Car vendors cut 17,500 jobs in six months

[Naveed Yaseen]

By Aamir Shafaat Khan
KARACHI, Oct 30: Substantial decline in orders for parts and accessories has forced the car vendor industry to undertake massive downsizing of workers, daily wagers and staffers. An estimated 17,500 is believed to have lost their jobs in the last five to six months.

One of the leading car makers, having more than 50 per cent market share, has massively reduced its production for the current year against its projected target and also for the next year, thus showing a clear signs of recession hitting the local industry.

Other car assemblers are also reviewing their production plans for the next year amid lingering economic meltdown.

Pak Suzuki Motor Company Limited (PSMCL) has surprised its vendors by disclosing in recent meeting on October 29 that it could only produce 74,865 units from January to September this year against its projected target of 133,000 units (cars and light commercial vehicles) in 2008.

The company would produce 16,035 units more in October to December period thus achieving a total production of 90,900 this year, showing a fall of 32 per cent. According to some vendors the Pak Suzuki has planned to assemble 90,000 units in 2009 as the company believes that the country is facing severe economic crisis thus resulting in bottoming out car and LCV sales.

PSMCL has asked its vendors to fasten their seat belts in view of the prevailing uncertain situation.

Vendors anticipate another round of big layoffs next year in case car assemblers drastically cut down production.

They said the vendor industry would suffer losses as they had already made huge investments after Pak Suzuki announced its projected production of 1330,000 units for 2008.

Sources in the car industry said that Pak Suzuki was reported to have laid down 250 jobs (daily wagers and contract staff) in the last six months and hinted at axing 200 more.

However, the official spokesman of PSMCL Shafiq Ahmed Shaikh denied such reports saying that “so far no permanent workers and officers have been removed from their jobs. As far as daily wagers are concerned they come and go.”

He said that the current situation in terms of production and sales of cars had been unsatisfactory.

Adviser and former chairman of Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) Shariq Suhail told Dawn that he had personally terminated 150 people in his company out of 350 in the last few months in which 100 people had been removed in just one month.

He said there were total 350 PAAPAM members and there had been wide-scale job cuts in every industry. “If a careful estimate of 50 persons is taken in one company, then the vendor industry has offloaded around 17,500 workers and staffers from their jobs in the last few months,” he added.

Shariq said that job cuts were being made owing to plunging car production and sales as rising food inflation had severely impacted the cost of living of people who have now restricted the purchase of luxury items.

Besides, the falling value of the rupee against the various currencies had made import of auto parts and accessories costlier.

Managing Director of Yusuf Industries and former chairman PAAPAM Mohammad Ashraf Shaikh said that he had also retrenched at least 150-175 jobs from its two factories out of total workforce of 400 in the last one month.

“I have made another list of 16 who will lose their jobs next month,” he added.

He feared that vendors could not sustain losses for long period and may have to cut jobs for their survival amid falling volume of car sales and production.

Another leading vendor said that he had reduced workforce (daily wagers, permanent staff and contractual workers) of his company to 350 from 600 in just two months.

Sources in the car industry said that makers of Honda cars had also slashed their production of City and Civic. They said that the company which was rolling out 32,000 units in 2006, cut down production to 16,000 units in 2007 and 12,000-12,500 units in 2008.

A Honda dealer, who asked not to be named, said he used to sell 120 units a month a year back and now he sold around 80 units a month.

The new Toyota Corolla and other models, produced by Indus Motors, were also facing problems. An authorised dealer said that after a fresh increase in price of new Corolla 1,300cc on October 20, the new booking orders or on-spot buying had dropped to only four to five cars a day as compared to 10-15 prior to price hike.

He said that car leasing and financing by banks had almost finished after suspension of scheme by many banks in view of rising cases of defaults coupled with very high markup rate of 20-22 per cent and rising prices. He added that only 20 per cent cars were now being sold through leasing and car financing as compared to 60 per cent six months back.

According to quarterly results, Pak Suzuki posted a profit of Rs0.64 billion during January-September 2008 as compared to Rs2.5 billion in the same period last year, showing a decline of 75 per cent.

Indus Motors posted profit of Rs0.05 billion in July-September 2008-2009 as against Rs0.9 billion in the same period of 2007-2008.

The cumulative auto sales (cars and LCVs) had already declined by 44 per cent in July-September 2008-2009 as compared to the same period of last fiscal due to slowdown in economy, halt in production of Toyota Corolla, increasing prices of cars and high rates of financing.

http://www.dawn.com/2008/10/31/ebr3.htm