The Hindu Business Line : More companies opt to trim man hours, cut production

Mumbai, Nov. 7 The economic slowdown has begun to hurt companies across industries forcing many top rankers to cut production, opt for reduced working hours and rationalise their workforce.

On Friday, India’s leading truck maker, Tata Motors, confirmed the shutdown of its Pune unit for six days this month, which will follow a three-day closure of its Jamshedpur plant. Ashok Leyland, the second largest producer of trucks, drove in tandem, slashing its weekly working days to three.

On the same day, JSW Steel opted for a 20-per cent cut in output this month.

Another steel maker Essar also confirmed reduction in capacity utlisation.

Last week, Tata Steel’s UK subsidiary, Corus, effected a similar cut.

Non-availability of finance and high interest rates had forced customers to postpone purchases, an official of Tata Motors said. “Ðifferent segments of the auto industry have been impacted to different levels. This will call for appropriate actions from Tata Motors from time to time,” he added.

Besides auto and steel, other segments in the manufacturing industry, such as cement, textiles and petrochemicals have also been feeling the pressures of the economic meltdown.

Grasim Industries, an Aditya Birla Group company, had cut production of Viscose Staple Fibre by about 30 per cent of its total capacity of 3.33 lakh tonnes/annum at Nagda in Madhya Pradesh and Kharach, Gujarat units.

Cement manufacturers have reduced capacity utilisation to about 85 per cent because of a sharp fall in demand from the realty sector, which consumes about 55 per cent of the total production of 200 million tonnes.

Petrochemicals major Reliance Industries is reportedly planning rationalisation of price structure to align with input cost and slowdown in demand.

The company last month had offered a VRS for its employees in the Patalaganga plant.

Clearly, the worst Indian fears of the global financial meltdown appear to be painfully coming true.

“For the next six months the situation looks bad. Earlier, the tyre industry was hit by escalation in raw material cost. Now, we face the problem of demand compression.

The demand has come down by 20-25 per cent,” Mr Paras K Chowdhary, Managing Director, Ceat, told Business Line.

Other sectors too

It is not only the manufacturing sector that is being hit by the slump in demand. Corporate houses across sectors such as aviation, shipping and infrastructure have initiated a slew of measures to counter the financial crisis.

In the aviation sector, for example, Jet Airways and Air India have pruned 10 to 15 per cent of their capacities.

Most airlines have put their expansion plans on the back-burner, especially on international routes, while some carriers are using smaller aircraft such as ATRs for domestic connections as this means lesser number of seats to fill and better utilisation of capacity.

Infrastructure woes

The infrastructure sector was in fact one of the first to feel the ripples of the financial crisis. Mr K.V. Rangaswami, Member of the Board and President (Construction), of Larsen & Toubro Ltd, feels that projects that have already achieved financial closure will not face any delays.

But, those that are yet to achieve financial closure will see some delays as banks are not prepared to lend, he adds.

Also, cost of funds has gone up from 8.5-9 per cent to 12.5-13 per cent. For a Rs 1,000-crore infrastructure project, a 3 percentage point increase in debt is a significant amount.

The shipping sector has also been affected. Shipping companies say there has been a sharp drop in dry bulk and container traffic, driving the freight rates down.

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