Auto sector woes

Published September 25, 2019

THERE have been many news stories of late about the dire state of the country’s automobile sector. It is of concern that the number of nonproductive days, or NPDs, is increasing each month at auto plants, and the spectre of large-scale lay-offs is advancing closer. Inventories have piled up at the three main plants, with Toyota and Honda especially hard hit, and at the rate of current accumulation, these inventories could reach the level of one month’s production soon. At that point, the management of these plants may well have some very difficult questions to answer: should they shut down for the full month and start laying off full-time, permanent staff? At the moment, they are coping by cutting down the number of shifts, thus raising the number of NPDs during which their workforce is sent on forced, unpaid leave. The situation is aggravated further by the second-round impact on the vendors — those manufacturers whose output feeds into the auto assemblers. According to one estimate, for every one job in the main auto assembly sector, there are eight jobs in the vending and ancillary industry. So if the auto assemblers have laid off an estimated 4,000 people, given the cut in the number of shifts and increasing NPDs, the vendors are likely to have dismissed the services of close to 32,000 people, a figure that becomes even larger if we include other related industries. And this is just the beginning of the story.

Of course, this is a global trend. The auto industry in many other countries is reeling from contracting demand. It is also a larger trend seen in manufacturing, within Pakistan as well as in the region and beyond. But two things should be borne in mind. First, in other countries the government is taking active measures to help support the industry in its time of crisis. India, for example, rolled out its package of measures to help the industry in late August. Second, the trend of an aggravated slowdown is visible across manufacturing sectors, but the auto sector is employment-heavy, and the government has an obligation to safeguard jobs. There are good reasons why the government should also take steps to alleviate the problems of manufacturing in general, if only to help protect employment and save whatever is left of the country’s productive base. It is high time we realised that this situation will not self-correct.

Published in Dawn, September 25th, 2019

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