Tata's not OK -- Telco to issue pink slips to over 2,800 staffers

Tata's not OK -- Telco to issue pink slips to over 2,800 staffers
DEV CHATTERJEE

MUMBAI, NOVEMBER 21: Look who's cutting costs: the country's largest automaker, Tata Engineering (Telco). The premier industrial company will issue pink slips to over 2,800 employees, including some top managers. The Voluntary Retirement Scheme (VRS), targeted at cutting rising costs by Rs 300 crore by the current fiscal-end, is to `right-size' its employee force of 27,000.

The company has drawn a detailed road-map for the planned downsizing, has sent copies to analysts of various financial institutions and has also posted the road-map on its website.

Forecasting a stagnant market for the rest of 2001 because of the slowdown in industrial production and poor agricultural growth, the company has argued that the VRS is the only way out to survive in an increasingly competitive market and mounting losses (Rs 220 crore in the first half of this year). ``The inflationary impact of the fuel price hike and higher product prices due to uniform sales tax and emission compliance will also dampen sales,'' the company observed.

Rajiv Dube, General Manager of Telco said: ``The idea is to emerge as India's best automobile company across all segments.''

The downsizing, which Telco carefully bills as rightsizing, coupled with other restructuring measures such as de-merger of its units and buying back expensive foreign exchange bonds, is slated to save the company over Rs 300 crore. Insiders say more retrenchments at the shopfloor level will follow after gauging the response to the current scheme.

The Tata group firm -- which reported a salary bill of Rs 702 crore for the fiscal 2000 -- said the downsizing would cost the company over Rs 140 crore for the VRS, but would result in an annual saving of Rs 34 crore. The VRS has already been notified by the company in all its plants, including Jamshedpur, Pune and Lucknow and is expectedly facing stiff resistance.

Telco's desperate measures to stay afloat are due to the fact that for the first six months of the current fiscal, the company has recorded a net loss of Rs 220 crore as against a profit of Rs 40 lakh in the same period of last fiscal. The company's share price crashed to a new 52-week low in the last few weeks and with hostile takeover bids becoming the order of the day, the company needed some good news to cheer up the bulls.

Says Venkatesh Aiyar, a Bombay Stock Exchange (BSE) broker: ``The performance of Telco on the stock markets has worsened in the last few weeks. The cost-cutting measures will positively affect its bottomline in the long run. Hence, we are giving a better rating to the scrip.''

On Monday the company shares shot up to Rs 83.40 on the Bombay Stock Exchange (BSE) from last week's closing levels of Rs 79 (Rs 69 last month) on reports the company has undertaken a massive cost cutting drive.

The company is also looking for prospective buyers for its axle and transmission manufacturing for lighter range of vehicles, spring shop and alloy foundries and aluminum foundry.

Last week, Telco Chairperson Ratan Tata met Maharashtra Chief Minister Vilasrao Deshmukh to lobby for a sales tax exemption. But the request is likely to be turned down due to the precarious state of Maharashtra government's own finances, say officials.

Indica finally breaks even

MUMBAI:Though Telco hasn't made it official, insiders say the auto major is seriously looking at the option of hiving off its car project into a separate company and bringing in a strategic partner. The company is reportedly in talks with DaimlerChrysler and General Motors in this regard.

Telco said the company has managed to achieve a cash break-even on its small car project and it has notched up a market share of 11.7 per cent in the passenger car market in the first-half of 2001 as against 9.9 per cent recorded in the same period of last year.