Hyundai to shift i20 production to Europe next year

Hyundai Motor India Limited (HMIL) has decided to shift its production of i20 model for the export market from Chennai to Europe next year.

Addressing reporters at its factory at Sriperumpudur, HS Lheem, managing director, HMIL, said the company would move the production to Turkey, Czech Republic or Slovakia next year. “It is due to high logistics cost and 6.5 per cent import duty levied by European nations on cars exported from India,” he said.

The company has been facing labour problems at its factory and had ruled out negotiations with the workers who are on a sit-in strike since Thursday.

Terming the strike as illegal, Lheem said, “The company will not negotiate and if they do not resume the work before July 30, they will not be eligible for the salary hike, which was accepted by the committee.”

According to Lheem, around 250 workers are on a strike due to which production had dropped 27 per cent. On Friday, the company said production dropped 40 per cent. However, the union representatives said around 900 people were currently on strike and production was not happening at all.

It may be noted that when a section of workers went on a strike for 17 days from April 20 to May 7, HMIL had said it was planning to move the production of i20 model to Europe as the labour troubles had caused overseas sales to fall behind target.

Hyundai, till June, manufactured 70,000 units, a majority of which was exported to Europe. The i20, which is positioned as a premium car in the Indian market, is considered as an entry-level car in Europe.

The i20 is expected to account for 40 per cent of the Korean company’s exports for 2009-10. The company has earmarked 80 per cent or 120,000 units a year of the 150,000 i20s produced in India for the European market. Last financial year, the car maker exported 253,354 units of all cars, including the i20, from India, about half its annual production.

For the year 2009-10, the company had set a target to export 300,000 cars, including all models, and 280,000 cars for the domestic market, said Lheem, adding the company would utilise the production line, where currently i20 is produced, for the proposed small car and i20 for the domestic market. The company has sold 4,000 units of i20 in the domestic market.

The workers went on strike against the management’s decision to sign a memorandum of understanding (MoU) with the workers committee, which was recognised by the management, for wage settlement.

According to Lheem, as per the MoU signed with the Tamil Nadu government, the factory should have got the public utility status, which could have prevented frequent strikes in the factory.

The labour problem in the factory started after the company management declined to recognise the registered union and dismissed 65 people, suspended 34 and transferred several others for enrolling in the union. The union had also raised issues with Hyundai on hiring contract manufacturers for direct manufacturing and denying leave benefits to them.