Maruti Suzuki India Ltd.

has been having a harrowing time since Wednesday when about 3,000 workers rioted, leaving a senior manager dead, more than 100 people injured, and part of the premises charred. The incident renewed global concern about workers’ violence at industries in India, especially in the automotive sector, and at Maruti in particular. India’s largest car maker by volume was wracked by labor unrest for much of last year at its plant at Manesar, in the northern state of Haryana. But a nearby plant at Gurgaon, a suburb of New Delhi, has been functioning relatively smoothly. Underlying the tension at the Manesar plant has been a year of strained relations, especially between managers and the new Maruti union, whose leaders have been accused by the car maker of instigating Wednesday’s violence. Labor woes at the facility, located about 50 kilometers from New Delhi, date back to June 2011 when workers halted all activity, demanding recognition from Maruti’s management of their newly-formed Maruti Suzuki Employees Union. Workers had pressed for a union that, they said, fairly represents them and functions independently from the one at Maruti’s Gurgaon plant, which they claim is pro-management. A 10-day agitation then ended after the management agreed to take back 11 workers who were sacked for disciplinary reasons. The company, however, didn’t agree to recognize the new Manesar union. In August, Maruti asked workers from Manesar to sign a so-called “good conduct bond” after the company found what it claimed were “serious and deliberate” quality problems in cars made at the plant. Workers were prevented from entering the factory before they signed the bond, leading to an impasse that lasted more than a month. The workers at Manesar finally relented, signed the bond, only to re-organize their protests within the factory premises. Production was stalled for another two weeks. Their principal demand was recognition for the union though they also called for the reinstatement of more fired workers. The strike ended on Oct. 21 only after intervention from the Haryana state government. As part of a tripartite agreement between Maruti’s management, the workers’ union and the Haryana government, Maruti agreed to take back 64 suspended workers but continued its inquiry against 30 other suspended employees. The 30 workers who remained under suspension included two of the top office bearers of the Maruti Suzuki Employees Union, Sonu Gujjar and Shiv Kumar. In November, The Economic Times reported that Maruti paid Mr. Gujjar and Mr. Kumar 4 million rupees ($72,365) to leave the company. The report also alleged that the remaining 28 expelled workers were asked to quit their jobs in exchange for 1.6 million rupees each. On Saturday, R. C. Bhargava, chairman of Maruti, said the 30 workers took voluntary retirement but declined to elaborate. Sonu Gujjar and Shiv Kumar have been unavailable for comment since last year.

With that, Maruti may have thought its days of unrest were over. But workers at the plant found new leaders and regrouped under union chiefs Ram Mehar Singh and Sarabjeet Singh. They began negotiating with the management on issues such as wages and the registration of their union. This time, Maruti agreed to recognize the workers’ union. “The state government, taking a cue from the incidents in the past, wasn’t interested in registering the union. But we insisted and the union was finally registered in February this year,” S.Y. Siddiqui, Maruti’s chief operating officer for administration, said on Saturday. “In fact the workers sent me a box of sweets after we helped them in registering the union.” The new Maruti Suzuki Workers’ Union took charge at Manesar with Ram Mehar Singh and Sarabjeet Singh spearheading it as its president and general secretary, respectively. The two men today are among 12 union leaders and several others workers wanted by the Haryana state police for their alleged involvement in Wednesday’s riot. They were not available for comment. “The relations were improving bit-by-bit. We learnt our lessons and established a communication channel that never broke down,” Mr. Bhargava said on Saturday at New Delhi. Wednesday’s incident came as a complete shock to us, we were still talking to the workers. Maruti Suzuki said last week’s violence began after a worker and a supervisor got into a scuffle. Workers claim that the supervisor made a caste-based insult, but both the company and police deny that. The Manesar union isn’t affiliated to any of the umbrella organizations of trade unions in India. But, expressing its solidarity with the Maruti workers, D. L. Sachdev, national secretary of the All India Trade Union Congress Thursday blamed the Maruti management for the current crisis. “The discontent among regular and contract workers has been going on. Unfortunately, the management hasn’t been able to resolve the issue,” Mr. Sachdev said.

A burnt out section of the Maruti Suzuki manufacturing plant at Manesar, July 19

Four reasons behind Maruti Suzuki's Manesar problems
Last year, labour unrest resulted in a loss of over Rs 2,500 crore for the company. So, what's causing Maruti such big problems at Manesar? ET Magazine looks at four reasons that could have resulted in the simmering tension between the management and workers at Maruti Suzuki. The Missing India connect Since 2007, two important changes have happened at Maruti. One, Shinzo Nakanishi, the current MD of Maruti Suzuki, took over the reins from Jagdish Khattar. RC Bhargava, who was a director, was made chairman. Two, Maruti and the India market are also becoming increasingly important for Suzuki Motors. Till recently, Maruti contributed more than half of the parent's profits. As Maruti's contribution to Suzuki has increased, the latter's tendency to control India operations has increased. Agreed, it has an Indian chairman but Bhargava is 78 years old. It does have many senior Indian executives who have been 'lifers' at Maruti. But insiders who will speak on the condition of anonymity say the Japanese voice counts and often tends to dominate crucial decisions. Culturally, Indians and Japanese are far apart. Their sense of discipline, punctuality, employee connect too are very different. Some loss of connect with Indians is expected. Leaner, Meaner Pressures The challenges of running manufacturing outfits have surged. Costs and wages have increased and sales are poor & volatile. Doing business is difficult. Doing profitable business is even more difficult. Every company is figuring out ways to bring down costs and improve productivity. Most have contract labour to bring in flexibility and reduce costs. At Maruti's Manesar factory, 40% workers are on contract and their salary could be half of the regular workers. Maruti is among the better pay masters. Amid all this, competitive intensity in the marketplace for Maruti has never been as severe. Being a volume player, the only way for it to survive and flourish is to churn out more and more cars. All this has translated into relentless pressure to improve productivity and margins at all levels. For Maruti, this pressure is particularly high. Not surprisingly, the Manesar plant, that churns out two top-selling models in the Maruti stable — Swift and Dzire — is at the heart of all the strife. Young & Restless Workers In Haryana, young blue-collar workers have seen dramatic changes around them. Land prices have surged as Gurgaon has become a commercial hub. Overnight, people have become rich and

their lives have transformed simply because they made a killing selling their land. Such changes have re-calibrated worker expectation who have seen their sleepy little hamlet transform into a city of high rises and malls in a decade. They are less tolerant and fairly aggressive in their expectations and how they want to achieve it. Poor wage hikes and raging inflation have queered the pitch further, resulting in an impatient, militant workforce, which believes in aggressive posturing. Sonu Gujjar, the leader of the labour unrest at Maruti plant last year, represents that generation. In his 20s, Gujjar organised a concall with analysts to put forth the workers' point of view and made headlines.