Plan aimed at minimising any direct redundancies.
Only a few months earlier, labour unions at Jaguar and Land Rover (JLR) facilities in Britain strongly defied all attempts by the management towards any restructuring of pension plans or cutting pay of new hires by a fifth.
However, Tata Motors, owner of the two luxury brands, has reiterated its intention to do so, by having employees accepting lower benefits or making a higher contribution to match current benefit levels. And, new hires, who will perhaps come on board in April, will join a defined contribution pension scheme. Some days earlier, JLR announced it would hire over 100 graduates and under-graduates next year to fill vacancies across divisions.
These efforts are being made to withstand the financial crunch in running the two expensive brands, while trying to avoid or minimise any direct redundancies at the plants.
In April, the management and the unions had agreed on changes to wage terms, where the employees agreed to take a two-year freeze on increments and in return the company assured no job cuts.
Tata Motors was forced to cut production, reduce the headcount, suspend bonuses and also encouraged employees to take a sabbatical. It further tightened its purse strings, especially after the appointment of KPMG and Roland Berger Strategy Consultants a few months earlier, to advise on cost cutting and better management of cash flows.
C Ramakrishnan, chief financial officer, Tata Motors, said at a recent conference call: “We have just begun discussions on pension revaluation. There will be some attempt towards pension restructuring.”
As of September 30, the total pension fund obligation was valued at £3.9 billion (Rs 29,554 crore) and the fair value of the pension assets was £3.6 billion (Rs 27,280 crore), marking a deficit of about £300 million (Rs 2,274 crore). This deficit has widened from pre-June, when it was about Rs 1,600 crore. Tata Motors has to complete the pension revaluation process by July next year.
Through frequent dialogue between the management and the unions over the past three months, the tough stand taken by the JLR unions have also softened. The unions have agreed to discuss the pension scheme, while allowing room for some concessions. However, no ‘substantial’ changes are expected.
“We have announced our intention to reduce the entire different-benefits scheme and we have also announced our intention to move the labour force more and more towards a younger and better cost-effective one,” Ramakrishnan added.
Tata Motors has already made public its intention of shutting one of the two vehicle manufacturing plants based in the West Midlands. The Solihull plant, which makes Land Rover models, may face closure due to quality issues, according to industry reports. Its other plant, in Castle Bromwich, produces the Jaguar range of sedans. However, actual shutdown will happen only after five to six years.
