| | Mahindra May Not Retain Ssangyong Staff
NEW DELHI: Mahindra & Mahindra has not made any commitment on retaining jobs or volume growth in its deal with Ssangyong Motor Company to buy a majority stake in the ailing South Korean automaker.
The memorandum of understanding between the two companies, signed on August 23, only offers to “honour” the current wage agreements that Ssangyong has signed with its unions, said Pawan Goenka, president, automotive & farm equipment division, M&M .
“M&M’s MoU with Ssangyong honours the current wage agreement that the company has with the unions,” he said. “We will hope to grow employment as the volume grows though we have no specific commitments.”
This is crucial given Ssangyong’s history of labour problems. The company faced a devastating strike last year that severely hit its production and profitability and prompted the management to cut its workforce by almost one-third to more than 4,000 from around 7,000 workers.
Auto analysts say the flexibility on the head count front will help M&M turnaround the company faster.
“Labour is always a critical component of a big deal like this. In Ssangyong’s case it’s even more critical given its track record and any flexibility on this front will help M&M,” said a principal analyst from a Delhi-based multinational consultancy firm who requested not to be named.
M&M has been chosen the preferred bidder for the sports utility vehicle maker and has already paid 5% of the deal amount. It will start confirmatory due diligence on Monday, which will last five to six weeks. The deal is expected to close by November.
Analysts say one of the reasons why Ssangyong’s earlier owner, Chinese firm SAIC, could not turn around the SUV maker was because of problems and trust issues between the union and the new management .
M&M has, however, indicated it has no plans to cut jobs after the acquisition. During the JLR deal, Tata Motors had to work closely with Unite, the JLR unions, to take care of worries over jobs and pension and other benefits .
Immediately after the deal went through, the global recession hit the company badly and Jaguar Land Rover announced a restructuring plan that included closing one of its three plants as well as voluntary rightsizing.
Earlier this year when JLR chief David Smith quit, there were reports that he had faced disagreements regarding a new pension and work conditions scheme at JLR, though both the company and parent Tata Motors denied it.
Source: Economic Times