“But a hungry man is dangerous”

During the Great Depression, the administrators of Pennsylvania learnt their lessons in managing the unemployed and impoverished workers:

the wisest strategy would be “to urge [them] to shun our large cities and towns, go into the country and work raking gardens, building fences or any other work which they are capable to do…. This may seem drastic, but a hungry man is dangerous.”

Growing militancy among workers in India is definitely a cause of concern for capitalists, who already seem to know that it is the same Hungry Man’s awakening (see the following report).

India Food Strike, Fatal Riots Hobble Push to Export Car-Parts

By Vipin V. Nair and Subramaniam Sharma

Nov. 13 (Bloomberg) — Prem Kumar’s demand for higher pay and better food at the cafeteria at the auto-parts factory where he works near New Delhi forced General Motors Co. and Ford Motor Co. to shut three plants on the other side of the world.

The strike Kumar led at Rico Auto Industries Ltd., coming after managers were beaten to death in labor disputes at two other partmakers, may derail an Indian government goal to boost components exports about sevenfold to $25 billion by 2015. One global automaker already is reviewing plans to source as much as $3 billion in parts from India and may instead buy half from China, said Vikas Sehgal, a Chicago-based partner at Booz & Co. He declined to name the company, which is his client.

“People are suddenly looking at India with an eye of suspicion and concern,” he said. “When a single company’s strike jeopardizes the global value chain, the country suffers in the long run.”

GM, Ford and other automakers have increased their parts procurement from India and other emerging markets to lower costs. India’s overseas sales of components grew 10-fold in the past decade to $3.6 billion in the year ended March 2008, according to the Automotive Component Manufacturers Association of India.

Labor costs in India are a tenth of what companies pay in the U.S., and raw material costs are lower by 11 percent, said Puneet Gupta, an analyst at CSM Worldwide Inc., an industry consultant. That’s prompted Hyundai Motor Co. and Suzuki Motor Corp. to open plants in India to export cars.

“India’s biggest advantage is cost, especially labor costs,” said Koji Endo, managing director of Advanced Research Japan, a Tokyo-based equity research company. “Good quality parts can be made cheaply.”

45-Day Strike

Labor unrest may undermine that advantage. The 45-day strike at Rico, which ended Nov. 6, caused GM to shutter a factory in Delta Township, Michigan. Ford closed plants in Chicago and in Oakville, Ontario, in Canada.

Each factory was idled for one week because the Rico strike disrupted supplies of transmission components to plants that build vehicles such as Ford Tauruses, Lincoln MKXs and Buick Enclaves.

“Such strikes put a question mark on India,” Gupta said. “If the government doesn’t act and the problems continue, in the long run, companies may shift their locations to elsewhere, like Thailand.”

Ford, GM

Ford continues to see India as a key part of the global supply chain, said Todd Nissen, a company spokesman in Dearborn, Michigan. GM also has no immediate plans to stop using Indian parts.

“As a global purchasing group, we need to manage through supply issues no matter where they occur to keep vehicle production as close to schedule as possible,” said Alan Adler, a GM spokesman in Detroit.

Rico Auto’s customers haven’t terminated contracts because of the strike, said Chief Executive Officer Arvind Kapur. The company is working on a plan to ensure that future incidents don’t affect operations, he said.

In September, a human resources official at Pricol Ltd., a supplier to Toyota Motor Corp. and Honda Motor Co., was killed by workers protesting against the management, said Chief Operating Officer K. Udhaya Kumar. He didn’t elaborate.

Last year, the managing director of Graziano Trasmissioni India Ltd. was beaten to death after a group of sacked employees turned violent, police said.

“The meltdown dynamics in a competitive environment not only create survival pressures on the managements but also induce an acute sense of insecurity and uncertainty in the minds of the wage-earning employed,” said Jerome Joseph, who teaches industrial relations at the Indian Institute of Management, Ahmedabad.

Rising Strikes

More than 1.5 million workers were involved in 250 strikes at Indian factories in 2008, compared with about 1 million workers involved in 255 strikes in 2003, according to Rajesh Thakur, a director at the government’s Labour Bureau.

Also, overall wages rose 0.8 percent, compared with 4.4 percent growth in productivity between 1990 and 2006, according to a 2008 report by the International Labour Organization. China’s wage growth in the same period was 9.9 percent, beating a productivity gain of 9 percent, it said.

Between 2006 and 2007, food prices rose by 9 percent in India, hurting purchasing power, according to ILO.

Rico’s CEO Kapur said a new hire costs the company about 6,000 rupees ($130) a month. Kumar, the union leader, said the company favors hiring temporary workers, who can be easily fired and take home about 4,000 rupees a month. That compares with full-time employees, who can earn about 11,000 rupees, he added.

“How can they secure themselves, educate their children and feed their families on such meager wages?” Kumar said. “It’s the rule of the jungle.”

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