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    The CompanySIL was established by the Government of Indiain 1972, as a. public sector enterprise, byimporting old plant and machinery from anautomobile company in Italy that had closeddown its scooter manufacturing activity a fewyears back. In 1991, the company employed alittle over 3200 persons, 85 per cent of themconstituting the labour force. Its financialperformance since inception had been poor andhad deteriorated at a faster rate in the later partof 80s. Owing to disturbed union-managementrelations, the management had started operatingfrom a location away from the factory. In theyear 1989-90, the company had incurred-arietloss of Rs 404 million on a sale of Rs 103 millionand had an accumulated loss of Rs 2,125 million.In 1987, the government had explored thepossib il i ty of even selling the company to aleading automobile giant in the private sector,but the talks failed, as' the latter was reluctantto accept the total labour force, which wasthought to be far in excess of the requirementso r meagre production. By 1998, however, thecompany had touched a sale of Rs 1279 miIH"I"},_and c ar n e' d a net profit of Rs 119 million .. Thisshattered several myths about the competenceand potential of the company.

    The New Chief ExecutiveDr Sahay had joined the company as GeneralManager (Foundry) in 1977 after stints i n bothpublic and private sector companies of repute.In SIL, he had served in all major functionslike Manufacturing, Ancillary Development,Engineering, R&D, Personnel and Administra-tion, Finance, and Marketing. He had movedup to the position of General Manager(Production) and then to General Manager(Marketing); the position he held prior toproceeding ,ana long leave in the year .1989.He was called back to take charge from the thenExecutive Director Mr P S Kapoor, who hadjoined SIL on deputation from Indian Railways.Mr Kapoor was relieved from the company inFebruary 1990, on expiry of his five year tenure.Val. 26, No.2, April-june 2007 60

    When the then part ti.meVishwanath Anand, Joint SecretaryMinistry, informed Dr Sahay that .Kapoor was being released from thetojoin his parent department and that hetake over charge from Mr Kapoor, Drwas taken by surprise. Though seniority bthe General Managers was disputed fromto time, on record, Mr P D Joshi (Manager, Production) was senior andaction was rather unusual. For Dr Showever, it was Hobson's choice. Insteadtaking over charge. in haste, he thought thatshould have a word with his senior colleand then respond. Mr P D Joshi was theperson he contacted and revealed to himgovernment's intention. He also advisedJoshi that should he desire to represent,should do so or else he should extendcooperation so that they could work as a t eand take the company on the revival pThough Mr J oshi m ad e representations,Ministry was firm on its decision and Mr Kapowas in a hurry to leave. After due consulDr Sahay final1y took over charge fromKapoor on February 12, 1990. Some ofSenior Managers remarked: "Mr. Karemained in the company for over fivebut he will not be allowed to remain inposition even for five days." Duringinteraction with the then Industry Minster,was told that the government could not dolefurther money to the company. It was alsoclear that having failed to privatize thethe government was considering closingthe company. Dr Sahay, however, was convtnthat the company could be turned aroundhe had some specific plans for the Samethere were no supporters to his views.indicated to the Ministry that if the campwas to be closed down, then someoneshould be assigned the job, as he would notfor the closure of SrL. The Ministry respby saying that even for closing downManaging Director was required.insistence that he could run the coprofitably, he was asked what his plansand what help he needed from the Ministry.explained the overall situation and requested

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    Suppliers could meet marginal rise in ourdemand, but they were averse to investing foraugmenting their capacity for meeting thegrowing requirements of a company whosefuture was uncertain and hanging on the mercyof Board of Industrial and Financial Restructuring(BIFR). Problems notwithstanding, th~ CEOthrew to us the challenge of doubling theproduction in half the shop area, which initiallywe refuted, but to our great surprise, weachieved when he' started teaching usbenchmarking techniques."Coverage under BIFRIn September 1991, the Sick Industries ControlAct, 1985 (SICA) was modified to cover' thepublic sector enterprises also. Under the Act,an industrial undertaking whose accumulatedlosses were in excess of its net worth come underthe purview of the BIFR. Since SIL hadaccumulated losses in excess of the net worthway back in 1988 itself, the company informedthe BIFR promptly. to avoid personal liabilitiesof the Directors, if any. A few months later,81 fR declared the company sick under SICA.

    The market sentiments changed rapidly asall the key stakeholders like suppliers, dealers,bankers, etc. got anxious. Dealers started askingfor their advance money and suppliers chokedsupply. They immediately sent a delegation todiscuss the issue with BIFR. Dr Sahay tried hisbest to ward off any disruption in productionand sales. Fortunately, SIL was meeting thecommitment made. to various stakeholdersespecially the bankers over the past two yearswhich en ab le'd the company enjoy theirconfidence. They believed the Chief Executive(as he had been keeping his promises), althoughthey were still not sure to what extent thecompany would be able to revive itself.

    "Right from the beginning I had maintainedthat sate value realized will not be used formaking any personal payments. The basic salaryand wages were being paid by the government,but not fringe benefits like the LTC/ leave

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    encashment, etc. Our raw material compowas roughly 60 per cent of sale" price.making payment to suppliers, we were leftsome money, which I thought should beto pay the bankers to regularise ourOur cash credit limit with SBI was around50 million, but it was already stretched to aRs 90 million and with interest, etc itreached Rs 110 million. The principal andinterest were not being paid. The accountbecome highly irregular and the bank wasready to allow it to operate. The cashaccount in lOB was equally alarming.requesting the bank to allow us to operateaccount, I promised to reduce the bank's expoby Rs 5 lakh per month I was strictly follothis. It restored the confidence of bankers, whelped in getting out of a very tight spot in whichwe found ourselves soon after referral to BIFR,when banks came forward in our support," saidDr Sahay.

    The company had got a study done by areputed consulting firm which, apart from productdiversification, recommended reducing them~power drasllcally to a level of 1700 to makeit viable. The opportunity came in December1993. The government had created a NationalRelief Fund under which large sums wereavailable for employees opting for voluntaryretirement. SIL announced a VoluntaryRetirement Scheme (VRS). All the officers hadi'opted for it. Earlier, in 1990, the leaders of thetwo unions and J AC had requested thegovernment to help. The then Prime Ministerhad indeed referred the matter to IDB! throughthe Industries Minister, but it could notthe inquiry as the company got coveredSICA in 1992. The Ministry, therefore,expressed to the worker/staff union representa-tives its inability to support the loss makingcompany. After this curt reply from the Ministryand the fact that all the officers had applied forvoluntary retirement, the leaders of the twounions also told their members plainly thatwas for the workers to decide what courseaction they would Like to follow: whether tofor voluntary retirement or wait and hope

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    out additional plant and machinery orowe):"," he concluded.

    Commenting on the issue of perception ofacity for three-wheeler manufacturing, aor officer said, "It is' true. Though we hadmachines that could be used for manufacturingth two-wheelers (scooters) and three-wheelers,had not realized the extent to which the'ties could be geared up to make three-eelers. As the Democles' sword of closurethe company hung visibly during the hearings

    of the BIFR, the pressure built up and we startedtrying harder to get the best from the machines.The conversion of many two-wheeler machinesinto three-wheeler machines was the brain childof Dr Sahay. The visit of Mr Krishnamurthy(an eminent management professional, who hadearned laurels for turning around several publicsector companies in the '70s and '80s), helpedus a lot in boos ling our confidence. He told usthat three-wheeler production could be ourbread winner. He also felt that it should enterother markets of the country and not be confinedto Lucknow. Needless to say, the backing andpushing by our new chief, who not only toiledand slogged himself, but made us slog and givethe best helped in the turnaround process."

    The next difficulty was arranging workingcapital. The company had stretched the cashcredit limits much beyond the permissible limitsand defaulted in 9-11ts commitment to the bank.The bankers, therefore, were in no mood to helpon the working capital front. "As no outsidehelpwas available, we started identifying and selling

    , sc:rap and requested the suppliers to extend ahelping hand for reviving the company. We alsoasked our dealers to place advance with thecompany for purchase of three-wheeler.Fortunately for us, we realized that there wasa .demand-supply gap and that there was alwaysa queue for the product, which enabled us toget advances from customers to work on," saidDrSahay. Unsatisfied demand and spare capacityin supply chain became major source of workingcapital.

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    Between 1990-92, the output increased a bit,but still it was an uphill task as without radicalstructural changes it was not possible to makethe company' economically viabl e. On the onehand, the company had staff far in excess ofrequirements, which could not be eased out ina public sector company in India. On the otherhand, it had inefficient technology, worn outplant and machinery, weak suppliers and dealers,and unwilling bankers and financial institutions.

    "I realized that if we had to succeed we hadto improve efficiency of our operations and payattention to technology," said Dr Sahay "'Istarted paying atte ..ntio n to maintenance andupkeep, layout, clearing the shop floor, etc.Today (1998), we are producing more than 12times the number of vehicles in half the spacewe used to occupy In 1990. We startedestablishing contacts with le a di ng engineeringand technicai institutions for the purpose oftechnology know-how. I twas no t easy as wedid not have financial resources. However,despite improvements in efficiency, the losseswere mounting. We were, indeed, caught in avicious circle. The governmenl helped us inkeeping the show going by pa)'ll1g the baresalary and wages but it di d n ot provide fundsfor frin.ge benefits like the Leave TraveiConcession (LTC), medical, uniform, etcTherefore, the war between hupe and d espairwas going on in the employee's mind."

    Sharing the experiences of improving theefficiency of operations, a senior executive said,"~.t was not easy for us to increase productionby making investment for modernization. VV,,,-did not have money for it. The concept ofBusiness Process Re-engineering helped us a lotWe improved the layout of the shop floor,processes', and usage of machines. In doing so,we realized that some machines could do thing:,beyond what we used to think earlier. Some ofthe machines were performing better than thenew machines in certain areas. You will besurprised to learn that the workers preferredthem. We also faced problems of procurementof raw material and components form vendors.

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    the best from the BIFR decision. A largenumber of workers applied for VRS, about 850or so. Banking on the grant from the government,the company accepted the workers' decision forVRS and issued letter to that effect, indicatingthe date of release. However, the governmentgrant did not come on time. Though moneywas available, there was no provision for SILin the budget. The management was caught ina fix. Its credibility was at stake. Dr Sahayapproached the bankers who expressed theirinability as it was beyond local headquarter'spowers. His spirit did not dampen. He went onpurSUing the matter with great perseverancewhich finally made the SBI local headquarterto refer the case to bank's headquarters. '''Thethen track record of meeting the promises madeto the bank helped the case. We kept our fingerscrossed. Our credibility depended on theiraccepting our request. The employees weregetting restless," said Dr Sahay. Mr K K Narula,General Manager (C&B), supported by the ChiefGeneral Manager, Mr'A K Puri, opened the door(or the company's future, recommending its cast'to. their headquarter .and advocating the sameas it was a national cause. The bank, whilegr-anting a loan of Rs 35 million, had set a timelimit for repayment. The company had paidahead of the time granted as it could managethe same to be provided for in supplementarybudget. The headquarters of the bank consideredthe proposal but sought government guaranteeto release money for the purpose. "We rushedto the government, who luckily agreed to doso. We were in a position to meet the promise.What a Herculean' task it was! Indeed, thisbecame the turning point in the history of SIL.The number of employees reduced, productionincreased. In the process, the company lost outsome good people also. In the workers' category,the voluntary retirement of all was accepted butonly some 20 per cent of officers were releasedunder VRS. The company needed somecompetent and qualified officer-sin certain areas,"said Dr Sahay. .

    Along with the release of about 850workforce, the manage~ent also dispensed withits fleet of vehicles, leasing it out to some ofVol. 26, No.2, .April-fun 2001

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    the retiring employees. "It was creatrng a bigheadache for us. There were perennial problemsof breakdowns. Now we do not face the problemsof breakdowns. The only car possessed by thecompany is used by the senior officials includingChairman and Managing Director, but this isalso used for receiving visitors and for meetingemergencies. I come from home by a pooledcar and in case of an emergency, 1 drive thecar myself," said Dr Sahay.

    The company also took some measures torehabilitate the employees who had opted forVRS. Each one of them was given a three-wheeler at concessional rate to earn livelihopd.Some were given small orders of supplies asancillary. Some helped the company Intransportation of incoming and outgoing materialof SIL, some were given dealership forcompany's products yet some others took tofabrication of body on SICs three-wheelers.

    "The orga~za.tion is quite open to us now,there is logic and transparency in managementdecisions" .said ;U1 officer. "For example, we'observed that our forging shop was not efficient.Outsourcing of components was cheaper. Wethen decided to close down the forging shopThe workers of the shop were shifted to variousdepartments, including the security departmentOne union even protested against the closureof shop and transfer of people But the workerswere happy. It was surprising. I am told thalit was because they felt that with securityuniform on, their status back home had goneup. People at home thought that they hadbecome Darogaji (Head Constable). In a way,it solved another problem: depleting securityforce. We had tried to work out throughtemporary staff, but it created various problems.The closure of forge shop was a blessing indisguise. It killed two birds with one seene.'

    Marketing ChallengesReflecting on the challenges earlier and now,the Deputy General Manager (Marketing) said,"Before the present CEO took over, we produced50-60 three-wheelers a month and they used to

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    get sold in and around Lucknow. The companybelieved that whatever was happening was thebest. Nobody was prepared to think big. Myfirst effort after the arrival of Dr Sahay was toseek the approval of State Transport Authorities(STA) of different states. All manufactured vehicleswill first get road worthiness certificate fromeither ARAI, Pune or VRDE, Ahmednagar,without which the state transport authoritieswould nol give approval for. registration ofvehicles in their state. They may still denypermission on other criteria such as total vehiclepopulation in the state being more than required,etc. The next stage is getting permit from theRegional Transport Authority (RTA) which isnecessary in the case of commercial vehiclesand without which they will not be allowed toply, and therefore, nobody will purchase it. Wehad permit for Uttar Pradesh (UP) and Biharonly. They also had to be persuaded, becauseif they were not favourably inclined, they maynol give permit as it happened in the case ofLucknow, when RTA refused to issue permit."

    "The second problem we are facing is thato r changed norms of emission (e.g., earlier, thecarbon monoxide permissible limit was .4 percent, now it is reduced to 2.5 per cent. Likewise,hydrocarbon plusnitrox limit was 2 gm. earlierand now it is 0.97gm. Now I have to get allthe products re-tested from ARAI or VRDE andget approval from each state afresh. You canimagine the task from the fact that getting STAapproval may take six months to 24 months.We are also facing the problem of technology.We have developed and produced, in-house, abattery operated electric motor driven vehicle.Vie had also worked out a project on electriccar, but the opportunity was lost as we did notget permission from the appropriate authoritiesat the appropriate time. .

    I feel the quality of product is not up toour expectation. It has to improve further. Themain reason for the same seems to be lack ofconcern for it, perhaps because we alwaysemphasized on quantity and production but didnot match demand on quality. Even today, wehave some difficulty in convincing our peopleVol. .26, No.2, April-June 2001 66

    that, in a competitive market, customer isboss. We must give credit to Dr Sahay that'is relentlessly pressing the point that cushas to be listened and that customer is theprofit; rest all are overheads. If the SDepartment raises the issue of custocomplaints, the manufacturing people wouldthat the vehicle which has been tested arid phere was good. The Service Departmentbe asked many questions to shut them up.some extent, they are also to be blamedinadequacy of their analysis on account of lackof proper data to support the customers'viewpoint Occasionally the modifications in thedesign get validated in the field, rather thanfixing lhe quality standards, before themodifications are introduced."

    \A/hen Dr Saha), se t the company to sail OIlthe ISO-9000 path, employees were bewildered.Majoritv did not believe th at SIL can acquirer5.0J( )OO certification In fact, he himself tookto leachlllg the staff about ISO-9000 and madethe higher officials teach the employees lowerdown. It was an internal revolution. The companywas awardr-d the ISO900I certificate. "It wasnot easy to gel People even joked that if SILgot the IS09()()I, it must be humbug It washe who persisted with the idea and made uswork for it," he said. "Now he is emphasisingun Total Quality Management (TQM)."

    "The third problem that-we are facing,"said, "is lack of education. The retirementscheme was faulty and training scanty. Somepeople who were good had left the company.Those who were left were those who felt thatthey would not get a job or could not manageindependently. Of course, there were some goodemployees also who could not leave the townfor family considerations. Dr Sahay was the onlyexception who had no other reason to stayexcept to fulfil a mission to change the courseand turn the company around. We thus had th.etask of building an organization with demoralizeemployees. The challenge was to inject life ipractically a dead body."

    Commenting upon competition inindustry, an officer said," Our main compe

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    the group did an extensive examination ofviability, met all the past Chief Executives, andcame to the same conclusion. We submitted areport to the government which was rejected.The government was willing to offer it to berun as a cooperative, but was unwilling to writeoff the losses."

    "There was some change in the governmentattitude also. The government appointed a newChief Executive (Dr Sahay). We also realizedthat we must cooperate with Dr Sahay. Witha new Chief Executive from inside, the climatechanged. While BIFR was of the opinion thatthe employees were responsible for the loss, werealized that we must also admit our share ofresponsibility in the company's mounting losses ..It was not easy to convey this to the employees,. but we told them after BIFR meeting plainlyIndeed, we maintained what we had said in (91)6that we must get eight hours of work and thatthere was no alternative to work if the companywas to survive."

    "There has been some positive role playedby the management. They promoted 10 per centof the employees in 1991 before the companygot covered under BIFR. Since April 1995 toApril 1997, about 80 per cent employees havegot promotion. Today, we realize a mentalrevolution has taken place. Majority of theemployees believe now that without work, noprosperity is possible. Now, if a target is setcollectively, nobody needs to be watched. Indeed,at times, people go and ask others (down stream)whether there was any problem with what theyproduced."

    "We do have some problems even now,When we increased production and profits,employees started expecting more. When weraised the issue with Dr Sahay, he requestedus to wait for a while and suggested that weplough back the funds into the operations. Weaccepted it, but then the other unions say thereis a nexus between us and Dr Sahay."

    Reflecting his concerns for the future, therepresentative said, "Al l of us (Union A) alsowant that most workers should be with us. But,beyond that, we believe that there is an impendingVol. 26 , No.2, April-June 2007

    danger of technological obsolescence.employees think that we can face thy future'further collaboration for import _9f techno10But, we believe that, we cannot bank on othcoming forward to help us. We must improour existing product itself."

    Talking to the case writers, the executimembers of U~ion B said, "Vle believe thatthe management is honest, the company can r u n .In the past, we have been headless in thesense. We had good persons at the topmanagement/_officer level, but they did not knowwhere to go. They did not move with time. MrsGandhi's g~vernment had announced in the 80sitself that the companies should go global.Indeed, the government had announced theclosure of SIL in 1979-80, but it continued thecompany for political reasons. We are also sourabout the government going back on itsundertaking to SIL (giv'en in 1972) that allimports of 2W technol.ogy will be [outed throughSIL, while allowing LML to import technologyin lCJ83without talking to us. The managementdid not take note of it. They were too bus)' topursue their own agendas, for instance, how toremove their superiors. VIe had, for instance,once manufactured mopeds for the first time,on an export order. But, the next Chief Executivedumped it and this meant Rs.35 million downthe drain. Now, the management is thinkingalong in right lines and we are in profit."

    The meeting of the case writers with therepresentatives of Union C was interesting. Theyraised two fundamental issues:What difference would the case writing onturnaround of Scooters India Limited maketo the currently prevailing bureaucratic andpolitical thinking of privatizing the publicsector?How can we call the performance of SIL asuccess, if it has been achieved by the lossof a large number of people (who made anexit through VRS, under threat of windingup by BIFR)?The representatives of Union D, too, .echoed

    the sentiments against privatization to justifytheir agitation: "Why should the governmen,t

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    Bajaj Auto (81 per cent share), Bajaj Tempo.th 5 per cent share), and Piaggio Greavesth 5 per cent share). Besides, there are a fewrginal players, together having about 4. pershare. The main competitor, i.e., Bajaj, has

    some other products to fall back upon iri caseof recession. The marginal players should alsonot be underestimated. They are able to achieveviability even with 100 three-wheelers per monthon account of their small size and. flexibility torecruit and relieve workers as per the demandOuctuations, something that we cannot do, beinga public sector enterprise. Greaves, at one pointof time, was manufacturing 2,000 three-wheelersper month with 250 people and we have 2,000people for a little over half of that volume ..Eventhough B IFR' s order was to reduce the staffstrength to 1,676 employees for manufacturing18,000 three-wheelers, we have not been ableto achieve it. Competition is telling this year;we have sold 800 three-wheelers less than lastyear, though our fall is less than others in theindustry. Earlier, we used to sell the vehicle byLaking advance from ,the dealers but nOW weare selling on one month cxedit terms."

    Reflections of the Trade Unions"By 1990, we realized enough was enough.There was too much of animosity. There wasno law and order. We asked officers about ourfuture. We even contacted Mr V P Singh. Hepromised to help. When he became PrimeMinister, our case was referred for inquiry bythe IDBl. Howev~r, before any result couldcome out, the company got covered underBIFR. The Ministry played havoc. Itmaintainedthat the workforce is too high and, therefore,the company cannot run. We knew that in manysick companies, people were continuing to workon the basis of 1976 scale. Wisdom dawned onus. So we sat down .arid decided to let dues bedeferred and production increase. We had toaccept the reality that the company could nowbe really closed down and ..announced to ourpeople that If they wished, they could opt forvoluntary retirement. We could not guaranteethe future. But, we did believe that ifmanagementVol. 26, No.2, April-lune 2001

    gives us work, we could always perform. Themachines, which were rejected earlier, aregiving 40 per cent more output these days." Asthe representative left, the Chief of Personnelsaid to the case writers, "this firebrand ~map isa good machinist. He finishes the day's workin two hours without having any qualityproblem."

    Sharing their experience of over 25 years,the representative of Union A said, "From 1974to 1985, people used to think that they weregovernment employees, do whatever they felt(good or bad) only to ens-ure their service. Ithink there)Yas a lac;,.kof responsibility at alllevels. Thertfwas a feeling among the workmen/staff/officers that senior executives were nothonest. Nobody bothered about profit or lossat any level. By.1Q86,the environment startedchanging. The government started feeling thatit could not run loss making companies. Ourunion started thinklllg that if the company ismaking losses, It has Implications for us. In1986, we had no work. From December '86to June'87, we raised an Andolan (movement):'Give us 8 hours of work.' We were worriedabout the future. We did not seek monetarybenefit Not many people were with us, but wewere undeterred. \Vc mel the Minister of Industryfor work. He said 'you are getting salaries, leavethe issue of work to us.' We were laughed atand condemned as 'Netagiri Sawar Hai' (wantsto be a statesman), 'Management Ke ChamcheHai' (stooge ofmanagement), etc. The movementdied, but soon after, the news of privatizationwas in the air. People were worried and westarted fighting again, asking the governmentfor guaranteeing our jobs."

    "The disillusionment and confusion lastedfor five years up to 1992. During this period,some concern started developing that, to someextent, we are also responsible for whatever washappening in the company. With referral toBIFR, it came out more emphatically. Whilethe government's stand was for closing downthe company, we felt it could run. Indeed,formed a joint action committee UAC) alongwith (supervisory) staff and officers. Weformed an expert group and the members

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    talk of SIL privatization, when we haveperforming like a private sector company

    termS of our dealings and behaviour?"Explaining the reason for performance, the

    representatives of Union E said, "Our culturehas undergone a change. We do agitate evennOW. But, unlike the 70s, after 1985, we do not, strike work. We did stop the executives fromentering factory premises more than once, butthey also tried to keep the production on.Indeed, once, during the supervisor's strike, wegave more production than normal days, to letthem know their worth. We know how we canget more production from our people becausewe move with workers. But that is our secret.

    Vol. 26, No.2, April-June 2007

    Wedo use it for negotiating with the mapagement.However, we do not let down the company now.Each of us nOW knows that if the company'sperformance goes down, our future is not safe.We have not been able to forget the trauma ofpeople committing suicide after taking VoluntaryRetirement, unable to fend' for themselves."Commenting upon the change in union's attitudetowards striking the work, an officer said, "itis true that iIlftances of striking the work havereduced now. Dut, it is more an outcome colandmark judgment at: the Supreme Court whichhas stated "that there should be no payment ifthe work is not done, which the managementhas been strictly enforcing."

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