Greater Noida plant closure sees 1,300 Honda employees take VRS, 20 relocated to iCAT

After last week’s media reports that it has ceased manufacturing operations at its Greater Noida plant, Honda Cars India (HCIL) today officially confirmed the same in a press statement.

The company release states: “To maintain sustainability of operations by leveraging production and supply chain efficiencies, HCIL has decided to consolidate the manufacturing operations for vehicles and components at its Tapukara plant in Rajasthan with immediate effect for all domestic sales and exports.”

President and CEO Gaku Nakanishi, was quoted as saying: “Despite an uptick in sales in the last three months, the current market conditions remain unpredictable for the industry at large. The impact of Covid-19 has pressed us to strengthen our constitution, and to achieve the same, HCIL has decided to consolidate its manufacturing operations by making the Tapukara plant a unified manufacturing base.”

“HCIL continues to believe in the resilience of the Indian economy and hope for a quicker recovery of the market. India is extremely important market in Honda’s global strategy and HCIL is committed to bring its latest and advanced technology models including electrified vehicles in future,” Nakanishi added.

The announcement also mentions that while the company has stopped production at the 100,000-unit Greater Noida plant, all corporate (head office) functions such as sales and marketing, purchase, finance and human resources along with R&D are going to operate from this 150-acre facility which was gradually restricted to only assemble the two CKD models – Honda Civic and CR-V – which have also been discontinued with this decision. 

While Covid-19 has affected businesses globally, it is learnt from sources that right from the start of 2020, HCIL has been carefully executing its strategy to close operations at the aforementioned unit, due to a slowdown in demand for its products over the last few years. Volumes in FY2020 closed at 102,116 units, registering a 45 percent year-on-year sales decline, while the company simultaneously faced a challenge of overcapacity with an additional 180,000 units-per-annum lying underutilised at its second plant in Tapukara, which commenced operations in 2014. HCIL’s passenger vehicle market share between April and November 2020 sits a shade over 3 percent. 

Relocation over four rounds of VRS
Autocar Professional’s sources reveal that the company began issuing alluring VRS (Voluntary Retirement Scheme) offers to its manufacturing operation associates in January 2020, followed by extending the same to employees in other related functions in July 2020.

US-based talent outsourcing and placement agency Lee Hecht Harrison (LHH) was appointed to assist employees in making a smooth “career transition”, sources told Autocar Professional on the condition of anonymity.

Two more rounds of VRS settlements were conducted in September and October, respectively, to draw to a total of 950 assembly line associates availing the relocation scheme, while close to 400 general staffers out of an estimated 1,500 including those in regional offices, are learnt to have opted for the “healthy compensations” offered by the company in its accord to cease regular production at this two-decade old facility.

The criteria to qualify for the VRS is learnt to be based on the number of years served by an employee – a minimum service tenure of five years – or being of the minimum age of 40 years.

20 employees stationed at iCAT Manesar
HCIL has also stationed around 20 of its associates from R&D, vehicle testing and homologation teams to the nodal vehicle testing and certification body in North India – iCAT Manesar. These employees, while still on the payroll of HCIL, are reliably learnt to have been permanently working from the testing centre located in the IMT district of Manesar in Haryana after the easing off of the lockdown restrictions in June-July earlier this year.

The decision, while aiding the day-to-day work of these employees also understandably focuses on reducing the headcount at the Greater Noida office building, which looks like it will have to be signed off soon as well.

New corporate office in Gurgaon
Even as the entire Greater Noida employee relocation drive is underway, sources say that the management could explore merging a part of the permanent staff with that of Honda Motorcycle & Scooter India’s (HMSI), based out of its corporate office located on Golf Course Extension Road, Gurgaon.

There are also some talk that HCIL will eventually pull the plug on the Greater Noida unit with a new corporate office in Gurgaon, so as to make it convenient for its teams other than manufacturing to function efficiently by being in relative proximity to the Tapukara plant.

The new financial year FY2022, from April 2021, is perhaps being considered to make the complete switch in a way to also be in sync with the school calendar and allow easier relocation for its existing employees with their families.

More efficient supply chain
Even though it paints a grim picture in an already tough scenario presented by the pandemic, HCIL looks to have made the right decision after weighing its options to reduce its piling-up losses. The Tapukara plant is much closer to the component-supplying belts of Manesar and Bhiwadi, where Honda itself has a flourishing supplier park with companies such as Bestex India, Yachiyo India and Motherson Automotive Technology and Engineering, located adjacent to its 450-acre campus off the Alwar highway in Rajasthan.

Moreover, while HCIL will no longer sell the flagship Civic and CR-V models in India, the company’s focus is learnt to finally be on the crossover segment, one where it needs a product almost immediately.

After a strategy flip-flop of mid-way pulling out of the Honda HR-V project in India, the company is learnt to be in the works to introduce an Amaze compact sedan-based entry-level crossover, targeting the Maruti Vitara Brezza, Hyundai Venue and Kia Sonet.

But, will the anticipated 2022 timeline leave enough oxygen for Honda Cars India to sustain its declining business in India? We will keep a tab.