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PHILIPS INDIA LIMITED : LABOR UNREST at SALT LAKE PLANT

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1930• Philips started operations in india at kolkata (calcutta) ias “Philips

electrical co. (India) pvt ltd• Comprised a staff of 75 and was a sales outlet for imported lamps

1938• Set up its first indian lamp-manufacturing factory in 1938 in kolkata• Subsequently started producing radio receivers

1957• Converted into a public limited company• Renamed “Philips India ltd”

1963• Invented the compact audio tape cassette and sets a global standard

for tape recording

1970 • New consumer electronics factory is started in Pimpri near Pune

TIMELINE OF PHILIPS INDIA LIMITED

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1982 • Philips introduced colour television transmission to India

1983 • Philips launched the compact disc 

1985• Philips inaugurated its consumer electronics factory at Salt lake,

kolkata

1993 • Philips launched its domestic appliance business in india

Cont..

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• The case study is about the labor problems of the Philips India Limited at Salt Lake factory, Kolkata India

• Labor Unrest is due to following reasons

1. Wage Structure

2. Selling of Plant to Videocon

• Two active Trade Unions at PIL were

1. Philips Employee Union (PEU) and

2. Piece Workers Union (PWU).

CASE DETAILS

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In 1992 PIL decided to modernize its Salt Lake factory located

in Kolkata the plant’s output

was to increase from a mere 40000 to 2.78 lakh CTVs in three

years

• PIL wanted to

concentrate its audio and video mfg. bases of products for different geographies

• In line with this decision, the company relocated its audio product line to Pune

• This resulted in

the displacement of 600 workers

• Due to involvement of Unions in process there were no signs of discord

Cont..

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Workers raised voices against mgt and asked

for hike in wages

Differences in interest of mgt and workers led to 20

months long battle over wages moreover

go slow tactic of worker led to huge

lose to PIL

In May 1998 PIL announced to stop

production

Series of negotiations led to agreement on

wage structure

Cont..

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• In the mid-1990s, Philips decided to follow the strategy of having a common manufacturing and integrated

technology to reduce costs.

• Director Ramachandran stated that the company had plans to depend on outsourcing rather than having its

own manufacturing base in the future

• Company selected Pune as its manufacturing base and decided to get the salt lake factory off its hands

• Employees were appraised and severance packages were declared

• Out of 750 workers in the salt lake division, 391 workers opted for VRS

• PIL appointed HSBC to scout buyers for factory

• Videocon approached as buyer but had reservations about over staffed and under utilized plant

• To make deal attractive PIL reduced the workforce and spent 7.1cr in modernizing the plant ₹

• Videocon confirms Kitchen Appliances India Limited as its nominee for buying the plant

SELLING TROUBLES

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• Against the value of plant i.e 28 cr videocon agreed to pay 9 cr₹ ₹

• December 1998, a resolution was passed at pil’s annual general meeting (AGM) with a 51% vote in favor of the

sale

• Most of the favorable votes came from philips NV who held a major stake in the company

• Group of FI shareholders comprising LIC, GIC and UTI initially opposed the offer of sale

• 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

• Workers approached the videocon to withdraw from the deal

• Workers then filled petition in the kolkata high court challenging the sale agreement

• Unions however also approached the company with an offer of rs 10 crore in an attempt to outbid videocon

• PIL rejected the offer made by unions on legal grounds

Cont..

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• In March 1999, the Kolkata High Court passed an order restraining any further deals on the

sale of the factory

• Justice S.K.Sinha held that the transfer price was too low and PIL had to view it from a

more practical perspective

• PIL filed a petition in the Division bench challenging the trial court’s decision

Cont..

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• In December 2000 the Supreme Court finally passed judgment on the controversial case in

favor of PIL

• The judgment dismissed the review appeal filed by the workers.

• The Company transferred to Videocon Workers employment was taken over by Kitchen

Appliances.

• The transfer of ownership did not interrupt the services of workmen Kitchen Appliances,

which started functioning from March 2001

JUDGMENT

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• The factory has been design by Videocon as a major center to meet the requirement of the

eastern region market and export to East Asia countries

• The judgment said that though the workers can demand for their rights, they had no say in

any of the policy decision made by the company, if their interest were not adversely

affected

• The Supreme Court decision taken repeats the position which Philips has maintained all

long that the transaction will benefit the Philips’ shareholders

Cont..

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