Wall Street Journal: IBM-Lenovo Deal Sparks Strike in Southern China

China Labour Bulletin is quoted in the following article. Copyright remains with the original publisher.

March 7, 2014

BEIJING—Hundreds of workers at an International Business Machines Corp. plant struck for a fourth day as the company prepares to transfer the computer-server factory to Lenovo Group Ltd.

Photos and videos of the strike have spread over social media since Monday and show workers in blue coats holding signs and shouting from outside the gates of the IBM Systems Technology Co. plant in the southern Chinese city of Shenzhen.

People who identified themselves as plant workers said U.S.-based IBM wasn't offering sufficient severance for those who opt to leave, while those who want to stay worry wages will fall, according to posts on the Weibo social-media service that couldn't be independently confirmed.

"We are protecting our rights," a Weibo user said in an online chat. He said he was a worker at the plant but declined to be identified.

An IBM notice he provided said workers have until Wednesday to decide whether to resign or to stay and become Lenovo employees. The notice offers a 6,000 yuan ($980) bonus for workers who decide to leave before this Friday.

Employees have a choice of remaining at the plant after Lenovo takes over, with wages comparable with what they have been receiving, or they can leave and receive an "equitable severance package," IBM spokeswoman Harriet Ip said Thursday. "While it is entirely an individual's choice, we are hoping employees will decide to remain."

Lenovo's $2.3 billion purchase of IBM's low-end-servers business is designed to help the Chinese company expand beyond smartphones and personal computers into the booming business of selling networking equipment to businesses, analysts said. The deal is expected to close this year.

Protests at foreign-run plants in China have become more common in recent years after large mergers. Workers have expressed concern over layoffs, pay cuts and reduced severance following the acquisitions, according to worker-rights groups.

Protests last summer by more than 5,000 Chinese workers at Cooper Chengshan (Shandong) Tire Co. derailed the $2.5 billion deal of the joint venture's part owner, U.S.-based Cooper Tire & Rubber Co. to India's Apollo Tyres Ltd.  Workers had said they were concerned about Apollo's ability to repay debts and about cultural differences between India and China.

Strikes hit several PepsiCo Inc. plants in China in 2011 after the U.S. snack and soft-drinks company said that China's Tingyi Holding Corp. would take over bottling operations in the country. The deal went through after the companies assured workers that their contracts wouldn't change.

The frequency of labor unrest in China has increased as economic growth has slowed and workers have become more willing to organize. There were 656 labor incidents in the country last year, up from 382 the year before, according to the China Labour Bulletin worker-rights publication.

Labor groups said the unrest often is avoidable.

"The main problem is that management simply does not explain to the workers what is going on. They just announce the takeover and make a 'take it or leave it' offer," said Geoff Crothall, a spokesman for the bulletin, which is based in Hong Kong.

Write to Paul Mozur at paul.mozur@wsj.com

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