Tata Motors tightens belt, offers VRS

Weighed down by a staggering Rs 2,123-crore loss in the December quarter, Tata Motors, India’s largest automobile manufacturer, is offering a voluntary retirement scheme (VRS) to its employees to “enhance competitiveness”.

The scheme, the second in 13 months, has been extended to all categories of employees, including workmen and managerial cadres, against only to ‘white-collar’ employees the last time.

The truck and car manufacturer employs about 30,000 people in India and an equal number abroad. The VRS has been offered to India-based employees alone.

To make the scheme attractive, the company has decided against a one-time payout. Instead, it will make a “generous benefit package” that includes a monthly salary (basic and dearness allowance) from the date of separation till the employee turns 60. This will help the company avoid taking a one-time financial hit on its books. The scheme offers a provision of medical insurance cover for 10 years after the separation.

These will be in addition to the usual retirement benefits such as provident fund, gratuity, superannuation (if applicable), encashment of unavailed leaves and unclaimed leave travel allowance.

“In continuation with its steps to respond to an increasingly competitive business environment and macroeconomic pressures that have resulted in depressed growth in the commercial vehicle and passenger car businesses in India, the company today (on Friday) announced new initiatives to enhance competitiveness,” said a Tata Motors statement.

It added the company’s focus areas would include productivity benchmarking, cost optimisation and job enrichment.

Tata Motors has six plants in India — in Jamshedpur, Pune, Lucknow, Sanand, Dharwad and Pantnagar. While the average age of the workers at the Sanand plant is 25-30, at the Jamshedpur, Lucknow and Pune plants it is much higher. In 2013, the company had reduced its workforce at the Pantnagar plant by about 1,200 workers (20 per cent).

In late 2013, rival truck and bus manufacturer Ashok Leyland had announced a VRS for 12,000 of its employees, after the Chennai-based company reported a net loss of Rs 25 crore in the second quarter of that year.

During the April 2014-January 2015 period, sales of Tata Motors passenger vehicles declined 24 per cent year-on-year to 129,000 units in the domestic market, while commercial vehicle sales fell 11 per cent to 236,000 units.

Tata Motors has raised its capital expenditure target for the coming financial year to Rs 4,000 crore from Rs 3,000-3,500 crore.

“The company’s people initiatives will complement the strong product portfolio announced till 2020, including the launch of two new products for its passenger vehicle business every year 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 organisation that is able to compete effectively, while ensuring a strong future for its people,” the company said.