M&M in Ssangyong no-strike deal

Written by Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Jan 6 2012, 10:00am hrs
At a time when Indias top car maker has been plagued by labour disputes, the countrys largest utility vehicle maker Mahindra & Mahindras move to extract a promise from over 1,500 workers of South Koreas Ssangyong Motors not to resort to any kind of strike for at least three years could set a precedent for the domestic automotive industry.

M&M, which acquired Ssangyong in November 2010, has signed an agreement that specifically listed out a quid pro quo solution to the vexing issue of labour troubles, president (automotive and farm equipment sector) of M&M Pawan Goenka said. The company is also scouting for local partners in Russia, Brazil and possibly China for distributorship of Ssangyong models.

Hit hard by the financial crisis and woes compounded by layoffs, the South Korean company had witnessed a series of labour disputes between 2007 and 2009. In fact, in 2009 close to 1,000 workers had seized Ssangyongs lone car plant at Pyeongtaek, bringing production to a halt for 77 days. During that period, some of the laid-off workers had also committed suicide, creating an environment of extreme tension in the factory premises.

However, since M&M acquired the firm, it has sought to keep a close eye on worker-management disputes, hoping that investing in production processes could make such issues a thing of the past. Its something very unique that happened and it is not often that you see such things. Specific promises were made by both sides: For instance, we assured the workers that as a company we would invest in the future of the company by way of product development, brand development and manufacturing capacity enhancement. These are the primary things the labour union was looking for, Goenka, who was a key negotiator for the M&M and Ssangyong deal, told FE on the sidelines of the Auto Expo, which began in the Capital on Thursday.

Goenka also added that Ssangyongs labour union had played a critical role in reaching a common ground. The leadership of the labour union of Ssangyong took a view that the need of the hour was for the company (Ssangyong) to get stronger and not look for any short-term gains for the workers.

M&M bought 70% stake in Ssangyong for $463 million in November 2010. While M&M has chosen to keep the current Ssangyong management intact, they have created a joint task force with representatives from both the parent and the acquired company to oversee operations.

Meanwhile, after having reached a financial stability at Ssangyong, M&M is now set to aggressively expand its reach across Asia, Latin America and parts of East Europe. Goenka said that M&M is scouting for local partners to enter into a completely knocked (CKD) unit model for Ssangyong products in Russia, Brazil and possibly China too. At present, though Ssangyong exports to China and Russia they do not have a CKD model, which is followed by M&M elsewhere, where they tie up with a local distributor for their range of products.

For the Indian market too the company would follow a similar CKD policy, Goenka said. On Thursday M&M showcased two Ssangyong products Rexton and Korando. While the company is set to launch the Rexton by the first half of the next financial year, they are still undecided on the date for the Korando E launch. In 2011, the company is likely to sell around 1.14 lakh units with a growth of close to 40%. M&M expects Ssangyong to sell up to 3 lakh units by 2015-16.