A labour hurdle to South Korean auto major Hyundai's expansion in India

Hyundai's aim to boost production by buying General Motors' Talegaon plant runs up against a two-year-old labour dispute

With Tata Motors ramping up production and gaining ground towards becoming the second-largest car manufacturer in India, Hyundai India, which currently holds that position, is considering inorganic expansion to stay the course. Last week, the Korean automaker signed a term sheet with General Motors (GM), which had announced it would exit India in 2017, for a potential acquisition of its Talegaon plant in Maharashtra. However, legal battles initiated by 1,000-odd former employees of the Talegaon plant continue to present a challenge for the acquisition process.

GM told Business Standard that the former employees are not part of the deal with Hyundai. But last week the General Motors Employees Union (GMEU) — which represents these former employees who want employment with the new owner of the plant — told this paper that it will continue to exercise “all legal options”.

Sandeep Bhegade is the president of GMEU, which represents the former employees of the Talegaon plant whose services were terminated by the American company in July 2021 citing Covid-19 and lack of orders for production as reasons. He told Business Standard that the union had not received any legal communication from GM regarding the recent deal with Hyundai.

“GMEU has been fighting against the ongoing illegal activities by GM India through legal channels for the last two years. Henceforth, we will continue this fight through legal means and exercise all legal options. The union will always try to get justice and rights for the workers,” he explained.

He added, however, that even as the legal fight continues, GMEU is ready to seek solutions through discussions with the company.

In response to queries on this matter, a GM spokesperson stated, “All employees have been legally separated from GM-Talegaon site, with the company providing a separation package. The separation package was seven times the legal requirement, with the average payout equivalent to more than 3.5 years of salary after tax. GM’s former employees are not part of the transaction.”

When did this dispute begin? GM stopped selling cars in India in 2017. In January 2020, GM had signed a term sheet with Chinese company Great Wall Motor for the sale of this plant. Five months later, in the Galwan Valley of Ladakh, soldiers of the Indian and Chinese armies engaged in a violent physical altercation, resulting in casualties on both sides. This geopolitical controversy cast a shadow on the deal.

“On account of the border dispute with China, the government of India changed its foreign direct investment policy. Due to that, the government authorities did not approve the deal entered with Great Wall Motor China,” GM said during a hearing at Pune Industrial Court.

In December 2020, GM stopped production at the Talegaon plant.

In April 2021, citing Covid-19 as the reason, the American company offered 1,570-odd employees of the Talegaon plant a voluntary separation scheme (VSS) for their “rehabilitation”, and 480 workers opted for it. As the plant did not have any orders for production, the company in July 2021 terminated the services of the remaining 1,086 employees, it added.

These 1,086 employees are now part of GMEU, which has filed cases with multiple legal forums to ensure that they get continued employment with the owners and full salaries for the interim period.

In January of last year, the Pune Industrial Court ordered GM to pay 50 per cent salaries to the former employees from April 1, 2022, as an interim relief, even as it continued to hear the case.

In July 2022, Great Wall Motor exited the deal, seeing that its application for the plant’s acquisition is unlikely to get government approvals.

The labour dispute then went to the Bombay High Court, which upheld the Industrial Court’s order. In October 2022, the Supreme Court upheld the Bombay High Court’s order and asked the Pune Industrial Court to resolve the dispute within four months.

The Pune Industrial Court then appointed a mediator to resolve the matter between GM and GMEU. Two rounds of talks have taken place in the last 30 days under the mediator’s supervision, but no solution has been reached.

Meanwhile, Hyundai wants to acquire the Talegaon plant, which can manufacture 130,000 units per year, as soon as possible to boost its production, which has not increased much in recent years. In 2016-17, the company manufactured 670,451 units in its two units near Chennai, India. In the first 11 months of the current financial year, the Korean company manufactured 647,478 units in India.
 

On the other hand, the number three carmaker, Tata Motors, has more than doubled its production during the same time period. In 2016-17, Tata Motors manufactured just 169,599 units. In the first 11 months of the current financial year, Tata Motors manufactured 409,173 units. Hyundai did not respond to queries sent by the newspaper.

With competition heating up in the Indian car market for the number two position, Hyundai would wish that the labour disputes at the Talegaon plant are resolved as soon as possible.