Wednesday, November 11, 2009

Some bumps ahead but not a dead end

plagued by labour unrest, auto majors in INDIA May have cause for worry, yet doubts about the country's capability to be a global hub are unfounded, reports Pawan Chabra

For the global automotive industry majors, India has for a long time been a favoured driveway. With companies like Hyundai, Toyota and even Ford choosing this country as their manufacturing hub, the sector is enjoying one of its best growth phases ever. However, one cannot deny that this is a labour intensive industry and it has hence been buffeted by recurring incidents of labour unrest in the country. Industry watchers claim that India (which is currently the second largest two-wheeler market in the world after China) is well on course to becoming the seventh largest passenger car market worldwide (currently the eleventh largest) by 2016. However, the current labour problems that are looming large over companies like Rico, Honda Motorcycle and Scooters India Limited (HMSI) and Sunbeam in the Gurgaon-Manesar belt have once again ignited the debate on whether India can indeed grow into a major hub for automotives in such a scenario. The billion-dollar quation to be asked is: will such incidents slow down the growth of the Indian automotive industry in the long run?

The problems started with the strike at HMSI’s plant when the majority of the 5,500 workforce decided to launch a 'go- slow' in August. As a result of the action, production at the HMSI plant dropped by over 50%. HMSI filed a petition in the court threatening to take its operations out of India. In fact, the company has stopped taking orders for some of its models with the back-order touching 1.4 lakh units leading to a production loss of over Rs 300 crore for about 75,000 units of two-wheelers. Similarly, Rico, which supplies to giants like Maruti Suzuki and Hero Honda (market leaders in their respective segments) has been facing severe labour problems for the past one month. At present almost 95% of its 3,500 workers are on strike.

The protest became dangerous after a worker, Ajit Kumar Yadav, 26, died when police fired on agitating employees of the auto component manufacturer. In fact, the auto belt in the region of Gurgaon-Manesar was rocked by the industrial unrest that had been simmering for the past few months. About 8,000 workers walked off their jobs as the Communist Party of India-affiliated trade union, All India Trade Union Congress (AITUC) mobilised a protest against the death of the worker. The picture gets clearer when one looks at the issues from the workers’ point of view. “We are fighting here for our rights and the management has no right to exploit workers,” asserts Chander Jeet Singh, a member of the Rico’s employees union. “After all, it is also in our interest to keep our jobs. We didn’t do this to threaten the management,” said another worker protesting against the company.

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Source :
IIPM Editorial, 2009

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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