Philips India - Labor Problems at Salt Lake

Selling Troubles Contd...

The unions challenged PIL's plan of selling the CTV unit at 'such a low price of Rs 9 crore' as against a valuation of Rs 30 crore 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 21 crore. 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 9.2 crore."

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. The unions approached the company with an offer of Rs 10 crore in an attempt to outbid Videocon.

They claimed that they could pay the amount from their provident funds, cooperative savings and personal savings. But PIL rejected this offer claiming that it was legally bound to sell to Videocon and if the offer fell through, then the union's offer would be considered along with other interested parties. PIL said that it would not let the workers use the Philips brand and that the workers could not sell the CTVs without it. Moreover the workers were taking a great risk by using their savings to buy out the plant. Countering this, the workers said that they did not trust Videocon to be a good employer and that it might not be able to pay their wages. They followed it up with proofs of Videocon's failure to make payments in time during the course of its transactions with Philips.

In view of the rejection of its offer by the management, the union stated in its letter that one of its objection to the sale was that the objects clause in the memorandum of association of Kitchen Appliances did not contain any reference to production of CTVs. This makes it incompetent to enter into the deal. The union also pointed out that the deal which was signed by Ramachandran should have been signed by at least two responsible officials of the company. As regards their financial capability to buy out the firm, the union firmly maintained that it had contacts with reputed and capable businessmen who were willing to help them.

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Case Details

Case Code : HROB004
Themes: HR Problems
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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