© Reuters. FILE PHOTO: The logos of car manufacturers Nissan and Renault are photographed at the Kiev dealership, Ukraine on June 25, 2020. REUTERS/Valentin Ogirenko/File Photo
By Sudarshan Varadan and Aditi Shah
Chennai (Reuters) – An Indian arbitrator has ordered Nissan (OTC:) Motor Co. to pay factory workers extra wages, despite warnings from the automaker that higher compensation payments could make its business “unviable in the long run”.
Nissan and its union have been in an industrial arbitration dispute since July after the two sides failed to reach a mutual agreement on several issues including wage hikes. The previous wage agreement expired in March 2019.
A Renault-Nissan court has ordered 3,542 workers to be paid an average of more than 7,100 rupees ($96) per month in temporary relief, according to an August 16 order seen by Reuters.
The payments, which are higher than the consortium’s initial offer of $30 a month but less than the union’s request of $270, will cost Renault-Nissan about $9.53 million in total.
Nissan said the arbitrator will continue to hear more than 50 other requests from workers over the coming days, which if agreed could cost the company 93% more per worker.
Petitions by unions and management – which have been seen by Reuters and have not been previously reported – expose the wide differences between workers and Renault-Nissan.
Nissan said in a statement to Reuters on Tuesday it was committed to offering a competitive package to its workers and was open to making retroactive payments at its plant in southern India.
The ongoing legal tussle reveals the business challenges Nissan faces in the world’s fifth-largest auto market, where despite having invested nearly $1 billion, competitors have outplayed it and struggled to attract car buyers.
The ruling comes despite Renault-Nissan’s arguments that it is incurring “heavy losses” in India and does not have the “financial capacity” to meet the demands.
The automaker said in its 147-page court filing in July that any pressure to pay higher wages “could make unit support unsustainable in the long run”.
Workers have sought wage increases, arguing in a 123-page petition that total wages paid by Renault-Nissan are less than half of what regional peers such as Hyundai Motor and Ford pay.
In an August 16 order, the arbitrator ordered Renault-Nissan to pay $134 per month for 12 months ending in March 2020, and $67 per month for 16 months ending in July 2021 in three monthly installments beginning in September.
“I strongly believe and conclude that there is a case for granting temporary relief to workers,” Arbitrator B Jyothimani said in his order.
Nissan is trying to restructure some of its key international markets such as India – where it has not yet decided a future strategy for its untapped plant.
The demands of the workers include a higher basic salary, an annual increase of Rs 500, an increase in allowances and insurance cover, and the appointment of an additional member of assembly lines to cover workers who take restroom breaks.
“The demands made by the worker to sacrifice for the survival of the company are much more than the sacrifice made by supervisory and managerial staff and managers,” the union said in the filing.
The union also said higher food and fuel prices had also forced them to demand more wages.
However, Renault-Nissan said local competition, transfer of management-level talent to other companies, increased raw material costs and a poor response for some car models had hurt the business.
The company also argued that the wages of its workers could not be compared to Hyundai and Ford because they had set up factories in the state much earlier, had higher production levels and better plant usage.
“The union’s request was simply a desire for a raise without regard to the realities of the business, market salary range and affordability,” Renault-Nissan said in its filing.