PT Hung-A Exits and The Narratives Created

 

A Tyre manufacturer, PT Hung-A Indonesia, just laid off one and a half thousands of its employees. The company was running in 33 years. Many speculations arose surrounding this big company's exit.

Let's put the facts first. PT Hung-A Indonesia is moving to Vietnam. The closing of Indonesian manufacture is an exit strategy to move the production to a Vietnam's factory. Why making such move?

They were sinking. The production line is no longer profitable in Indonesia. They couldn't make the tyres that the client wants.

The tyre manufacturer was waiting for import license. They couldn't make another plant. They need to import more components. They were waiting for that permission.

TBH, I couldn't blame the government for why the permission was not issued. I have no data to back up the blame. May be there was something that was not permitted.

Now let's go discuss the BS analytics!

One of the rumors created was because the labor cost. So many comments on the Internet blaming the labor and the labor organizations. They feel like the labor organization made the labor cost unfriendly to the business.

I don't think there was ever an issue with the labor organization asking for higher minimum pay. The government would never be taking a risk by raising the standard too high without considering the entrepreneurs. They will absolutely be asking them first.

However, many of the bad practices come from Indonesian entrepreneurs. Some of them tried to scam the labors by not paying their health insurance even when it was cut from their income. Some of them has a notorious story of not paying the labors. Some of them not even try to implement safety in workplace.

For those injustice in the workplace, wouldn't that be a good time to take their right to protest?

I don't agree with some of the Astra group business practices, but have you ever heard of Astra Group labors taking a demo?

One of my friends was an ex-Astra Honda company. She said that they usually go to demo just to make a solidarity with other labors. The coordinator from other companies would go and call them out.

Astra Group has a good plan that supports its employees. It has a good standard in improving their employees. Why can't the other companies do it?

I'm starting to get curious about those people who always blaming labor cost. Are they real? Are they buzzer that get paid to spread the misinformation?

I don't think I have enough energy to discuss about other issues.

I mean, we got a lot of unlawful costs. It's a common theme over the years but no solution ever been given. We all know about it, but none with the authority goes beyond yet.

I mean, I could say let the labors stand for their factories and beat up any NGO that trying to get extra pocket money from their respective factories. But that would be an unlawful behavior. Vigilante is not a solution. And sometimes, the NGO has their right point to interrupt a factory operation.

I can say, let's build a national railroad so that the distribution of goodies will have lower costs. But, what about the truckers?

Anyway, I better leave that to others with better in-depth knowledge.

I just curious about why they want to move to Vietnam. I found astonishing facts that would make tyre industry blooming there:

Vietnam tyre companies are certified as Green Company. With this competency, they can go and export their products to Europe. This contrast with Indonesia that still in the fight with Europe over Palm Oil and Nickel. This kind of relationship can jeopardize other companies including the tyre company. Deforestation is a major issue right now for EU and I don't think our rubber plantation is ready for that.

As a number two natural producer, rubber plantation in Indonesia is mostly held by smallholder rubber farmers. This is awesome but unfortunately have a big shortcoming. They usually not that informed about the distribution and any rule change.

Hmm... this is not making any sense! [About Hung-A moving out]

As I researched further, actually our rubber plantation is well-supported by the world. The UN has a program to make sustainable rubber plantation. I mean, who wouldn't want to implement the program? It is for the farmers, not big corpo!

If EU really try to ban the plantation, it will be banning the farmers! So, we can be sure that the rubber plantation is actually a safe plantation.

Oh, I think I see the point the Indonesian government wants to make with these tyre companies.

Indonesia has the largest rubber plantation in the world. But despite the significant size of Indonesia’s rubber plantation area, barriers to maximizing its potential still exist. Downstream activities, such as post-harvest handling, manufacturing, and processing are still not as significant due to the lack of infrastructure and product diversification. Without a new approach, Indonesia’s rubber industry would remain heavily dependent on the export markets in the next decades while its domestic rubber consumption stays low.

I think Jokowi administration wants to have a domestic industry for the rubber industry. That might be the reason why the permit for import is being withheld. I adore that fight for better future even though it is taking its toll right now.

Natural rubber real enemy right now is actually the synthetic rubber. Based on the trend, it provides higher margin. So, it's natural that the demand for the natural rubber may decreasing in the near future.

China as a market leader in producing and consuming synthetic rubber may produce better synthetic rubber production techniques. I can say that for sure because the demand for rubber is so high. Also, learning from their automotive industry, I can say that China has that knack for rapid continuous improvement.

Anyway....

Many major tyre companies actually make the effort to invest in Indonesia. Michelin and Goodyear are the good examples. We also have a local company Gajah Tunggal. The most recent one is a Chinese tyre company invested in Indonesia. 

Sigh....

With the advent of electric car, a new market is now growing for tyre manufacturer. It seems Huang-A makes a decision years before to move its operation to Vietnam. I can say they might have taken the wrong step with wrong prediction.

They have the advantage of 33 years in Indonesia. They should've invested more in Indonesia. But they chose to invest elsewhere making their Indonesian factory out of business. 

I don't blame them for diversification. It's a valid reason. They are a business. They need profit. 

It's just that I think they are in the wrong move right now. But who am I to judge? Maybe they have their reason to move to Vietnam; reason that I don't know about because in the end I'm just an outsider trying to figure out the reason.

Big company is like an airplane. They can't change their direction easily. It takes years to move out. I think they won't be coming back soon.

However, I'm curious if the rest of the company left in Indonesia built another factory in Central Java like the rumor said. It would be another delicious gossip around corpo trying to cut cost.

I don't know. 

I just wanted to make a rebuttal about labor being the issue. Why is this progressing towards the rubber and tyre industry? I need to stop right now. Lol.