Contract labourers working in factories of component suppliers to Maruti Suzuki could bear the brunt of the lockout at the Manesar plant of India's largest carmaker.
Working on wafer thin margins amid stiff competition, many of the component suppliers which have been already feeling the heat due to an overall slowdown in the automotive market, are considering to reduce their workforce.
"If there is prolonged lockout at Maruti's Manesar plant, there is no doubt that there would be lay-offs of contract workers in the ancillaries," said a senior official with an auto component maker, who asked not to be identified.
Describing the situation as unfortunate, the official said it has come at a time when the automobile market is struggling with sluggish demand.
"Whenever there is a ramp up in production of automobiles, there is a proportional increase in the rate of employment of contract labourers in many of the component suppliers. When the production is down, it goes down," said the official.
When contacted, Automotive Component Manufacturers Association of India (ACMA) Executive Director Vinnie Mehta said: "This lockout is happening against the backdrop of an overall market slowdown. Maruti has redefined the automotive landscape in Indian, particularly in the Gurgaon-Manesar belt, and a lot of component makers are dependent on it."
Mehta, however, declined to comment on the possible impact of the lockout on contract labourers in parts makers.
"We need to understand that the safety and well-being of employees are more important than production," he added.
Yet, component makers are not willing to take the risk of letting inventories pile up and hence are reducing production.
Suspension spring maker Coventry Coil-o-Matic Executive Director Raja Bafna said: "Earlier we were working 24x7. Now we have stopped working on Sundays at our plant in Rewari but we are not laying off any people."
He said the company has been affected by the lockout at Maruti Suzuki's Manesar plant as well as drop in sales of MSI's small car Alto.
"We were supplying springs worth Rs. 35 lakh per week. Now it has come down to Rs. 15 lakh as we are now supplying to only Gurgaon plant," he added.
An official in another component firm that supplies parts to Maruti Suzuki also expressed similar views.
"In the past, we used to have about 10% margin but today with so much of competition it is not even 2%. In such a scenario, we can't let inventories pile up. Obviously, we need to cut production, which mean we can't have excess employees who are idle," the official said.
While no official figures of contract workers employed by component makers are available, industry sources said that at any given factory it could be 50% of the total workforce employed and in some cases even 80-90%.
Maruti Suzuki had declared an indefinite lockout at the Manesar plant on July 21 following violence in which one senior executive was killed and 100 others were injured.