Bosch

After a very strong first half performance where the company’s topline grew by almost 26 per cent, while the bottomline even better at 34 per cent with valuations still looking fair at trailing twelve months PE of 22x, many would have been tempted to buy the scrip as safe haven in this volatile market. However, no one could have thought there could be sudden tools down strike at Bosch’s Bangalore plant.

While this is certainly not the first time a strike has occurred at Bosch, what amazes us is the length at which the current strike continues to go. It should be noted a similar strike had occurred on March 8 last year at the Naganathapura plant, on the outskirts of Bangalore where the company declared a lock-out. However the lock-out was lifted a week later. But in this case it’s been almost two weeks since the strike started on September 28, 2011 and yet there is no solution or middle ground reached between the management and the workers. It should be noted all the 2500 workers in the plant are on strike.

The story so far

According to Raghavendra executive committee member Mico Employees Association (MEA), the MEA and the Bosch management had signed an agreement before the Labour Commissioner of Karnataka, which agreed on the issue of not outsourcing or sub contracting functions with an effective date till December 31, 2012. However, now the MEA claims that the Bosch management has gone back on its word after the workers discover that seven machines from the pump housing department were removed and given away to the sub contractors on one Sunday and that too without the knowledge of the workers who found the machines missing on Monday morning.

However the company claims that the outsourcing of certain non core manufacturing and support processes was done after monthly meetings with the workers union and it would not result in to loss of jobs, which is being claimed by the MEA.

MEA and Management missing the bigger picture

While that was the story so far, what has happened now is that at one end while the workers continue to remain adamant with its strike, the management isn’t making any move either. According to discussions with reliable sources today afternoon both the parties (management and MEA) are yet to take first step towards resolving the issue and it gives us a feeling that it is more a clash of egos at this point of time than anything else and the bigger picture of bringing the company operations to normalcy is being ignored at the moment.

If that was not enough our reliable source also confirms that the company is actually using the corporate staff to continue with the production. In fact our source tells us that the company feels that these are pretty automated and simple processes which could be run by the corporate staff as well. This according to us is a serious risk the company is taking to run its operations. It should be noted that what Bosch manufactures are very precision products, which involves lot of quality control. Is the Bosch staff technically qualified to run these processes, we don’t feel so. Besides isn’t the company concerned about the OEMs to whom it would supply these products and isn’t the company concerned about the image it would create amongst its clients when it is using its corporate staff to run its production lines.

Besides considering this production is being run only in one shift, this would certainly dent the overall production numbers and in turn also affect the sales growth of the company in the last quarter. According to our calculations though the September quarter numbers would be intact the fourth quarter (fiscal year ends on December) would surely see the impact on revenues.

Bosch in these last 14 days could have easily lost about Rs 55-57 crore of revenues and it would continue to bleed if the standoff between the management and workers continue. As of now though the scrip is holding up well at Rs 7105, a further continuation of this issue may have an impact on the scrip going forward.