Industrial agitations affecting the business sustainability of a location

For quite some time now, the location of the Gurgaon – Manesar belt was the area that was promoted as a automobile and components cluster. So you have bigger manufacturers such as Maruti, other manufacturers, and a huge number of automobile components maker. However, in the past couple of years, there has been a number of union problem, labour agitations, etc, that is threatening the viability of this zone. There are a host of reasons for this – in some cases, there are genuine reasons where the workers feel that they are under-paid (and Maruti very rarely sees industrial actions since it pays its workers much more than other companies, and also because it employees a lot more engineers than other companies).; however in other cases, this is more because the workers are provoked by some of the major unions to unionize and fight for more right.
One result of this increased industrial activity is the risk element, and with more strikes and shutdowns in the region, the region has lost some of its attractions. Companies that have tightened their belts over the past economic slowdown no longer have the excess capacity to make up for lost production, and need to move to other regions in order to diversify their risks. If more companies perceive this region to be a risky region industrially, and if there are more law and order problems between company management and workers, then there will be a movement out of the region (link to article).

Arvind Kapur, managing director of Rico Auto, told TOI that customers of the company — many of whom had been impacted by the near 45-day strike at its Gurgaon factory — had asked for de-risking of the operations to ensure that supplies are not disrupted in case of any labour or industrial dispute.
The company currently has seven plants in India — four in Haryana, and one each in Punjab, Uttarakhand and Gujarat. Kapur said the company had estimated that business loss due to the labour unrest was to the tune of Rs 35-40 crore, though Rico was hopeful to make up for the lost production.
On the impact on the company’s financial performance, he said, “Rico’s turnover and profits for the full year could see ‘some impact’ due to the labour problems and loss of production at the Gurgaon factory.”

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