Volvo Bus India unit losing money due to strike

MUMBAI Tue Aug 3, 2010 3:30am EDT

MUMBAI Aug 3 (Reuters) - The Indian unit of Sweden's Volvo Bus Corp has lost about 70 million rupees ($1.5 million) in earnings following a work slowdown orchestrated by the local union, a company spokesman said on Tuesday.

Roughly half of the 550-odd staff at Volvo Buses India Pvt Ltd's factory near Bangalore started the "go-slow" process in April, and went on strike a week ago.

The workers, who are in disagreement with management over wages, are also demanding re-instatement of four workers who were suspended in April as a disciplinary measure, the company spokesman said.

"We have told them not to link the wage negotiations with the suspension issue, which is under policy enquiry," the spokesman said, declining to be named. "They are two separate issues and we want to go ahead with the wage agreement, which is one of the best in the industry."

The union could not be immediately reached for comment.

Volvo Buses, in which the Swedish parent holds 70 percent, is a joint venture with Bangalore-based Azad Group. The factory started operations in January 2008 and sells about 500-600 buses annually.

After the staff was suspended earlier this year, the workers in the factory have been on a prolonged "go-slow" agitation, the spokesman said. A "go-slow" process is one wherein many employees work slower than usual while some refuse to work at all.

LABOUR PROBLEMS ABOUND

Labour issues and strikes are not new to India. Earlier this year, workers at Hyundai Motor's (005380.KS) India plant went on a three-day strike over dismissal of some of its employees. [ID:nSGE65902I]

Last year Honda Motorcycle & Scooters India, a unit of Japan's Honda Motor Corp (7267.T), saw a "go-slow" by its workers at its plant in the northern Indian state of Haryana, over wage negotiations and other issues.

A wave of strikes by migrant workers in major Asian economies such as China and India has raised questions over how these countries will preserve their status as low-cost manufacturing bases while avoiding growing discontent among employees.

India's labour laws are rated by the World Bank as among the most rigid and some analysts say they hurt corporate competitiveness in Asia's third-largest economy.

While government data for strikes this year is not available, there is evidence they are on the rise and more unrest may be in store as India looks to divest stakes in overstaffed state firms to bridge a yawning fiscal deficit.

A World Bank report on the ease of doing business ranked India 122 of 181 countries last year, and suggested that greater flexibility in labour laws would help create more jobs and reduce poverty. (Reporting by Janaki Krishnan; Editing by Ranjit Gangadharan and Jui Chakravorty)