HONDA MOTORCYCLES AND SCOOTERS INDIA LTD.

(HMSI)
The president of Honda Motorcycles and Scooters India Ltd. (HMSI), who was also its CEO, had
recently chalked out an aggressive expansion plan, which involved making the production capacity
of the company’s plant (at Manesar, Gurgaon, India) triple by the end of 2007-08. Post-
expansion, the company would produce 0.6 million motorcycles compared to 0.2 million in 2005;
and its total two-wheeler capacity would increase to 1.2 million units from eight lakh in 2005. He
was exploring the options towards building a strategy for a long-term cooperation with the
employees. But he had bitter memories of the recent past. He looked back at the happenings in the
company in the last twelve months. Neither he nor perhaps any of the members in his managerial
team could have imagined that workers’ seemingly not-so-major grievances could actually lead to
a war-like situation. It was not just any ordinary unionization struggle that HMSI workers had
recently fought for. The company could not prevent the union formation, which took place in May,
2005; that too with affiliation to AITUC (All India Trade Union Congress), which was the trade
union wing of the Communist Party of India. What was more worrying to him was the damage to
the company’s image due to the large-scale violence that took place at the Gurgaon civil lines area
involving its workers and the police on 25 July, 2005. The workers had gone there to seek a more
proactive intervention of the state machinery towards reinstatement of their colleagues who had
been dismissed or suspended by the HMSI management for acts related with union formation. This
incident was reminiscent of a police state reflecting barbarism of the type practiced in the feudal
era. The CEO would surely not have liked that to happen even to his supposedly “indisciplined”
workers. Many happenings of that day were telecast almost live by multiple news channels in
India. And they were perceived by the management to have done perhaps an irreparable harm to
the social existence of the company.

The drop in the company’s sales was also worrying him. The company had suffered a production
decline resulting in monetary loss of Rs. 1300 million as a consequence of the strike and go-slow
tactics by the workers especially during the months of May and June, 2005. But there was much
more to it than just the monetary loss. He wanted to focus the attention of his whole workforce and
the managerial team on the ambitious goals that the company had set before itself when it decided
to extend its manufacturing operations to India. While choosing the company’s logo of the wings,
the company aimed to fly high by taking a dominant role in the Indian two-wheeler industry,
simultaneously taking advantage of the rapidly growing Indian economy. He was looking at the
possible ways in which he could increase the intensity of the company’s march towards realization
of its vision.

HMSI: PRODUCTS AND WORFORCE

Honda was the largest manufacturer of two-wheelers at the global level. HMSI was a wholly-
owned subsidiary of Honda Motor Company Limited (HMCL), Japan. The Tokyo-headquartered
HMCL was one of the leading manufacturers of automobiles and power products and the largest
manufacturer of two-wheelers in the world, with more than 120 manufacturing facilities in 30
countries worldwide. HMCL was known to have excelled in the adoption of the post-Fordist
production system (also called Toyota Production System). HMSI was established on 20th October
1999. Its aim was to achieve this dream through production of world-class scooters and
motorcycles manufactured at its state-of-the-art plant. The HMSI factory was spread over 52 acres.
The initial installed capacity was 100,000 scooters per year, which was scheduled to reach
6,00,000 scooters by the end of 2005.

This case is prepared by Prof. Debi Saini, MDI, Gurgoan

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HMSI operated on principles, which were followed worldwide by all Honda companies.
Maintaining a global viewpoint, HMSI was dedicated to supplying products of the highest quality,
yet at a reasonable price for complete customer satisfaction. It aimed to produce technologically
superior, efficient and reasonably priced two-wheelers, with Honda-tested technology, backed up
with after-sales service of Honda’s global standard. Instead of being just vehicles of transportation,
its products were intended to become vehicles of change: change in the way you work, the way
you travel, and change in the way you live.

The company had about 3000 employees in all; of these 2000 were in the worker category––1300
were confirmed workers, and 700 were contract workers. About 1000 employees belonged to the
supervisory and managerial staff. Besides, 700 persons were working as trainees and 300 were
apprentices under the Apprentices Act, 1960. Almost every worker or trainee held a certificate
from some or the other ITI (industrial training institute) in India. All trainees normally got
absorbed in the regular workforce after the training; whereas only about 15 per cent of the
apprentices were able to get a job with the company after the apprenticeship was over.

Going by the region-cum-industry considerations, HMSI had the reputation of being a

comparatively good paymaster. During the time when workers waged recent agitation, the
company had increased the wages of each worker by Rs. 3000 per month. Thus, in October 2005,
salaries for workers ranged from Rs. 8,150 for its unskilled worker to Rs. 11,200 for skilled
worker, which included Rs. 2,000 towards house rent allowance.

EMPLOYEE WELFARE

HMSI had taken several initiatives in the area of employee welfare, which ranged from
subsidized canteen facilities to attractive hospitalization reimbursement for all employees. Some of
the key initiatives in this regard were as follows: Besides canteen, transport facilities to and from
workers’ residences were provided at subsidized rates. The company had a sports club for
employees’ use at Sukhrali village in Gurgaon, which had facilities for indoor games. Workers had
been organizing matches with employees of other companies in different games including football,
volleyball, table tennis, chess, carom board, badminton, tug of war and high/long jump. Two sets
of uniforms, one company cap and one pair of shoes were provided to each employee every year;
all employees including the managers wore similar uniforms.

Most of the HMSI workers were not covered by the Employees State Insurance (ESI) scheme
under the ESI Act, 1948 as their salaries had crossed the maximum salary limit for coverage. The
company covered such employees under Paramount Health Care facility. Besides OPD (out-
patient department) facility, this scheme envisaged re-imbursement for hospitalization expenses.
Till very recently, the coverage of the workers and their family for hospitalization insurance was
as follows: A workman and his/her spouse and up to two children were covered for Rs. 75,000
each, and workers’ mother and father were covered for Rs. 1,50,000 each. On the intervention of
the union these rates were enhanced later on in September, 2005. The company also met its
liabilities under various labour laws. Earlier, it used to invite workers’ families for celebrating the
foundation day, but as the size of the workforce increased, that practice was stopped. To provide
support to an associate at the time of happy and sad occasions the company had a policy of paying
cash as under: Rs. 2100 birth of a child (limited to maximum number of two children); Rs. 3100
on his/her marriage; Rs. 5000 given to the family of an employee on his/her death; and Rs. 3000
on death of an associate’s spouse or child or parent.

HUMAN RESOURCE POLICIES

The Human resource policies of HMSI were in alignment with the philosophy of its parent
company, HMCL. The latter considered itself as a unique organization as it claimed to have
adopted some distinctive employment and production practices. It also had certain fundamental

2
beliefs, which among others, included the value of each individual. HMSI’s philosophy
advocated two fundamental beliefs: 1) Respect for Individual Differences; and 2) the Three Joys
that it wanted to promote for all organizational members. Respect for the individual stemmed from
initiative, equality, and trust. The company believed that it was the contribution from each
individual in the company that was responsible for company’s success, and which would take the
company into the future. With its focus on The Three Joys, in line with its parent Honda's
Philosophy, HMSI conducted all its daily activities in pursuit of: the Joy of Buying, i.e. the joy of
using world-class products; the Joy of selling, i.e. the joy of selling world-class products; and the
Joy of Manufacturing i.e. the joy of producing high-quality products. Based on its philosophy, the
respect for the individual got translated into independent spirit and freedom, equality and mutual
trust of human beings who worked for or came in contact with the company. The company
claimed that its policies focused on developing each individual’s capacity to think; reason; and
most importantly, ability to dream.

The company believed that what thrilled its employees––who were called its associates––most was
the “Joy of Creating,” which was a key mission at Honda, which aimed to promote working for
company’s own happiness. The company promoted “association” among different categories of
employees through provision of similar uniforms and same canteen facilities for all. The
induction programme of HMSI involved, among others, acclimatizing the employees to the Honda
philosophy, which was a clear written statement. The company also talked of a “Honda way”
which was not a written statement but was expected to run through the company. For example, one
of the prominent Honda ways was perseverance to ensure safety and quality in all aspects. The
Honda way meant “human behaviour or way of thinking based on Honda philosophy.” The HR
department was expected to organize training programmes and facilitate internalization of culture-
building so as to promote the Honda way among the employees. Apart from training in Honda
philosophy, the company organized the following types of training for its employees: TQM (total
quality management) training; training for building team leaders; ISO 9000 training; and 5S
training. The training department, which was a part of its Human Resource department, was
supposed to be headed by an assistant manager; but this position was lying vacant since long.

HMSI had a performance appraisal (PA) system for all its employees including those in the
worker category. It involved interviewing of the person concerned by the section head and the
shift incharge, on the basis of which PA was done on a rating scale. For the purpose of increment,
workers were divided into five categories; increments ranged from Rs. 400 to 1400 per month
depending upon the PA grade of an employee. The company announced all PA results and salary-
hikes immediately on the end of the financial year. Thus on April 1 of each year, one would get
his/her pay-hike/promotion letter. The promotion chances for workers ranged from worker to sub-
leader to assistant executive to executive. Since almost nobody was covered by the Payment of
Bonus Act, 1961, as they got higher salary, the company had the policy of giving an ex gratia of
one month’s gross pay to every employee as incentive pay around the Diwali festival.

Since April 1, 2004 the company had constituted a works committee (WC) under the Industrial
Disputes Act 1947 (IDA) consisting of 15 workers and 5 management representatives. However,
after the union came up, the WC had become merely symbolic. The management had also
constituted some other committees consisting of workers and management representatives. Some
of these were canteen committee, transport committee, health committee, and sports committee.
The nominations to these committees were done by the management on the basis of the perceived
interest of different persons.

The company’s six-page three-monthly quarterly newsletter was titled “Dream Team.” Its focus,
among others, was on covering company’s achievement in terms of awards, contracts,
recognitions, quality certification, list of new dealers, and kaizen activity. A perusal of the past
issues of the Newsletter revealed that its focus was on targets, safety, exhortations related to, and
announcement of, achievements concerning quality, safety and training programmes on defensive

3
and safe driving of two-wheelers. Very few employee-related matters were covered. Nor was there
any scope for workers’ expression through any letter to the editor related to issues that concerned
them. Employee-related matters covered included: sports competition results; news about
marriage; and child birth in case of employees or their spouses.

SEEDS OF UNIONIZATION AND AFTER

Things were going smooth for nearly two years after production started, but for a series of
unpleasant events. Perhaps the major resentment of the workers was expressed when the company
decided to give to each employee a Diwali gift of Rs. 600 in November, 2004. Union leaders said,
“In the past years also, the value of the Diwali gift was of about 400 to 500 rupees. Looking at the
stature that our company enjoys in the global market, we all felt belittled at this small gift.” A
manager added that the perception of unfairness among workers was enhanced when some rumour
also got spread that Hero-Honda had given a refrigerator each to its workers as Diwali gift. Ninety
nine per cent of the workers refused to accept this Diwali gift, and the company took it back.
Alternatively, it offered a coupon of Rs. 600, which too was refused by the workers. After 10 days
of Diwali, this money was transferred to the bank accounts of all workers.

Workers also encountered certain other problems. They were made to sign a ‘movement sheet’
whenever they went to toilet or drink water. One day a worker was denied permission to go to the
toilet, as he could not withstand the pressure, he pulled the line chain and rushed to relieve
himself. When he returned some minutes later, he was dismissed. Often workers had to attend to
more than one machine simultaneously, as happened in the post-Fordist production system; this
created stress for them. The company was also very strict in granting leave. Even when a worker’s
close relative was seriously ill or circumstances were otherwise serious, leave would not be
granted. While denying the leave, sermons were given to them, which they did not like. Sometimes
they would be told to leave the company permanently if they could not perform up to its
expectations. If a worker wanted to change a shift temporarily for some compelling reason, it was
almost never granted. Memos were issued for different reasons; almost every day some or the
other worker would get a threat of termination. There was considerable fear of management’s
authority amongst the workers; nobody could dare raise his voice or think of seeking a grievance
redressal.

Workers perceived that many managers had been showing partiality in matters related to posting.
Their blue-eyed boys were posted in jobs outside the production-line work. The production-line
job was far more exerting than that outside it. The enormity of the problem had taken a serious
proportion, and led to considerable bickering among workers. The managers enjoyed this picture
as it prevented the workers from uniting. The practice was going on since beginning. The Japanese
top management knew little about it. The Indian managers would not let the workers meet the top
management to share their problems. Union leaders claimed that this was done mainly with a view
to creating a friction amongst the common worker. They wanted these postings to be done on the
basis of seniority.

Workers were also unhappy with the idiosyncratic attitude of the Vice-President (VP)–
Manufacturing (a Japanese national), a free-style person, who was a strict Honda disciplinarian;
they were afraid of him as he could say anything to anybody any time. He was often seen moving
on the shop-floor with a 14-feet-long stick that was used for measuring the standard height of a
trolley. Most workers did not like his carrying a stick; they would crack jokes about him at his
back. One day, a worker got late by 2 minutes after the tea time. He kicked this worker at his leg to
show his anger; but partly it was a friendly kick. This worker somehow did not react at all, nor did
the other workers do so. As the news spread amongst others by the evening, workers raised
slogans against the VP. The next day, he apologized in front of the workers’ gathering. The Indian
managers asked some 15 workers to have a meeting with them on this issue. Production got
completely stopped for one and a half day. Another somewhat similar incident occurred on a day

4
when a Sikh officer of the company was wearing a different-coloured cap and not the usual
company cap. The VP gave a push to his cap from one edge; and it fell down. The official
concerned felt insulted but kept quite. The errant VP was later sent back to Japan; no other action
was taken against him.

The workers were not satisfied with a mere apology from the VP. In the next 15 days they came
out with a charter consisting of more than 50 demands which included: an increase of Rs. 2500
per month in wages; 20 per cent annual increment in wages; house rent allowance to be pegged at
70 per cent of wage; conveyance allowance at Rs. 1500 per month; 20 per cent bonus on wage +
dearness allowance; provision for free distribution of one kilogram of milk and ½ kilogram of gur
(jaggery) per worker everyday; provision for a Union Office within the company premises along
with all incidental facilities like telephone; a loan of Rs. 2 lakh for marriage of sibling/child;
provision of a library within company premises; abolition of the policy of overstay (if the
production target for the day was not achieved, workers were required to compulsorily stay back
until the target was achieved).

With considerable heartburn and opposition, on April 1, 2005 the management offered to workers
a compensation package comprising of an increment of Rs. 3000 per month. This was on the
condition that the workers would not form a union. They refused to accept the management’s
offer.

When the management did not yield, the workers started collecting money for funding of union
activities. HMSI management suggested to the workers, “Why don’t you form an internal
committee instead?” The workers declined this suggestion. Many workers were individually called
to a manager’s room and were exhorted not to join the union. Letters were sent to certain workers’
homes that they were indulging in undesirable activities. The management allegedly hired some
outsider toughs to frighten the workers if they formed a union; but their resolve was too strong.
With the help of local union leaders (affiliated to political parties), they began making efforts to
form a union, and subsequently moved an application for registration of the union to the Registrar
of Trade Unions at Chandigarh. The management, not wanting the formation of a union in the
organization, tried its level best to stop union registration. It resorted to various means like
lobbying with the Haryana Government to help prevent union formation and its registration. The
registrar allegedly denied registration of the union on the ground that the proposed workers’ action
was initiated in bad taste. It also apprehended that it would result in disharmony of relations
between the industry and workers in the region at large, and would also prove detrimental to the
growth and development of the industrial belt in and around Manesar.

Consequent to this, the workers resorted to a slowdown of work (go slow) and refused to put in
overtime to complete the production targets. The management viewed the new stand of the
workers as a serious case of breach of discipline and suspended four workers on charges of
insubordination, tampering with the quality of output, adopting a go-slow policy, indiscipline and
unrest. During the same period, the management also refused to absorb some trainees who had
completed their two years of internship.

The aforementioned actions of the management led to widespread discontent among the workers.
Most workers, whether permanent or trainees, collected together under the leadership of the
suspended workers, and started raising slogans. They also “gheraoed” the management within the
offices located at the factory premises. During this “gherao” one person from senior management
was manhandled and beaten up. The entire incident of “gherao” and violence resulted in the
production being shut down for 30 minutes. The management saw this as a grave and acute case of
breach of discipline. It retorted by suspending 50 workers and dismissing the previously suspended
four workers without any enquiry. This made the situation in the company still more explosive.
Interestingly, so far as the importance of local laws was concerned, the global philosophy of
Honda stated as follows:

5
 Honda is committed to providing a work environment that is free from unlawful
discrimination, including harassment that is based on any legally protected status. Honda
will not tolerate any form of harassment that violates this policy. This policy forbids any
unwelcome conduct that is based on an individual’s age, race, colour, religion, sex,
national origin, ancestry, marital status, sexual-orientation…or any other basis protected
by state, federal or local law.

In view of the resistance from the management, the registration of the proposed HMSI union was
further delayed by more than a month. The cause of the workers and their application for
registration was then supported by a letter of the AITUC chief Mr. Gurudas Dasgupta, a member
of Indian Parliament. This letter dated May 20, 2005 was addressed to the Chief Minister of
Haryana and requested him to look into the matter to secure early registration of the proposed
union. Subsequently the HMSI labour union was registered by the Registrar. The newly-formed
union raised further demands while adopting the demands raised earlier.

CONCILIATION FAILURE AND THE INTESITY OF WORKERS’ ACTION

Eventually, the dispute landed itself for conciliation. Conciliation proceedings were initiated on
May 26, 2005 by the Deputy Labour Commissioner of Gurgaon, who was the conciliation officer
in the Gurgaon region for all general-demands disputes. For conciliating matters related to
individual disputes, the Gurgaon area was divided into four regions, each headed by a labour-cum-
conciliation officer. Six conciliation meetings were held on June 3, 17, 28, and July 8, 14, and 19.
The HMSI management was represented by two managers belonging to the company’s human
resources department. They remained almost quiet during the proceedings. The only contention of
the management was that the company was not required, on any ground––whether legal or
equitable––to raise the wages of the workers since it was already paying more than the region-
cum-industry standards. The representatives of the union, however, chose to stick to their
demands. The DLC thought that the conciliation proceedings failed due to “the uncompromising
stand adopted by both the union as well as the management representatives.” He submitted a
confidential failure report to the Haryana Government under section 12 (4) of the Industrial
Disputes Act 1947 (IDA) on July 19, 2005.

In the meanwhile, during the pendency of the conciliation proceedings, the management asked the
workers to sign a statement of good conduct. This statement provided that workers would remain
disciplined while in the factory premises and that they were returning to work unconditionally. The
statement also contained a clause envisaging non-pursuance of union activities by the workers
while on work. It was this clause that became contentious and due to which the workers refused to
sign the statement. The management, in retaliation, refused to let the workers enter into the factory
premises without their signature on the good-conduct bond.

The management hired some temporary workers from its vendor companies in order to maintain
production schedules. These temporary workers were asked to stay in the factory premises and
requisite facilities were provided to them within the factory. Eventually, the management and the
union reached an agreement in June 2005 whereby the management agreed to allow the workers to
enter the premises of the company and work only under the condition that the terminated staff
would not be taken back/reinstated. Furthermore, it was decided that the workers would be
allowed entry into the factory premises in batches of 400 that too if they signed good conduct
bonds. Workers agreed to do so.

However, an apprehension continued to bother the management as a few years ago at Hero-Honda
Motorcycles Ltd., Dharuhera (a joint venture between the Hero Group of Companies and Honda
Motors) a similar situation had arisen, and temporary workers from vendor companies were used
to continue the production. The management of Hero-Honda Motorcycles Ltd, under
circumstances similar to those in the present case, entered into an agreement with the workers and

6
allowed batches of 400 workers to enter the premises and resume work. However, after entering
the premises, these workers disrupted the work done by the temporary workers from the vendor
companies and brought production to a halt. The management at HMSI feared a similar incident
being repeated at HMSI.

On the following day, the workers put up the union flag at the factory gate, the HMSI management
got apprehensive and decided to allow only batches of 100 workers to enter the factory premises;
but later the management further retracted and announced that it would take back workers in
batches of 50 only. Anguished workers agreed yet again but the management eventually decided
not to allow any worker to enter the factory. The management also requested and got a good
degree of police protection. The persistently explosive situation in the factory resulted in fear
being instilled in the minds of the temporary workmen who had come from the vendor companies.
Many of these workers fled from the factory premises. At the end, only 38 workers reported to
work on June 18, 2005. At 1:30 p.m., the management was forced to declare that the production
would be shut down for the day. After obtaining registration for their union, the workers had been
resorting to “go slow,” as a result of which during the month of May, June and July 2005 the
production was reduced to just 10 per cent of the normal––from 2000 scooters per day to around
200 scooters per day. Later it was discovered that the management had placed an advertisement in
a newspaper for recruitment of new workers.

THE DANCE OF NAKED VIOLENCE AND ITS AFTERMATH

On July 25, 2005 workers from HMSI and those from the neighbouring industries staged a rally at
offices of the district authorities to press their demand for reinstatement of their dismissed and
suspended colleagues. The police prohibited the workers from entering the Civil Lines area which
housed the offices of all major government functionaries of the district, including the District
Collector. At this point several masked men began throwing stones. The protesters attacked the
Deputy Superintendent of Police (DSP), who was beaten mercilessly, an incident covered by the
television media that invited public sympathy for the police. They also set fire to the vehicle
belonging to the sub-divisional magistrate (SDM). The police, however, succeeded in controlling
the mob. The identity of these masked men had not been confirmed, and workers denied that
anyone from their ranks were amongst them. After this clash a message was sent to the workers
that the administration would meet them and accept their memorandum; they were asked to
assemble at the lawns of the secretariat. When within the enclosure, in order to take revenge of the
earlier attack on the police, on some slight provocation it resorted to the use of brute force against
the unarmed workers (see pictures to the left). The media reported the use of the worst possible
police brutality on the workers. While the initial claim of workers’ injured was 700, most workers
were discharged after first-aid. But 70 of them suffered severe injuries. Later on the police arrested
a number of workers and booked them under different sections of the Indian Penal Code. The legal
counsel of the HMSI union was also booked by the Haryana Police on charges of

An angry lady relative of an injured worker assaulting

a policeman on 26 July, 2005, Times of India

7
attempt to murder. The media reported that the police brutality, though inexcusable, was not
exactly unprovoked. The television images of the savagery exhibited by the Police in their attack
on the workers brought to many minds the savagery of Jalianwala Bagh by General Dyer’s army
perpetrated in the interest of their British masters. A journalist of The Hindu, English daily wrote:

The scenes from Gurgaon gave us more than just a picture of labour protest, police
brutality or corporate tyranny…The streets of Gurgaon gave us a glimpse of something
larger than a single protest. Bigger than a portrait of the Haryana police. Greater than
Honda. Far more complex than the "image of India" as an investment destination. It
presented us a microcosm of the new and old Indias. Of private cities and gated
communities. Of different realities for different classes of society. Of ever-growing
inequality.

Of course, it was admitted that some policemen were beaten by the mob before the police
responded with its brutality. The HMSI union maintained that it was so done by the outsiders. The
constabulary forced workers indiscriminately to kneel holding their ears while they were being
thrashed. The second day’s violence was reportedly sparked off when enraged members of the
public who turned up at the civil hospital could not find their relatives (see picture above). Some
of these were whisked away by the police and were charged with the previous day’s violence. That
inflamed matters further.

The police action on workers was severely protested by the print and the television media and the
politicians in and outside Parliament. As a result, the Inspector-General of Police conceded that the
incident was an act of gross negligence on part of the police. The DSP and the SDM concerned
claimed that out of the 375 odd persons arrested after the incident, 79 had nothing to do with the
strike at HMSI; this was later on also verified with the records of the HMSI.

On July 26, 2005, the day after the unprecedented violence, HMSI had closed operations for half a
day; but it did not declare a lockout. Consequent to severe protests in different circles, on 27 July,
the Haryana Chief Minister ordered a court of enquiry to investigate the violent incident to be
conducted by a retired Judge of the Punjab and Haryana High Court. The terms of reference,
among others, provided for: completing the inquiry within a period of 3 months; examining the
role of outsiders in the incident; and examining whether the force used by the Police was justified
or excessive; and whether the means available with the police were adequate to control the crowd.
The Haryana Chief Minister was also directed by the Congress President Mrs. Sonia Gandhi to
hold discussions with the HMSI management and its workers. Sixty-one workers remained in jail
for more than two weeks; they were released on 11 August.

THE TRUCE AND ROLE OF THE STATE

On July 30, 2005 an agreement, arbitrated by the Haryana Chief Minister, was arrived at between
the workers and the management of HMSI. Of course, technically this was a conciliated settlement
and not a case of arbitration under the IDA. The agreement stated that the striking workers would
resume duty from Monday, the 1st of August 2005 and that they would not raise any new demands
during the next one year. The trade union, which was the bone of contention between the workers
and management would, however, continue to operate. The agreement also stated that the 50
suspended workers would be reinstated as also the four union leaders whose services had been
terminated. However, the terminated employees would be reinstated only after they had submitted
an unconditional letter of apology. The four terminated workers were also required to submit a
separate assurance letter to the top management. The undertaking contained a clause that the
workers promised not to engage in any act of indiscipline and assure normal production. However,
the management retained the right to conduct an enquiry into the reasons for termination of the
aforementioned four terminated employees and if after such enquiry the employees were found
guilty, the management had the right to transfer them to any other department other than the

8
manufacturing department. The agreement also provided for termination of any employee of
HMSI who would get convicted in any of the court cases that had been initiated against them by
the city administration in connection with the July 25, 2005 incident. And, the workers would get
full salary for the months of May and June, 2005. However, from June 27 onwards, the principal
of “no work no pay” (as per an earlier ruling of the Supreme Court of India) would be
implemented. It was also provided that the injured workers who were not able to work
immediately would be given paid leave.

About the workers’ demand to absorb the trainees as permanent employees after the completion of
their internship as per the prevalent practice, it was decided that a proper test and a detailed
appraisal form would be administered for evaluating their performance before inducting them as
permanent staff. Finally, it was agreed that the agreement would be considered as final conciliation
in respect of all demands raised by the workers and in future both the parties would maintain
cordial relations.

UNION–MANAGEMENT DYNAMICS IN THE POST-VIOLENCE SCENARIO

The union office-bearers felt that a good degree of change could be seen in the attitude of the
managers in the post-July 25 scenario. The management allowed concessions on several fronts. On
the day of the tripartite agreement, the management wanted to terminate the services of some 200
contract workers even though the tripartite agreement provided for reinstatement of all workers.
But the union could convince the management that the company should stick to the agreement.
There was also an informal understanding that the union leaders would have the freedom of not
working on the shop floor since several IR issues were pending that required their persistent
attention. No domestic enquiry proceedings were started against the four dismissed workers who
had been taken back; nor were they transferred to other departments as envisaged in the tripartite
agreement.

Police had registered cases against 63 workers, including all the seven union office-bearers for the
July 25-violence. This necessitated running around to contact different people for making their
defence sound. The injured workers had their problems, which needed intervention of the union:
out of 50 workers who had suffered major injuries, 15 cases were far more serious which included
head injuries, multiple fractures, damage to knee caps, etc. The company showed all these injured
as absent, and was hesitant to pay them their salaries. Union leaders said, “We had to struggle to
ensure that their salaries are paid regularly.” They had to monitor the worker–supervisor relations
closely to see that workers were treated better. The management had also informally allotted a
room to the union leaders, though it was not sufficiently big. But it had promised them a proper
union office after some time.

Another area of the union leaders’ involvement was the issue of absorption of trainees in regular
jobs. Even as the absorption of all persons who had completed their trainees into regular service
formed part of the tripartite settlement, the management was initially refusing to take most of them
on different pretexts; they had supported the workers’ struggle. The union got all of them absorbed
in regular jobs. Speaking of the change, a union leader observed:

Now, when a worker asks for leave, managers speak with much restraint; their response
being far more positive. Workers are able to adjust half-day shift within the next day with
negligible hassles. The number of memos that workers get is negligible. The workers
wanted four days’ leave on Diwali in November 2005, and consequently closure of the
factory for four days. This meant three days’ compensatory working on Sunday and/or
holidays; the management has hesitantly agreed to this proposal. Further, most factories in
Gurgaon were working on 29th September, 2005 when some of the major Indian trade
union federations gave a call for industrial strike all over the country in protest against the
Central Government’s economic policies. Our union, however, observed the day as strike.

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 Though the management felt bad to know its decision, the union compensated the loss by
working on a Sunday.

One of the major recent achievements of the union was the hike in the coverage of the worker and
their family members under the medical insurance scheme. In September 2005, the hospitalization
expense of a worker’s wife went up to Rs. 1,35,000. The management refused to pay the excess of
the coverage limit. The worker was already in distress as his wife had died. Earlier, nobody could
dare talk these things with the management. The union negotiated this issue and made the
management agree for a family floater coverage scheme of Rs. 1,75,000; this overall limit could
be utilized by one or more or all the family members. If the expenses still exceeded this amount,
the company agreed to pay up to Rs. 1,00,000. This agreement was reached not through any
written settlement with the union but by way of a change in management policy at the instance of
the union, and came into effect from October 1, 2005.

Another new development was that whenever there was a workers-related problem or issue, the
management invited all the seven union office-bearers for discussion; this was never so earlier.
The management was facing the problem of increasingly stressed workers who had to work
overtime to meet the production targets. Overtime was being paid at the rate of double of the basic
wage rate. Workers found it somewhat attractive to work overtime and make extra money. But this
had led to, among others, medical problems. Workers never felt fresh while on work. Union’s help
was sought, and a decision was taken to scrap the overtime working completely in most cases.

Despite these developments, union leaders still did not feel happy at the worker–manager relations.
One incident took place on 2nd September 2005, when two supervisors in the aluminum machine
shop behaved with workers authoritatively and in a provocative manner as they used to do so
earlier. The workers of this department reacted; some 150 of them came to the union leaders
seeking their intervention. When the union leaders went to settle the issue with the Senior Manager
concerned, he spoke angrily with the union leaders too. Workers of the whole shift stopped the
work for some 15 minutes. A union leader said, “We went to all the departments to exhort the
workers to start the work; we did not want work to be interrupted. That day most senior managers
had gone to Chandigarh for some work. After they came back, the next day they all felt sorry for
the incident and appreciated our intervention in the matter.”

Another incident occurred on 9 September, 2005. The ‘A shift’ in assembly achieved its target of
1000 scooters for the first time after the union formation. Earlier, the target used to be achieved in
almost every shift. Union leaders said that the targets could not be achieved for various
interruptions. However, they could not satisfactorily explain why these interruptions did not affect
the target achievement earlier. On hearing the target achievement that day, Vice-President–
Manufacturing, along with GM–Production came to the shop floor during the lunch time and
commended the achievement of the workers; next day sweets were distributed to all workers.

The scheme of inviting workers’ family on the founders’ day had been stopped as the number of
employees had increased, and this was becoming unmanageable in view of the fact that Honda
workers were from more than 20 different states of India. This practice had been revived since late
September, 2005. Now the family members were invited to the factory at the company’s expense
in batches. They were shown the conditions under which their near ones worked in the factory.
The Diwali gift for the year 2005 became a matter of negotiation. Each employee was given a gift
of Rs. 2000 and a credit in their bank account of Rs. 4,000 in the form of incentive bonus
including the managerial staff. So unlike one month’s gross pay for the year 2004 the bonus
money for the year 2005 was smaller. But the management could convince the union that the
factory had suffered huge losses and hence the ex gratia bonus had to be cut down. The biggest
sufferers were the managerial employees, as they had got a bonus of one month’s salary in 2004.

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Expatiating on the issues involved, a union office bearer observed as follows:

We are committed to the company. We consider it as ours, and always want to do our best
for it. The respect for the individual and the Joys that the company claims to be practicing
are merely in the book. Some of the senior managers want to see a big distance between
the top management and the workers. The HR manager never wants that we meet the
Japanese top management, as he feels that a transparent working may expose his ulterior
designs and motives. Only some 20 per cent of the managers treat us with the dignity that
we expect as members of the company; most others have big egos. The managers as well
the workers need to change. You know, the problems always emanate at the shop floor,
but nobody bothers about analyzing their causes and possible solutions in a more practical
and acceptable manner. The worker always wants fair and just working of the company.
When this does not happen, he reacts.

LOOKING BACK AND THE FUTURE PLANS

The company had been performing extremely well since beginning, and had shown promising
results on several fronts. As shown in Figure 1, as per a research conducted on two-wheeler
dealers by TNS Automotive Dealers Satisfaction study in 2004, HMSI led the two-wheeler
category in India. It got 108 points, leaving behind Hero-Honda which got second place with 96
points. It had got several other recognitions in other spheres. But in the post-July 25 scenario, the
company took quite some time to absorb the shock of what had happened. It wanted to know what
had gone wrong and where, and how could things be made to improve. Recently, it revamped and
intensified its training function. Managers were being sent out to attend management development
programmes (MDPs) organized by, among others, Confederation of Indian Industry (CII), and All
India Management Association (AIMA) in areas such as inter-personal skills; negotiation skills;
team-building and conflict management; and leadership building. The HR department had been
actively informing the line managers to volunteer for the MDPs that were being organized by some
of the leading organizations. Interestingly, however, the solitary vacancy of an Assistant Manager–
Training was lying vacant since long. Some of the issues at hand that needed attention were
identified by a manager of HMSI as follows:

The company had a total lack of direction on people front, which to a great extent is still
persisting. Management does not know what to do to overcome the shock of July 25 and
its aftermath. Japanese were conversant dealing with the Japanese unions, that were known
to be much more tolerant. The company also has a lot of problems of hierarchy
consciousness. The present GM–Operations came from Maruti (a Suzuki-controlled
automobile company), where he could successfully tackle somewhat similar discontent
among workers. The Japanese do not understand the workers’ language also. The
Director––General Affairs, who also is responsible for overall HR management, came
with a lot of ideas, but he could not understand the organizational working from the
employees’ point of view. When workers had resorted to go-slow, Japanese managers did
not know what to do. On the other hand, Indian managers were specialists in production;
they did not understand how to handle industrial relations (IR) issues. If D.P. Singh [who
was HR chief till some time ago, and had left HMSI, commanded respect among most
workers] had not left, perhaps the problems may never have arisen. He had a good rapport
with the workers. Another problem was that the Japanese had not given Indian managers
much power to take major initiatives in different dimensions. Things have, however,
somewhat improved in this regards now after 25/7.

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 2004 DSS Ranking : Two-Wheeler

LML 31

Hero Motors 36

Kinetic Engineering 37

Yamaha 45

Royal Enfield 46

TVS Motors 73

Bajaj Auto 92

Hero Honda 96

HMSI 108

Two-Wheeler Average 59

Industry Average 63

0 20 40 60 80 100 120

Fig. 1: 2004 DSS Ranking: Two-Wheeler

Source: Dream Team: HMSI Newsletter, April-June, 2005

In view of the damage done to the company’s reputation, HSMI was busy in an image-building
exercise. Earlier, the managers seemed to remain under the impression that Honda products would
sell due to its world-wide image. But it realized that in the post-July 25 scene, its advertisements
were not being perceived as effective; so newer ways were being thought of to cope with those
problems. It recently organized a one-week drive in this regard, whereby the HMSI logo was
applied in henna on ladies’ hands. In its endeavour to reach the far-flung masses across the
country, HMSI was running road shows of two of its popular two-wheeler models, Eterno and
Unicorn. A meeting of the top management and the department heads took place at an outside
resort to decide the future course of action. They were aware that two posts of Senior Manager–IR
and Senior Manager–Administration were lying vacant since long. These officials decided that a
new person should be appointed as Senior Manager–IR and Administration. Also, in September,
2005 all union office-bearers were taken to an outside resort, and were given training by the HR
department on building cooperative industrial relations. Outsider trainers were also invited in this
programme. The company also nominated a committee consisting of seven worker representatives
who would bring the workers’ grievances to the notice of the management and the union leaders.

The CEO was asking himself whether these measures were sufficient to move in the right
direction, given the substantial damage the company has recently suffered. He was perhaps
haunted by the ghost of July 25 more than anything else. He was considering alternatives for
bringing about change in the situation fast; he was also wondering if some radical decisions were
required and on what fronts.

You may focus on the following Questions while presenting the case:

1. Explain the class the background and the developments provided in the case.
2. What do you think were the principal causes of the trouble that HSMI faced?
3. What lessons in people management do you learn from this case?
4. If you are engaged as a people-management consultant by the CEO of HMSI about the
predicament that he faces, what would be your recommendations?

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