Supplier Risk: Ford Is Caught Off Guard by Volatile Labor Conditions in India

Ford Motor Company may have learned this week that they need greater visibility into labor unrest at their offshore supplier’s factories. Today's WSJ reports that "A Canadian plant owned and operated by Ford Motor Co. will shut down temporarily next week because of labor strife affecting an auto-parts supplier in India ... [and] Shutting down operations was a direct result of a shortage of transmission parts from Rico Auto Industries in Haryana state in India, the site of recent labor unrest."

The article implies that Ford should be given a pass on this supply chain disruption claiming "The strike has offered another glimpse into India's mercurial manufacturing sector. Labor unrest can erupt quickly in India, leaving companies with little time to negotiate with disgruntled employees or adjust to a strike. The labor troubles, especially in India's lucrative automobile industry, have prompted warnings from foreign companies that they might consider shifting operations from the country if strikes continue to hamper production." The supplier "said the company had been updating its foreign customers about the unrest as it simmered over the past two months. He said no customer of the Indian parts supplier had severed its ties as a result of the strike, which the executive described as illegal because of the lack of prior notice."

Illegal or not, given that the disruption and subsequent "closure is expected to cost Ford 5,000 vehicles, according to a person familiar with the matter" it would obviously behoove Ford to employ far better -- if they had any to begin with -- labor intelligence on the ground and not rely upon "updates" from the supplier who has a clear incentive to down play the potential unrest in advance of a crisis.

William Busch

Discuss this:

Your email address will not be published. Required fields are marked *