16-10-2012, 12:14 PM
Philips India - Labor Problems at Salt Lake
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SELLING BLUES
The 16th day of March 1999 brought with it a shock for the management of
Philips India Limited (PIL). A judgement of the Kolkata[1] High Court
restrained the company from giving effect to the resolution it had passed in
the extraordinary general meeting (EGM) held in December 1998.
The resolution was to seek the shareholders’ permission to sell
the color television (CTV) factory to Kitchen Appliances
Limited, a subsidiary of Videocon. The judgement came after a
long drawn, bitter battle between the company and its two
unions Philips Employees Union (PEU) and the Pieco Workers’
Union (PWU) over the factory’s sale.
PEU president Kiron Mehta said, “The company’s top
management should now see reason. Ours is a good factory
and the sale price agreed upon should be reasonable. Further
how come some other company is willing to take over and
hopes to run the company profitably when our own
management has thrown its hands up after investing Rs.70
crores on the plant.”
Philips sources on the other hand refused to accept defeat. The company
immediately revealed its plans to take further legal action and complete the
sale at any cost.
SOURING TIES
PIL’s operations dates back to 1930, when Philips Electricals Co. (India) Ltd.,
a subsidiary of Holland based Philips NV was established. The company’s
name was changed to Philips India Pvt. Ltd. in September 1956 and it was
converted into a public limited company in October 1957. After being initially
involved only in trading, PIL set up manufacturing facilities in several
product lines. PIL commenced lamp manufacturing in 1938 in Kolkata and
followed it up by establishing a radio manufacturing factory in 1948. An
electronics components unit was set up in Loni, near Pune, in 1959. In 1963, the Kalwa factory in Maharashtra began to produce electronics measuring
equipment. The company subsequently started manufacturing
telecommunication equipment in Kolkata.
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.
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.
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 7.1 crore 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 28 crore and Videocon
agreed to pay Rs 9 crore in addition to taking up the liability of Rs 21 crore.
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.
JUDGEMENT DAY
In December 2000, the Supreme Court finally passed judgement on the
controversial Philips case. It was in favour of the PIL. The judgement
dismissed the review petition filed by the workers as a last ditch effort.
The judge said that though the workers can demand for their
rights, they had no say in any of the policy decisions of the
company, if their interests were not adversely affected.
Following the transfer of ownership, the employment of all
workmen of the factory was taken over by Kitchen Appliances
with immediate effect.
Accordingly, the services of the workmen were to be treated as
continuous and not interrupted by the transfer of ownership.
The terms and conditions of employment too were not
changed. Kitchen Appliances started functioning from March
2001.