One of the most aspirational mass-market car brands, Honda had already been facing shrinking sales in India which is hit harder due to the pandemic. The company known for its strong HR policies has recently rolled out a Voluntary Retirement Scheme (VRS). According to sources a large number of senior and mid-level executives have opted for the scheme. The carmaker is providing them salary of 12 to 15 months along with assistance from an HR firm to secure them alternate jobs.
New Delhi: A good number of senior executives are going out of Japanese carmaker Honda Cars India under the Voluntary Retirement Scheme or VRS, initiated by the company, which has seen several key functionaries leaving the entity pointing to a grim scenario as the entire automobile industry grapples with some extremely tough market conditions.
Honda Cars India, the wholly-owned subsidiary of Japanese Honda Motor Company first time rolled out VRS scheme in January 2020 for plant workers. Sources suggest in the fresh VRS scheme some senior executives in the critical functions like marketing, sales, dealer-development, human resource and quality are opting for the scheme.
Honda’s key executive list doing the rounds includes key functionaries like Sunil Gambhir in the Business Development/Corporate Affairs, Tanuj Singh Sandhu in dealer development department are other names in the fast stretching list of exits. Earlier in March, Honda Cars also announced restructuring where Rajiv Gupta, VP sales and marketing and Anil Baveja, General Manager, Marketing & Strategy were moved out from day to day activities and Kunal Behl took over as national sales and networks head.
This is the second VRS by Honda Car India in 2020 after it had launched employee exit options for its associates from the workforce in January earlier this year
In a long drawn exercise where the company know for being top heavy is reportedly targeting around 80-odd executives in the ongoing VRS to leave or exit the company rolls, the list extends to many senior executives who had spent decades with Honda and few almost from the inception.
Honda operating the car making subsidiary since 1995 has been one of the most successful carmakers in the market with especially its City sedan; currently running into fifth generations and has been a blockbuster product and a leader for long in its segment. The Civic in its earlier avatar was an extremely aspiration and successful car, but the current generation has failed to live up to the expectation and revive similar fairings.
The company has been facing reverses with its lopsided strategy of targeting the premium segment and then shifting to the mass market with small cars and hatchback and reverting into premium stay with the return of its Civic after a long hiatus and the CR-V now strapped with diesel for the first time. All these have failed to make the desired dent in the Indian market and the struggle for Honda has only intensified despite the fact that it developed and introduced some diesel engines especially for India.
Now the exodus raises questions over the viability of its business in India where its sales are only sliding and making it tougher with each passing month. In the latest month, July sales dipped 47 percent to 5,383 units which were substantially higher than most peers and rival carmakers.
It would be interesting to watch how does Honda Cars’ story unfold in India. Auto industry veterans say Honda’s cost-cutting drive comes at a time when it ideally should be vying for new ideas to generate sales and improve its hugely idle production capacity.
The VRS is nothing new in the Indian automobile industry that has taken these measures to underscore the cyclical nature of the market with a highly fluctuating demand and production. Virtually every brand in the market has taken measures to arrest the downward cycles, but over the years a consistent growth and maturing market have prevented the use of pink slips and VRS that normally backfires.
In today’s scenario, amid the ongoing Covid pandemic the market is witnessing harsh times with only segment leaders gaining from the recovery and Honda has not been able to capitalise on its brand power and technological edge.
The voluntary scheme was for associates over 40 years of age or who have completed 5 years of service
While the exact number of the exit could not be ascertained till the time of loading the story, the company in an emailed response said, ““We had rolled out a Voluntary Retirement Scheme for the office associates which aimed to provide a win-win situation for the associates in terms of the overall benefits as well as the company to be able to enhance efficiency in operations, given the current market demand and industry forecast.
The voluntary scheme was for associates over 40 years of age or who have completed 5 years of service. We cannot share the specific details, but being an employer based on trust, the scheme focused on welfare of our associates and the benefits were among the best in the industry to help them explore new dimensions in their life & career smoothly. It not only offered financial and health security but associates are also being provided support from internationally acclaimed HR firms towards a smooth career transition.”
On the questions of the future of Honda Car India and the impact of the recent exits, the company added, “The VRS was offered after careful consideration that it will not impact any of our business activities and will help us increase our operational efficiency.”
The company said that the previous VRS in January was for factory associates and was very well received. Honda Car India Limited has rolled out a VRS for its associates who are above the age of 40 years or have completed five years of service with the company. Amid the ongoing process, many of its (HCI) departments will become very lean staff to keep it going in both the head office and the zonal offices.