Galanz plant riot reveals plight of appliance industry

At midnight on April 14, the Galanz plant in Zhongshan, Guangdong province, was rampaged by workers discontent with their wages. [Photo /Securities Times]

(ECNS) – China's home appliance manufacturing sector is getting a jolt from employee disputes, as workers protest against low wages, delayed benefits and poor working conditions.

These events have brought to the spotlight the difficult position China's manufacturers are in, as they find themselves no longer able to rely on cheap labor, mediocre products and price wars.

Galanz workers riot

At midnight on April 14, the Galanz plant in Zhongshan, Guangdong province, was rampaged by workers discontent with their wages. Over 200 workers started destroying dorm rooms, dining halls, forklifts, computers and other facilities in the plant.

Galanz, the world's largest microwave oven manufacturer, issued a statement shortly after, claiming that the workers were "drunk."

One of the participants surnamed Huang said they were not, and that some workers had cried out that the company treated them badly. More workers followed suit and went on to riot for six hours.

Huang said Galanz pays only two thirds of the wage it promised.

"We earn 2,500 to 3,000 yuan a month (less than $500)," Huang said. "We have to work night shifts and hardly have any breaks."

So far, over 300 workers have resigned, including Huang.

Galanz is also known for its price wars. In 1996, the company lowered prices for the first time by an average of 40 percent. At that time, a Galanz microwave oven sold for half the price of a Panasonic. Galanz continued to knock down prices nine times in the following seven years, each time by 30 to 40 percent. Over two thirds of its competitors were pushed out of the market.

However, waging price wars is equal to burning money, and Galanz has found itself with no funds for research, development and innovation. The company has stagnated.

The industry

It's been quite an eventful week for China's home appliance manufacturers. Midea workers also went on strike over low wages, while air-conditioner manufacturer Gree was accused of delaying millions of bonuses.

Experts say these events send a signal to the industry that a revamp in both product and management is urgently needed.

Years ago, China's manufacturers had a sufficient supply of cheap labor. But this has changed as the workforce ages and average incomes grow.

Declining profits are compounding the problem. Chinese manufacturers usually specialize in low-end products that don't have large profit margins, while the high-end market is dominated by foreign brands.

What these manufactures should do, as some experts suggest, is get rid of the old model characterized by cheap labor, low prices and overcapacity. Meanwhile, companies need to boost their brands and focus more on high-end products.