Philips India - Labor Problems at Salt Lake
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Case Details:
Case Code : HROB004
Case Length : 05 Pages
Period : 1992-2000
Organization : Philips India Videocon
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Consumer Goods & Services
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
Selling Troubles
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In the mid-1990s, Philips decided to follow Philips NV's worldwide strategy of
having a common manufacturing and integrated technology to reduce costs. The
company planned to set up an integrated consumer electronics facility having
common manufacturing technology as well as suppliers base. Director Ramachandran
stated that the company had plans to depend on outsourcing rather than having
its own manufacturing base in the future. The company selected Pune as its
manufacturing base and decided to get the Salt Lake factory off its hands.
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In tune with this decision, the employees were appraised
and severance packages were declared. Out of 750 workers in the Salt Lake
division, 391 workers opted for VRS. PIL then appointed Hong Kong and
Shanghai Banking Corporation (HSBC) to scout for buyers for the factory.
Videocon was one of the companies approached.
Though initially Videocon seemed to be interested, it expressed reservations
about buying an over staffed and under utilized plant. To make it an
attractive buy, PIL reduced the workforce and modernised the unit, spending
Rs 7.1 crore in the process.
In September 1998, Videocon agreed to buy the factory through its nominee,
Kitchen Appliances India Ltd. The total value of the plant was ascertained
to be Rs 28 crore and Videocon agreed to pay Rs 9 crore in addition to
taking up the liability of Rs 21 crore. Videocon agreed to take over the
plant along with the employees as a going concern along with the liabilities
of VRS, provident fund etc. The factory was to continue as a manufacturing
center securing a fair value to its shareholders and employees...
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Judgement Day
In December 2000, the Supreme Court finally passed judgement on the
controversial Philips case. It was in favour of the PIL. The
judgement dismissed the review petition filed by the workers as a
last ditch effort. The judge said that though the workers can demand
for their rights, they had no say in any of the policy decisions of
the company, if their interests were not adversely affected.
Following the transfer of ownership, the employment of all workmen
of the factory was taken over by Kitchen Appliances with immediate
effect... |
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