The ongoing strike at Bajaj Auto’s production plant in Chakan has led to loss in inventory for India’s second largest motorcycle manufacturer. The company produces maximum motorcycles at Chakan but has now decided to shift 50% production to its Aurangabad and Pantnagar plant, if the strike is not resolved by the end of this week. Rajiv Bajaj has given his management team a time of one week to resolve the conflicts between workers and the company. Currently the Aurangabad plant caters to 1/3rd of total production.
Bajaj Auto claims they suffered no loss due to the strike as the company had good amounts of inventory and sales have dropped due to the slowdown. This means Bajaj Auto is not facing supply constraints. Furthermore the company states that the reduced sales last month wasn’t because of the strike but instead due to the decrease in demand. The decision to move production elsewhere was spurred due to the need of meeting export demand and following launch schedules.
Currently 900 out of the 1500 employees have resumed work and the rest are expected to join soon. Amongst many demands of the union, one is to reinstate 22 sacked employees. The company refuses to bring them back on the grounds of disciplinary action as reinstating them will send a wrong message to workers, who at times feel they can get away by breaking company’s rules and procedures.
In order to move production out of Chakan, Bajaj Auto will have to move equipment and vendors which is a cost effective exercise but the company has to take a stand against indiscipline and crazy demands (stock options at 1/1800th the price). This move is somewhat similar to what Tata Motors did when its Nano plant in Singur saw political unrest. The shifting of production to other plants is not temporary and Bajaj Auto will permanently move production to reduce dependency.