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The company had a host of internal problems – particularly human resource troubles at the Uttarpara plant. The Uttarpara plant had workforce of 14,000 employees and the wage bill alone constituted 22% of plant's expenditure. Against the standard output of 8-10 cars per employee per annum, the plant's output was as low as 3 cars. Analysts claimed that with the 1999 production level of 2500 cars, the plant should have been staffed with no more than 3,000 personnel. Annual production at the plant declined from 30,822 cars in 1995-96 to 26,684 cars in 1996-97. In November 1997, 2835 Ambassadors and 146 Contessas were produced.
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The numbers came down to 1385 and 33 respectively by October 1998. In its bid to turn around the plant, HM invested around Rs 750 million to modernize the assembly line, build new body and paint shops and purchase new equipment. The company also embarked on a cost-cutting exercise and announced a Voluntary Retirement Scheme (VRS) for workers in April 1998 and again in November 1998, offering a Rs. 0.1 million package. However, the VRS was not received well by the strong Center of Indian Trade Union (CITU) and the Indian National Trade Union Congress (INTUC)6 led employee unions. Commenting on a similar VRS offered by the Fiat management at its Kurla, (Maharashtra) plant, employees said "Workers at the Fiat factory at Mumbai have got an average of Rs.0.35 million per worker while we are fobbed off with such measly sums." |
The strong political patronage to the employee unions made it tough for the management to convince workers about the VRS. Both the CITU and INTUC union leaders refused to accept the VRS offered by the company. The unions were confident that the West Bengal State Government would back them on the issue. As employee protests intensified, HM approached the state government with a proposal to run the plant for only three days in a week, in an attempt to save Rs. 0.32 million every week. The company also promised that it would continue to pay the workforce full wages for an entire week. However, the government rejected HM's proposal, following which the company decided to seek legal recourse.
6] Two of the biggest trade unions in the country, the CITU was affiliated to the CPI-M party, while the INTUC was an
affiliate of the Congress party.
Case Code : BSTR021
Themes: Turnaround Strategy
Case Length : 10 Pages
Period : 1998-2002
Organization : Hindustan Motors
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Automobile & Automotive
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