Tata Motors announces VRS for workmen

Mumbai: Tata group controlled Tata Motors Ltd, India’s largest auto maker by sales revenue, on Friday announced slew of initiatives including Voluntary Retirement Scheme (VRS) to enhance the company’s competitiveness.

The VRS is presently intended for the workmen, said the company in a release sent to BSE.

Under the VRS, Tata Motors said “a generous benefits package will be offered to employees who opt for the scheme, including a monthly payout (Basic + DA) that begins at the date of separation till the employee turns 60 years of age, thus ensuring an assured monthly income as opposed to just a one-time payment of a single amount.

A unique feature of the offer is also the provision of a medical insurance cover for a period of 10 years post separation, the company said. These are in addition to normal retiral benefits such as provident fund, gratuity, superannuation (if applicable), encashment of unavailed leaves, LTA (leave travel allowance) due but not claimed, etc.

“The company’s people initiatives will complement the strong product portfolio it has announced till 2020, including the launch every year of two new products for its passenger vehicle business, and several new products and variants for its commercial vehicles business. The company is determined to meet these plans by creating a strong, robust, global and customer-centric organization that is able to compete effectively while ensuring a strong future for its people,” Tata Motors said in a release sent to the exchanges.

As of March 2014, the company had a total of 30,334 employees.

On Friday, Tata Motors ended at Rs.575.50 on BSE, up 2.7% from previous close while India’s benchmark Sensex Index rose 1.65% to close at 29,220.12 points. The announcement came after market hours.

Tata Motors has been trimming employee costs steadily.

In fiscal 2014, Tata Motors incurred an expense of Rs.47 crore on employee separation, according to company’s annual report. This was part of an organization wide cost optimization programme, which included employee cost as an important pillar, the annual report said, adding that the programme was rolled out to address the challenges and business downturn.

On 12 January Mint reported that Tata Motors was one among the most successful companies in cutting costs among the BSE 100 companies over the last three years.

Analysts said the VRS, as part of the larger cost pruning measure should help the company. However, a real turnaround will kick in only with an improvement in truck and car sales.

For the December ended quarter, Tata Motors reported a 26% fall in profits.

Net profit, including those of its units, fell to Rs.3,580.72 crore in the three months ended 31 December from Rs.4,804.80 crore in the year earlier, the company said in a filing to the stock exchanges. Net sales rose 8.8% to Rs.69,121.61 crore.

Tata Motors is not the only auto firm that has looked to trim its workforce in response to a slowdown in the economy and consequently in auto sales.

In January 2014, the Hinduja flagship, Ashok Leyland for the first time in its history, announced a VRS. Close to 500 people in executive jobs opted for the scheme. It was part of the larger debt reduction exercise started by the company.