Philips India - Labor Problems at Salt Lake

Souring Ties Contd...

In the wake of the booming consumer goods market in 1992, PIL decided to modernize its Salt Lake factory located in Kolkata. Following this, the plant's output was to increase from a mere 40000 to 2.78 lakh CTVs in three years. The company even expected to win the Philips Worldwide Award for quality and become the source of Philips Exports in Asia. PIL wanted to concentrate its audio and video manufacturing bases of products to different geographic regions.

In line with this decision, the company relocated its audio product line to Pune. In spite of the move that resulted in the displacement of 600 workers, there were no signs of discord largely due to the unions' involvement in the overall process. 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.

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.

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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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