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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By 1996, PIL's capacity expansion plans had fallen way behind the targeted level. The unions realized that the management might not be able to complete the task and that their jobs might be in danger. PIL on the other hand claimed that it had been forced to go slow because of the slowdown in the CTV market. However, the unconvinced workers raised voices against the management and asked for a hike in wage as well. PIL claimed that the workers were already overpaid and under productive. The employees retaliated by saying that said that they continued to work in spite of the irregular hike in wages. These differences resulted in a 20-month long battle over the wage hike issue; the go-slow tactics of the workers and the declining production resulted in huge losses for the company. In May 1998, PIL announced its decision to stop operations at Salt Lake and production was halted in June 1998. At that point, PWU members agreed to the Rs 1178 wage hike offered by the management. This was a climbdown from its earlier stance when the union, along with the PEU demanded a hike of Rs 2000 per worker and other fringe benefits. PEU, however, refused to budge from its position and rejected the offer. After a series of negotiations, the unions and the management came to a reasonable agreement on the issue of the wage structure. |
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Selling Troubles
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.
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 71 million 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 280 million and Videocon agreed to pay Rs 90 million in addition to taking up the liability of Rs 210 million. 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.