Infrastructure or the lack of it, has often been cited as the primary reason for India remaining a developing country even with all the talent available in the world. There is no denying that fact, but there are numerous other reasons which will hinder India’s growth even if the infrastructure improves. One of the them is bought to light from the headline.
Hyundai after facing numerous strikes by its employees in the recent past has decided to stop its production facilities in India and move it to Turkey. Including the recent one in Mumbai which resulted in this decision, there have been as many as 4 strikes since 2008 at various Hyundai facilities.
The car maker seems to have had enough of fighting union battles and has decided to put an end to it by closing down its production facilities in India. Hyundai has apparently chosen Turkey for cost advantages and lower taxes but employee unrest at its Indian facilities has been the triggering factor.
A quick look into Hyundai’s operations in India and its impact can be highlighted from,
In 2009 alone, Hyundai exported about 50,000 i20 compacts from India to Europe, more than half its total production of the car - means that not only manufacture cars for selling in India but also exports them to other countries from its Indian facilities.
Now, this clearly suggests that Hyundai considers India as a strategic locations for its operations especially for the production of its compact car segment. The repercussions of the Hyundai stopping production in India are plenty
- Loss of Jobs :
I don’t have exact numbers of the headcount in Hyundai’s India operations but i guess it will easily run into thousands. With the production moving away from India locations, all these jobs are going to be lost.
- Revenue Loss:
The government stands to lose revenues which it makes from levying taxes, export duty etc.
Apart from these obvious ones, there is one really worrying repercussion that this incident could possibly trigger namely
A Bad precedent for other foreign car manufacturers…
Car makers around the world have noticed Hyundai’s success story from its Indian facilities and how it has pioneered the small car production. With a bad example like this, newly arrived car makers like Nissan and GM would think twice before rolling out their production facilities.
Now I am not saying that the labor strike is unjust and uncalled for since it is difficult to gauge the real culprit in cases like these. However, the union battles in India are not new and are in most cases backed by political muscle.
Moreover, I presume union leaders here take companies for granted to accept their demands sooner or later. But Hyundai seems to have left no room for that now. Talk about fighting for the benefit of employees.
Labor strikes are not prevalent in India alone but given Hyundai’s strong action I wonder if the handling of the same has been done well. This is indeed unfortunate and big bolt to India’s attractiveness as a manufacturing hub for foreign automakers. What are your thoughts on this?