Strikes in China may lead to heavy costs for MNCs

Strikes in China may lead to heavy costs for MNCs

SHANGHAI — A wildcat strike at an IBM factory in southern China illustrates how tectonic shifts under way in the country’s labour market are emboldening workers to take matters into their own hands, raising risks for multinational companies.

MARCH 10

SHANGHAI — A wildcat strike at an IBM factory in southern China illustrates how tectonic shifts under way in the country’s labour market are emboldening workers to take matters into their own hands, raising risks for multinational companies.

More than 1,000 workers walked off the job last week at the factory in Shenzhen, after managers announced on March 3 the terms of their transfer to new ownership under Chinese PC maker Lenovo Group.

Lenovo agreed in January to pay US$2.3 billion (S$2.9 billion) for International Business Machine’s low-end server business.

The workers want higher pay if they switch to working for Lenovo or higher severance packages if they choose to leave.

The strike, still ongoing as of yesterday, fits a growing pattern of industrial activism that has emerged as China’s economy slows. A worsening labour shortage has shifted the balance of power in labour relations, while smartphones and social media have helped workers organise and made them more aware of the changing environment, say experts.

“Chinese workers, after being exploited for so long, are now united and increasingly aware of their rights. They have a better idea of collective action,” said labour lawyer Duan Yi.

A report by the advocacy group China Labour Bulletin last month said it had tallied 1,171 strikes and protests from the beginning of June 2011 to the end of last year.

Many worker protests during that period in Guangdong province — a manufacturing hub where the IBM server factory is situated — were sparked by the closure, merger or relocation of factories.

Last November, hundreds of employees stopped work at a Nokia factory in Dongguan, complaining of changes following the firm’s sale of its mobile-phone business to American software giant Microsoft.

Technology played a part in the strike, which protesters organised through the online chat system QQ and other social media platforms, said a worker in Dongguan.

Mr Duan is seeking arbitration for a group of 70 Nokia workers who were laid off at the time.

Last August, 5,000 workers in Shandong province went on strike to protest against Apollo Tyres’s proposed US$2.5 billion acquisition of US-based Cooper Tire and Rubber. The deal was eventually scuttled and Cooper reported this month that the work stoppage in China had cut operating profit by US$29 million in the third quarter of last year.

IBM said last week the terms offered to workers at the International System Technology Company factory in Shenzhen were comparable in aggregate to what they are currently receiving and severance packages would be equitable.

IBM’s workers had read about prior strikes, including that by Nokia’s workers, and suspected ahead of time that they might have to make a similar stand, said a 28-year-old worker, surnamed Chen, who has worked there for three years. “We were basically prepared and expected in advance that there would not be a good deal,” he said. He declined to allow his full name to be published out of concern that he might face repercussions.

Lenovo has declined to comment on the strike. REUTERS

 

About bambooinnovator
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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