Dunlop India factory, which was shut for the past five years due to financial problems, started 'maintenance work' with a group of workers in Chennai on Monday.
The factory located in Ambattur Industrial Estate, which became sick in 2001, under the Manu Chabbria-led management, has been taken over by the Kolkata-based Ruia group which finalised agreements with workers on re-opening the unit.
Chairman of the Ruia group, R A Pawan Kumar Ruia, on Monday announced the commencement of work at the factory as hundreds of Dunlop employees gathered at the factory premises to witness a significant moment in their lives.
Ruia, also new chairman of the tyre major, said the start of the work at the factory was "a cause for the people, a cause which was in the minds of the people for a long time."
Fifty workers would start the maintenance work at the premises. This number would go up as and when necessary, the chairman said.
At present, Dunlop India has 1,277 employees. The factory's revival has come about after extensive negotiations that lasted more than six months and over 10 rounds between the Ruia group and the worker's union.
An agreement was arrived at on March 27, 2006, under which the maintenance work was expected to be started on April 10 and roll out of the first tyre expected before August 31.
The chairman, however, told the employees that the company will be able to employ only 1,000 people for the present and VRS would be granted to about 300. However, he added that in case the plant's capacity went up and if there was a need for more people, those who were given the VRS would be the first to be considered for the job.
As per the agreement, the new management would pay the workers who are on the rolls of the company, Rs 10,000 as back wages.
The first instalment of Rs 2,500 was paid on Monday. Another Rs 2,500 would be paid on May 10 and the remaining amount of Rs 5,000 would be paid once production commences, Dunlop Factory Employees Union president A Krishnasamy said.
Ruia said production at the Ambattur plant would start sooner than the plant at Shahgunj.
Ruia said the installed capacity of 90 tonne per day at the Ambattur plant will be increased to 130 tonne per day.
Ruia said the company was taken over "as is, how is and where is" position which meant that the new management would take over all liabilities, would have to settle all creditors and also solve whatever labour problems that existed during the takeover.
This meant that Ruia group, at present, has to settle Rs 650 crore (Rs 6.50 billion) liabilities that currently exists.
The Chairman also said the new management was looking at increasing capacity, more modernisation and newer technologies that would help them take on the competitors.
He said they were planning on a working capital of Rs 100 crore (both plants put together) and also a CAPEX expenditure of Rs 125 crore (Rs 1.25 billion).
The funding for this would be got from bankers, promoters and some foreign banks as well.
He also said the management was considering various ideas for tyres and also newer product lines, for which they had undertaken a study.
Ruia said issues like outstanding bills on electricity and sales tax were being negotiated with both the Tamil Nadu and West Bengal governments which, he expected, would be settled soon.
He was optimistic that the company would achieve a turnover of Rs 400 crore (Rs 4 billion) for the year 2006-07 (ending March), saying the company would break-even in the third month of operations itself.
He said the company was already getting queries from foreign companies to supply products in the long term. "The company has also put in a comprehensive marketing strategy that will cover the OEM's, the replacement market and the export market," he said.
