1. What is your opinion about the problems of Vikas Motor Limited that have been caused due to the advent of foreign companies?
2. Do you agree with the decision of the board of directors regarding the abolition of collective bargaining and its replacement with individual employee bargaining?
3. How do you foresee the future of this company? What measures are required now to normalize the situation?
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Vikas Motor Limited is the second-largest two-wheeler manufacturer in the country. The company has ten brands, each performing well, and five production plants in different regions of the country. It has a single recognized union which is strong and effective with nearly 70 per cent membership of the employees. As part of its IR strategy, Vikas Motor follows a well-established collective bargaining technique for deciding labour-related issues, including wages and other benefits. Due to collective bargaining, the company has been revising the compensation packages of the employees once in three years. Collective bargaining has also ensured that the company has remained free from any major industrial dispute and disturbances for several years till date. However, the entry of foreign companies into the market, which created a price war in the two-wheeler segment instantly meant that every company in the automobile industry was forced to respond in some way to this emerging trend. Obviously, companies viewed cost reduction as the most viable approach to warding off the threat of elimination from the market. Understandably, the emphasis of Vikas Motor was also on cost cutting, and its board decided that the best strategy for wage reduction or freezing and cutting back on expensive employee benefits is the introduction of individual employee-level bargaining and the elimination of collective bargaining. The directors also felt that collective bargaining achieved the desired result on the IR front but not in terms of productivity and cost reduction. However, Mr Gupta, Director of HR and IR, differed with the general opinion of the board and advised it to look at collective bargaining as an instrument of change and not as an obstruction. Finally, the board decided to abolish collective bargaining as a wage-fixation technique and replaced it with individual employee-oriented and performance-based system for wage determination. The employees and their union received the…
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