Strike hits Bajaj's Chakan output

Bajaj Auto expects a fall of 33% in production as the plant operates with just 15% of its usual manpower strength

Production at Bajaj Auto’s two-wheeler plant at Chakan near Pune resumed partially on Wednesday, after a complete shutdown yesterday due to a strike by workers protesting against the management’s refusal to allot them equity shares of the company at a heavily discounted price. The company said about 200 people reported to work on Wednesday. However, the union at the plant said no production was done on Wednesday.

Bajaj Auto, India's second largest motorcycle producer, expects a fall of 33 per cent in production as the plant operates with just 15 per cent of its usual manpower strength.

The Pune-based company expects to make 50,000 motorcycles (mainly Pulsar and KTM range) this month from the Chakan plant, down from its usual range of 75,000 units a month ago. The plant’s actual capacity is 100,000 units a month. In an interview to CNBC-TV18, Rajiv Bajaj, managing director, said, "Against the normal production of 3,000 a day, in June we would be able to do 2,000 a day and that is because of all the disruptions created internally.”

The company said it has inventory of four to five weeks, including those with dealers. Production in July, too, is expected to remain at the same levels, Bajaj added.

The workmen had initially threatened to stop work from Friday but they stopped reporting to work from yesterday.

Workers are demanding each one be given an option to subscribe to 500 equity shares of the company at a discounted price of Rs 1 a share, a demand rejected by the management. The Bajaj Auto stock closed at Rs 1,788.10, down 0.66 per cent, on BSE on Wednesday.

Bajaj Auto has never had an employee stock option plan.

The Chakan plant employs about 1,500 people.

Dilip Pawar, president of Vishwa Kalyan Kamgar Sanghatana, said, "The management is misleading workers over several issues. There is tremendous unrest between workers and the management over a wage agreement. We are demanding a new wage agreement, reinstating 14 workers and all the workmen should be given an option to subscribe to 500 equity shares of the company at Rs 1 per share."

Bajaj Auto in its recently-released annual report stated the union had given notice of termination of the existing settlement dated 21 May 2010, according to the provisions of the Industrial Disputes Act, 1947. According to Bajaj, the company has a wage agreement in place, which is valid till 2019.

There are over 600 workers in the factory who are on contract basis. Some of them are engineering diploma holder trainees and a few are working under 'earn and learn scheme', said the union leader. The average age at the Chakan plant, according to Bajaj, is 25-26 years.

Pawar played down Bajaj’s allegation that the union is creating trouble by kidnapping and hurting employees. The union leader said all the allegations are baseless and the management is misleading workers.

The Chakan plant has an annual capacity of 1.2 million bikes. It produces Pulsar, Avenger, Ninja and KTM. In FY13, the plant produced 880,000 units. In FY13, the company sold 630,000 Pulsars . Besides Chakan, Pulsar is also manufactured at the Waluj plant (installed capacity of 1.8 million), according to a report from Edelweiss.

“Given the dealer-level inventory estimated at around four weeks, the impact of a short period strike may be limited. However, if the strike extends beyond a week, sales of Bajaj Auto’s higher realisation Pulsar bikes may get impacted with a daily revenue loss of around Rs 21.1 crore. We broadly estimate a gross margin of around 24 per cent for the company’s domestic motorcycle business, which could translate into around Rs 5 crore daily contribution loss,” added the report.