likelihood of pay cut for the period of lockdown. We are reviewing the situation frequently and will finalise the quantum and timelines for payment in due course.”

Bajaj Auto has said it’s not looking to lay off employees for the moment and that the pay reduction will be balanced, measured and graded. It will review the situation on a daily basis.

Chennai-based Ashok Leyland is close to announcing a wage cut across the board. A company spokesperson declined to comment on internal matters. Tata Motors declined to comment. However, people aware of the matter said that company hasn’t taken a final decision on the matter.

Some vehicle makers such as Hero MotoCorp and Eicher Motors deferred payments to vendors, underlining the liquidity challenges that may emerge. However, Hero MotoCorp subsequently decided against such a move.

Most auto component makers have paid March salaries but with April being a complete washout, many may struggle. Besides Apollo Tyres, the likes of Exide Industries have already announced pay cuts to manage cash flow challenges.

While the company will protect management jobs during the crisis, a 15-30% pay cut at selected upper levels will be taken todeal with the unprecedented crisis, according to an internal circular issued by MD and CEO Gautam Chatterjee. This may be reviewed at the end of the first quarter.

Sources at Mahindra & Mahindra said the company is trying to cut costs in areas such as travel, infrastructure and capital expenditure, which are major costs for manufacturing companies as compared with the salary bill, which is relatively less. Pay cuts may be the last option, they said. Mahindra is insulated to an extent due to its tractor business and the prediction of a normal monsoon, said one of the persons. A company spokesperson declined to comment.

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