The Hindu Business Line : India still insulated from global job cuts

Automotives, manufacturing and even telecom companies have now started to face the heat. This means the worst nightmare stares at the employees of these companies in Europe and the US. The result: Pink slips.

The Detroit problem

Last week, the big three car manufacturers of Detroit in the US, led by General Motors (GM), sought a bailout package of $25 billion from the Congress in the US because they are on the brink of bankruptcy. There are no indications that the package would be approved. Two-and-a-half-lakh workers are employed by GM alone currently.

Companies such a Rolls Royce have also announced huge job cuts. British Telecom, a top telecom player in the UK, has announced that 10,000 jobs would be cut. The main reasons given for these job cuts are to prune costs and create more leaner organisations.

The larger reason however, is that there is considerable slowdown in the demand and purchase of cars and consumer durables.

This, in turn, is the result of banks tightening credit norms for lending to customers as they exercise greater caution in lending. Loans are not available easily for consumers which can fuel demand.

The Indian angle

What do all these happenings mean to Indian companies?

Let us take the example of the automobile majors GM, Ford and Chrysler.

Indian auto ancillary companies supply parts to these companies. These include players such as Sundram Fasteners and Bharat Forge. If the auto majors go bust, then these companies may face erosion in revenues apart from the possibility of not being able to easily recover earlier dues.

At another level, Indian IT companies also have GM as their client. For example, Wipro Technologies and Satyam Computers are IT vendors of GM. Between them, they had won a $450-million deal in 2006, for a period of five years.

So, considerable revenues are at stake for these companies; not to mention the fate of employees working on these projects.

The British Telecom (BT) case is a bit different. Its presence in India is more through Tech Mahindra (through BT Global Services). BT has announced that in the trimming of its global workforce, the agency and contract workers are more likely to face the axe. In any case, BT’s own presence in India is limited and, hence, fears of job loss are minimal.

Meanwhile Citigroup has announced it would cut over 50,000 jobs to bring down employee costs drastically.

Here again the impact on Indian workers may be limited. In October, TCS acquired the back-office operations of Citigroup in India — Citigroup Global Services (CGSL) for $505 million.

This acquisition also means that TCS would take over the entire workforce of CGSL, which is around 12,400. The job cuts may minimally affect Citigroup employees in India.

The employees of the now defunct Lehman Brothers, which employed around 170 people in its Mumbai office, will be absorbed by Nomura Holdings, which bought Lehman’s Asia-Operations.

Overall, the job cuts by large companies outside India have had limited ramifications for the Indian workforce. India being a low-cost market may be a favoured destination by global majors rather than one where they might have to trim jobs.

One may, however, need to watch the emerging scenario carefully to assess the ramifications, if the global economic scenario worsens.

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