Rico strike forces shutdown at Ford

Rico strike forces shutdown at Ford

New Delhi: The nearly month-long labour unrest at Rico Auto Industries Ltd has caused collateral damage overseas.

A break in the supplies of components has forced Ford Motor Co. to shut its Oakville assembly plant in Ontario, Canada, for a week. The shutdown, which starts on 26 October, is due to a “component shortage" from Rico, company spokesperson Todd Nissen said in an email.

Set up in 1953, the Oakville plant makes four crossover vehicles—Ford Flex, Ford Edge, Lincoln MKX and Lincoln MKT—according to information on the company website.

It builds over 200,000 vehicles each year.

A section of employees at Rico have been on strike since 21 September, when 16 of their colleagues were suspended for indiscipline. At the top of their list of demands is the registration of a trade union formed by the All India Trade Union Congress (AITUC).

Still, Rico’s management had been able to mostly maintain production and meet schedules as, out of a total of 3,000 employees, around 1,700 were reporting for work.

However, the outbreak of violence on Sunday, which resulted in the death of a worker, brought production to a halt as agitating workers blocked factory gates. Production schedules are still disrupted, said a person with direct knowledge of the situation, who declined to be named. On Tuesday, workers at other Gurgaon units had joined the Rico strike in a show of solidarity.

Rico supplies Ford with transmission support brackets, and the strike has resulted in it being unable to meet order schedules.

“We’re not providing a specific breakdown of how many vehicles will not be built, but I can confirm it will be several thousand units," Nissen wrote.

“We are operating under force majeure conditions. Yes, we are in short supply because of a strike," said the person familiar cited above.

A spokesperson for Rico Auto declined comment. Negotiations haven’t made any headway yet, the union said.

“Talks took place on Friday but there has been no resolution to the strike," said Suresh Gaur, AITUC Gurgaon district president.

Rico ships the brackets to a Ford transmission plant in Detroit, Michigan, from where they are sent to assembly plants across the region.

For the time being, Ford says it plans to stick with its Indian suppliers. “We have not had any significant supply issues with Indian suppliers in the past. We remain committed to doing business with Indian suppliers as part of our global supply base," said Nissen. “But we’re watching this situation closely and we hope it gets quickly resolved."

India exports about $4 billion (Rs18,600 crore) in auto components every year.

Ford India declined to comment. “We do not comment on specific supplier relationships," a spokeswoman said.

It was not immediately clear whether Ford India’s operations would also be affected as a result of the industrial action.

In addition to Ford, Rico’s global customers include General Motors Corp. (GM) and Jaguar Land Rover.

“We have not been affected so far by the strike at Rico," said P. Balendran, vice-president at GM. He declined to comment on whether the company may face a parts shortage in the coming week.

Similarly, a spokesperson for JaguarLand Rover, which operates “just in time" delivery of parts at all of its plants, said that it was “not currently experiencing any problems".

Experts believe that new manufacturing structures, with the emphasis on lower inventory, make it imperative to avoid any interruptions.

“Supply chains have become so lean that manufacturers don’t keep any inventory. Lining up alternate suppliers needs time," said Rakesh Batra, partner at the automotive practice at consultancy Ernst and Young. “This is affecting not only Ford but also other manufacturers that have export commitments," he added. “This is a huge issue with global sourcing."