Auto vendors warn of layoffs, salary cuts

Published May 1, 2020
Leading Japanese assemblers are yet to show the exit gate to their workers and staffers despite production closures. — AFP/File
Leading Japanese assemblers are yet to show the exit gate to their workers and staffers despite production closures. — AFP/File

KARACHI: Auto vendors would lay off 20 per cent workers besides unwilling to pay April and May salaries to the employees in case assembling of vehicles in the country continues to remain shut for more months.

However, leading Japanese assemblers are yet to show the exit gate to their workers and staffers despite production closures since the second week of March.

The countrywide lockdown is expiring on May 9 but it is unclear whether the government would extend it or ease it despite rising deaths related to coronavirus.

A spokesman of Indus Motor Company (IMC) said the company did not lay off any workers nor cut their salaries for March and April.

Similarly, officials of Honda Atlas Cars and Pak Suzuki Motor offered similar responses, saying no employees have been made redundant or salaries reduced during the past two months.

On the contrary, vendors of automobile assemblers are in a quandary as they are mainly dependent on sale of locally made vehicles.

“We may have to reduce at least 20pc workforce in the coming months in case lockdown extends from May 9,” Pakistan Association of Parts and Accessories Manufacturers Association (Paapam) Chairman Mohammad Akram told Dawn on Thursday from Lahore.

“Our members have paid full March salaries but majority of them will either cut them by 50-60pc for April or be unable to pay salaries,” he said attributing zero automobile sales and production from mid March.

Akram recalled that vendors had already laid off 50pc of workers since July 2019 (and before the coronavirus outbreak) as the sector had posted a sharp decline in sales especially over a 40pc drop in car volumes.

According to him, the State Bank of Pakistan’s recent payroll refinance scheme is not workable as the banks are asking for collaterals, which their members, being financially overstretched, cannot provide. In any case, with no inflows, the additional debt burden to pay salaries to employees is unbearable, he added.

He urged the federal government to intervene urgently to resolve this issue as, in view of the prolonged lockdown, it would be impossible for the industry to pay salaries and wages for April and onwards.

Akram called upon the government to create a special fund to directly pay salaries and wages to the employees of the small and medium enterprise sector from April 1 until lockdown ends.

The SBP relief packages are primarily focused on deferral of Long-Term Financing facilities while Paapam members are mostly using short-term facilities on which no relief has been announced.

Further, the chairman said the SME Utilities bill package has a coverage of 7KW to 70KW, which means Paapam members aren’t covered as most have installed power ranging between 100KW and 400KW.

Published in Dawn, May 1st, 2020

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