Late last week, labor unrest was reported at two Toyota (NYSE:TM) manufacturing facilities in India, where threats against management resulting from tense wage negotiations pushed the company to idle the plants indefinitely, locking out 6,400 employees for the time being until negotiations were settled and the plants reopened.
Several days later, the plants have been unlocked, but many of the workers who were idled are now refusing to return to work, The Wall Street Journal is reporting. When operational, the two facilities — which are just outside Bangalore and build the Etios, Corolla, and Camry cars – produce 310,000 vehicles per year, meaning if the situation isn’t diffused soon, it could lead to damage to the company’s sales in the region and jeopardize Toyota’s goal of selling 10.32 million vehicles globally this year.
Of the 6,400 employees, 4,200 union members remain on strike, waiting for a better deal on wages, holidays and housing, the Journal reports. The union is also demanding that Toyota reinstate employees who were suspended last week. About 30 of the “worst offenders” — those threatening management — were suspended.
“It is not a positive situation to be in for an auto company,” Anil Sharma, a senior research analyst at IHS Automotive, told the Journal. “I expect both parties to sit together and discuss the issues before it escalates further. But if it drags on beyond a month, then Toyota stands to lose big time.”
Each facility was churning out 570 vehicles per day before the unrest, but the company hasn’t offered an update on what the capacity is with the absent employees. The plants are a joint venture, with Toyota possessing an 89 percent stake in the two plants; India’s Kirloskar Group owns the remaining 11 percent.
“Workers are demanding more wages because the cost of living has gone up,” Abdul Majeed, a partner at Price Waterhouse, the Indian arm of PricewaterhouseCoopers, said to The Wall Street Journal. “But the management also needs to keep a tight control on costs as the auto market in India is facing one of its toughest years.”
Toyota’s employees are asking for more holidays, company housing, and raises of up to 4,000 rupees (about $66) more per month. A Toyota union spokesperson said the company had already offered raises of 3,050 rupees per month.
“If we increase the salary too much, then it will affect the rest of our ecosystem of suppliers and in the end, we may have to pay more for our parts, which will increase our costs,” making Toyota less competitive, Toyota-Kirloskar Vice Chairman Shekar Viswanathan said. The company has already offered workers a fair wage increase even though managers’ wages have been frozen, he said, and the company can’t afford to pay more as offering too much would trigger hikes at its suppliers as well, he told the Journal.