Hero fears row over hikes may hit production

Jan 18 2013, 01:05 IST
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SummaryHero MotoCorp, which is facing a silent protest by workers at its Gurgaon plant over wage revision, has offered a hike of around R7,500 per month but has so far not been able to convince the workers, who are demanding around double the offered amount at Rs.14,000-15,000 per month, sources said.

Hero MotoCorp, which is facing a silent protest by workers at its Gurgaon plant over wage revision, has offered a hike of around R7,500 per month but has so far not been able to convince the workers, who are demanding around double the offered amount at R14,000-15,000 per month, sources said. The company’s management is worried that if the protest — which began on January 4 and entails workers working with black armbands but not resorting to violence or affecting production — is not resolved soon, it may take a turn for worse and affect production.

Sources said that the latest offer of a hike of R7,500 was made at a tripartite meeting of the management, workers and officials from the Gurgaon additional labour commissioner’s office on Wednesday evening. In fact, at the meeting the company increased its offer from the previous amount of around R6,500, which was similar to what was given to workers at its other plant at nearby Dharuhera in 2011.

When contacted, a company spokesperson said: “This information is incorrect. We have been holding talks with members of the Union at our Gurgaon plant with the hope of a reasonable and sustainable settlement. It is, therefore, not appropriate at this point of time to get into specific details with regard to the ongoing talks, until we reach an amicable conclusion.”

“Negotiations were on till late Wednesday evening under which the company increased its offer from R6,500 to R7,500. The company probably feels that it can’t hike wages at Gurgaon much more than what has already been offered at Dharuhera plant in 2011, so as not to create a discord since the two plants are located within a span of few kilometres,” a source said.

According to the company, the average monthly wage at the Gurgaon plant stands at R46,000, while new entrants get R40,000, a significant portion of the salaries being variable based on performance.

“As a company we are known for maintaining good employee relations. The wage negotiations are being done in a peaceful manner and we are hopeful that both parties will reach a settlement soon,” Hero MotoCorp CFO Ravi Sud said in an investor call on Thursday following the announcement of the company’s third-quarter earnings.

A source at the Gurgaon plant union said that the workers will continue with the ‘silent protest’ for another week before looking at options like a tool-down strike or a slowdown in production. Apart from the black bands, the workers have been protesting by boycotting company-provided snacks.

“The meeting went on till late on Wednesday evening but no solution has been found regarding our demands yet. Workers’ salaries are a very small component of their expenditures and many of us have been working for 15-16 years, so we should see a good pay hike. We have agreed to all of the management’s production target requirements for the next few years,” the source in the union said.

One of the three major automakers in the Gurgaon-Manesar industrial belt, the pressure on Hero to hike wages for its workers has risen ever since Maruti Suzuki in September last year increased wages for its Gurgaon plant employees by 50%, which translated into a monthly hike of Rs 18,000. Then a few weeks ago, Honda Motorcycle and Scooter India also offered a 50% wage hike, translating into a monthly hike of Rs 14,750 to the workers at its Manesar plant. Though both wage agreements are spread over three years, about 60-70% of the pay increase will come in the first year itself. Employees at both companies also avail other benefits including transport, housing assistance and medical allowances for families.

Wages of jobs

* Hero MotoCorp’s wage costs as a percentage of net sales stood at 3.2% in FY12, against Maruti’s 2.3% in the same fiscal

* Hero MotoCorp is the market leader in two-wheelers; unit sales in April-December FY13 were down 2% (4.42 million), FY12 sales were up 15% (6.06 m)

* It has three plants (Dharuhera, Gurgaon and Haridwar) with a combined annual capacity of around 7 million; two more are coming up in Rajasthan and Gujarat, taking capacity to 9-10 million in the next 2-3 years

* Hero bought out Japanese JV partner Honda in 2011 and is now aggressively expanding in global markets with plans for assembly plants in South America and Africa

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