IBM workers strike in China over terms of Lenovo takeover

March 9, 2014 Leave a comment

March 6, 2014 3:24 am

IBM workers strike in China over terms of Lenovo takeover

By Tom Mitchell and Charles Clover in Beijing

More than 1,000 workers went on strike at an IBM factory in southern China to object to the terms of their transfer to Lenovo as part of its $2.3bn acquisition of the US technology group’s x86 server business.

Chinese workers are challenging multibillion-dollar deals involving their employers with increasing frequency, injecting an element of risk into large cross-border mergers and acquisitions.

Last year, employees at a Cooper Tire factory in eastern Shandong province seized their plant, ejected managers and withheld financial information when the Ohio-based company agreed to be bought out by Apollo Tyres of India. The industrial action helped wreck what would have been the largest Indian acquisition of a US company.

One worker, who asked not to be identified, said that protests began on Monday and production remained suspended at the IBM manufacturing facility in Shenzhen, the industrial centre bordering Hong Kong. The factory will be taken over by Lenovo as part of the Chinese company’s planned purchase of IBM’s low-end server business, announced in January.

The worker added that the factory’s more than 1,000 employees were acting independently of the government-sanctioned All China Federation of Trade Unions. “The [official] union has never done anything to help protect our rights,” the worker said. “We don’t trust it or the [government] labour bureau.” Independent unions are banned in China.

“Employees currently involved in x86 operations in Shenzhen have a personal choice of going to Lenovo under terms and conditions comparable . . . to what they currently are receiving, or they can voluntarily choose what we believe is an equitable severance package,” IBM said. “While it is entirely an individual’s choice, we are hoping employees will decide to go to Lenovo.”

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The Chinese computer company said it was aware of the industrial action but declined to comment further, noting that IBM was handling negotiations with the workers. The x86 transaction is expected to close this year.

According to a blog post, which showed pictures of IBM workers massed outside the factory, employees had been offered redundancy terms that included an Rmb6,000 ($980) lump sum payment if they signed by March 7.

The factory’s workers are demanding higher payments both for workers who agree to transfer to Lenovo and for those who decide to leave.

Pictures posted online showed Shenzhen police vans and labour department vehicles parked near the factory, although no arrests have been reported.

In two separate cases in southern Guangdong province, more than a dozen workers are being prosecuted for “public order” offences after they participated in labour protests at a furniture factory and a hospital.

Activists fear the cases signal that a crackdown on legal activists launched last year is being extended to labour organisers as well.

Shenzhen authorities could not be reached for comment on Thursday.

 

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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