Corporate Front: Strategy, Can The BPL Group Emerge Unscathed?

CORPORATE FRONT: STRATEGY
Can The BPL Group Emerge Unscathed?

Apart from falling production-levels, a strike is threatening BPL's advantage as a low-cost manufacturer.

By Dilip Maitra

T.P.G. Nambiar November 19, 1998, was a Red Letter Day of a different sort for the Rs 2,700-crore BPL Group. That Terrible Thursday, 4,000 workers from its 10 units situated in Bangalore and its outskirts went on an indefinite strike. Suddenly, an industrial relations problem has surfaced at the 35-year-old consumer electronics giant, which did not have a workers' union till early 1998.

Now BPL does--even though its locus standi is being challenged by the company. Dubbed the BPL Group Of Companies Karmikara Sangha, the union enjoys the support of the Centre of Indian Trade Unions (CITU)--affiliated to the Communist Party of India (Marxist)-- and is striking against BPL's policy of confirming unskilled workers only after 3 years of service, and paying them less than the statutory minimum wage until then. Says R. Srinivas, 52, President, Karmikara Sangha: "Almost all the workers have joined the strike."

R. Srinivas (centre), President, The BPL Group In response, BPL avers that the group has always paid its workers more than the minimum wage. And BPL contends that the union is illegal since "there is no legal entity called the BPL Group." Explains V.P. Krishna Kumar, 56, Head (Corporate Human Resources), BPL Group: "The companies in the group are distinct legal entities and, therefore, cannot be clubbed." And Lukose Vallatharai, Karnataka's Labour Commissioner, seems to agree. In a show-cause notice, dated December 7, 1998, to the union, he said: "The union's registration is ab initio null and void as the appropriate authority for recognising such an organisation is not the Government of Karnataka."

However, the union--which has till January 25, 1999, to reply--insists that its registration is valid. Says T.K.S. Kutty, 50, General Secretary, Karmikara Sangha: "We have not made a mistake. There are several unions like ours." Of course, if the Labour Commissioner is still not convinced, the union can always approach the courts for a stay order. And that is bad news for these BPL factories which, in 1997-98, contributed Rs 2,000 crore to the group's turnover. According to a supplier of components to BPL's CTV factory at Old Madras Road in Bangalore, output has fallen from the pre-strike level of 1,500 units per day to 500 units in December, 1998. Clearly, the fight could result in lower production and profits at BPL this year.

The Nambiars' hopes rest on the Labour Commissioner cancelling the union's registration. They would find it more comfortable to deal with individual unions in its 7 companies. Says Krishna Kumar: "We welcome company-wise or unit-wise unions, with or without any affiliation to any trade union organisation, and we are ready to negotiate with such a body." That is, perhaps, one way BPL can retain its status as a low-cost manufacturer: its personnel costs, as a percentage of sales, were 1.57 per cent in 1997-98 compared to Videocon International's 1.71 per cent, Mirc Electronics' 3.90 per cent, and Philips India's 7.20 per cent.

Meanwhile, BPL is trying to boost production by hiring additional workers, and seeking the assistance of its supervisory staff on the shopfloor. Apart from maintaining a huge inventory of finished-products and components, a new assembly-line has been set up at the Palakkad (Kerala) factory to churn out 700 more CTVs a day. Two CTV factories in Uttar Pradesh--at Ghaziabad and NOIDA--have also been asked to increase production. In addition, a high-level team has been dispatched to China to explore the possibility of sourcing 90,000 CTVs and 45,000 audio-products to make up for the possible shortfall in output.

While Krishna Kumar is confident that, despite the strike, "there will be no shortage of BPL products in the market," if he is proved wrong, it could impact the financial performance of the group's cash-cow, the Rs 1,748.78-crore BPL Ltd (1997-98 net profits: Rs 86 crore). Worse, it could deepen the red marks on its laggards, like BPL Refrigeration (net losses: Rs 41 crore). But, at the moment, the Nambiars don't seem to believe that blinking is best for BPL.

Issue Contents Write to us Subscriptions Syndication