Renault-Nissan ordered to pay further wages, regardless of warning India unit may turn into ‘unviable’ By Reuters

© Reuters. FILE PHOTO: The logos of automakers Nissan and Renault are pictured in a dealership in Kiev, Ukraine on June 25, 2020. REUTERS / Valentyn Ogirenko / File Photo

By Sudarshan Varadhan and Aditi Shah

CHENNAI (Reuters) – An Indian arbitrator has urged Nissan (OTC 🙂 Motor Co to pay its factory workers additional wages, despite warnings from the automaker that a higher payout could make its business “unprofitable” in the long run.

Nissan and its union have been involved in a labor dispute over an arbitration tribunal since July after the two sides failed to reach an amicable settlement on several issues, including higher wages. A previous collective agreement expired in March 2019.

A tribunal has ordered Renault-Nissan to pay its 3,542 workers an average of over 7,100 rupees ($ 96) per month as an injunction, according to an order viewed Aug. 16 by Reuters.

The payments, which are higher than the consortium’s original offer of $ 30 per month but lower than the union’s request of $ 270, would cost Renault-Nissan approximately $ 9.53 million in total.

The arbitrator will continue to hear over 50 more workers’ claims in the coming days, which, if agreed, could cost the company 93% more per worker, Nissan said.

The petitions tabled by unions and management – which have been reviewed by Reuters and not previously reported – show the widespread disagreement between workers and Renault-Nissan.

In a statement to Reuters on Tuesday, Nissan said it was committed to offering a competitive package to its workers and was open to a retrospective payment at its south Indian plant.

The ongoing litigation reveals the business challenges Nissan is facing in the world’s fifth largest auto market, where despite investing approximately $ 1 billion, it has been ousted by competitors and struggling to woo car buyers.

The judgment comes despite arguments from Renault-Nissan that it is making “enormous losses” in India and that it has “no financial means” to meet the demands.

Any pressure to pay higher wages “could potentially make the unit’s existence unprofitable in the long term,” the automaker said in its 147-page complaint to the arbitrator in July.

LEGAL HURDLE

The workers had called for a wage increase in their 123-page petition, arguing that the total wages paid by Renault-Nissan are less than half of what colleagues in the region like Hyundai Motor and Ford pay.

In the August 16 order, the arbitrator ordered Renault-Nissan to pay $ 134 per month for the 12 months ending March 2020 and rupees 67 per month for the 16 months ending July 2021 in three monthly installments starting in September.

“I firmly believe and conclude that there is a reason to give the workers temporary relief,” said Fr Jyothimani, the arbitrator, in his decision.

Nissan has tried to restructure some of its key international markets like India – where there is still no decision on a future strategy for its underutilized factory.

Workers ‘demands include a higher base salary, an annual increase of 500 rupees, an increase in allowances and insurance coverage, and the appointment of an additional member of assembly lines to cover workers’ toilet breaks.

“The sacrifices made by workers for the viability of the company are much more than the sacrifices of supervisors and directors,” the union file reads.

The union also said that increases in food and fuel prices have forced them to ask for more wages.

However, Renault-Nissan said local competition, the drain of executive talent to other companies, an increase in raw material costs and a poor response to some of its car models have hurt its business.

The company also argued that its workers’ wages cannot be compared to Hyundai and Ford because they had factories in the state much earlier, higher levels of production, and better plant utilization.

“The union’s request was just a desire for an increase without taking into account the realities of the business, the market salary range and affordability,” Renault-Nissan said in its filing.

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