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Jul 13, 2009

Pricol Plans to exit kovi ??


Auto component manufacturer Pricol Ltd may be forced to move its production lines out of Coimbatore district if the labour unrest at its three plants continues for another six months.

The labour problem had aggravated the production loss caused by the recession and for the first time in three decades, the company posted a loss of about Rs 30 crore during last financial year. It also skipped payment of dividend to the shareholders.Speaking to newsmen here on Friday, Ms Vanitha Mohan, Executive Director, said the labour problem, arising out of the management’s refusal to engage with two unions associated with Marxist-Leninist ideologies, had cost the company dear in the past two years.

The company, which was clocking an annual growth of 15-20 per cent, should have “ideally been an Rs 800-crore company this year” but Pricol has stagnated. In 2008-09, Pricol’s turnover was Rs 614 crore and net loss was Rs 30 crore.She said this has resulted in the company losing customer confidence and some of the OE customers have warned that if the company “engages with a Communist union, we won’t have confidence that your labour relationship would be good in the long term”.

Some of the large players in the auto industry want Pricol to either find a solution by easing the two unions out or “move all the lines to Pune or Manesar”, where Pricol has got spare capacity.
Ms Mohan categorically said “this is (the facilities in Coimbatore district) our parent organisation and we do not want to move out of Coimbatore”. But if the threat of strike looms large, then the customers ‘get nervous’.

Mr Vikram Mohan, Director, said some of the OE manufacturers, to whom Pricol was the single source for certain component supplies, have developed additional sources of supply as they were concerned about supply disruption. He pointed out that Pricol could not afford to lose business from the auto majors in the country.He said the three plants, which are witnessing varying degrees of labour problems, were working only at a third of their capacity whereas its other plants at Pune and Manesar functioned at 70-80 per cent capacity utilisation. While part of the reason for lower capacity in Coimbatore plants was due to recession, an equally compelling reason was the labour unrest. The company’s plants in Maharashtra, Haryana and Uttarakand had “extremely conducive” labour relationship. The three units in Coimbatore accounted for about 50 per cent of Pricol’s turnover.Asked how long the Pricol management would wait before taking a call on shifting the production facility, he said if there was no amicable solution in the next six months, “we have to start weighing our alternatives because our cash flows will not permit us to survive beyond that”.

Ms Mohan said while the management was open to the idea of holding talks with the workers, it was against holding negotiations with the two unions that were loyal to an outfit that has been outlawed by the Central Government.Pricol paid wages that were higher than the benchmark figures and even during the time of unrest, it did not retrench any worker (other than for violence related reasons) or resort to lay offs to reduce operational costs.

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