Philips India - Labor Problems at Salt Lake
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Details
Themes: HR Problems
Period : 1992-2000
Organization :Philips India Videocon
Pub Date : 2002
Countries : India
Industry : Consumer Goods & Services
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Case Code : HROB004
Case Length : 05 Pages
Price: Rs. 200;
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In December 1998, a resolution was passed at PIL's annual general meeting (AGM) with a 51% vote in favor of the sale. Most of the favorable votes came from Philips NV who held a major stake in the company. The group of FI shareholders comprising LIC, GIC and UTI initially opposed the offer of sale stating that the terms of the deal were not clearly stated to them. They asked for certain amendments to the resolutions, which were rejected by PIL. Commenting on the FIs opposing the resolution, company sources said, "it is only that the institutions did not have enough time on their hands to study our proposal in detail, and hence they have not been able to make an informed decision." Defending the company's decision not to carry out the amendments as demanded by the financial institutions, Ramachandran said that this was not logical as the meeting was convened to take the approval of the shareholders, and the financial institutions were among the shareholders of the company. Following this, the FIs demanded a vote on the sale resolution at an EGM. After negotiations and clarifications, they eventually voted in favor of the resolution. The workers were surprised and angry at the decision. Kiron Mehta said, "The management's decision to sell the factory is a major volte face considering its efforts at promoting it and then adding capacity every year." |
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S.N.Roychoudhary of the Independent Employees Federation in. Calcutta said, "The sale will not profit the company in any way. As a manufacturing unit, the CTV factory is absolutely state-of-the-art with enough capacity. It is close to Kolkata port, making shipping of components from Far Eastern countries easier. It consistently gets ISO 9000 certification and has skilled labor. Also, PIL's major market is in the eastern region."
The unions challenged PIL's plan of selling the CTV unit at 'such a low price of Rs 90 million' as against a valuation of Rs 300 million made by Dalal Consultants independent valuers. PIL officials said that the sale price was arrived at after considering the liabilities that Videocon would have along with the 360 workers of the plant. This included the gratuity and leave encashment liabilities of workers who would be absorbed under the same service agreements. The management contended that a VRS offer at the CTV unit would have cost the company Rs 210 million. Refuting this, senior members of the union said, "There is no way that a VRS at the CTV unit can set Philips by more than Rs 92 million." They explained that PIL officials, by their own admission, have said that around 200 of the 360 workers at the CTV unit are less than 40 years of age and a similar number have less than 10 years work experience. The unions also claimed that they wrote to the FIs' about their objection.
The workers then approached the Dhoots of Videocon requesting them to withdraw from the deal as they were unwilling to have Videocon as their employer. Videocon refused to change its decision. The workers then filed a petition in the Kolkata High Court challenging PIL’s decision to sell the factory to Videocon.