MARUTI’S LANKA—A SENSATIONAL IR CASE IN AN INDUSTRY

By Dr. Sibram Nisonko,Associate Professor(MBA),IBMR college,chinchwad,Pune,09272337048,snisonko@sify.com.

Maruti Suzuki is a subsidiary company of Japanese automaker Suzuki Motor Corporation. It has a market share of 44.9% of the Indian passenger car market as of March 2011. In February 2012, the company sold its 10th million vehicle in India. It is India and Nepal's leading automobile manufacturer and the market leader in the car segment, both in terms of volume of vehicles sold and revenue earned. Until recently, 18.28% of the company was owned by the Indian government, and 54.2% by Suzuki of Japan. The government of India held an initial public offering of 25% of the company in June 2003. As of 10 May 2007, the government of India sold its complete share to Indian financial institutions and no longer has any stake in Maruti Udyog.

The Indian labour it hired readily accepted Japanese work culture and the modern manufacturing process. In 1997, there was a change in ownership, and Maruti became predominantly government controlled. Shortly thereafter, conflict between the Government and Suzuki started. Labour unrest started under management of Indian central government. In 2000, a major industrial relations issue began and employees of Maruti went on an indefinite strike, demanding among other things, major revisions to their wages, incentives and pensions. After elections in 2000 the new central government pursued a disinvestments policy. It proposed to sell part of its stake in Maruti Suzuki in a public offering. The worker's union opposed this sell-off plan on the grounds that the company will lose a major business advantage of being subsidized by the Government, and the union has better protection while the company remains in control of the government. The standoff between the union and the management continued through 2001. The management refused union demands citing increased competition and lower margins. The central government prevailed and privatized Maruti in 2002. Suzuki became the majority owner of Maruti Udyog Limited.
Maruti-Suzuki workers went on strike first on 12th October 2000 when nearly 4,700 employees of Maruti Suzuki (MSIL), formerly Maruti Udyog Limited boycotted work, protesting the company's demand for an undertaking from them .Daily output was cut by 86% as the company forbade entry to workers not signing the undertaking. The MU Employees' Union treasurer said that signing it would have meant losing their fundamental rights. It was also a protest against the management's decision to link bonus and incentives to productivity and efficiency. The primary concern of the management was that production should not stop on account of the agitation. Workers from suppliers were roped in to do the 1 | Dr.SibramP a g e

00. The workmen had been notified that only those workers could enter the factory who gave an undertaking in writing that they would not indulge in any activity which adversely affected the production and discipline and that "workmen who do not give the undertaking would be deemed to be on illegal strike. The face saver was that no undertaking had to be given. Finally on 9th January 2001. All your theories of motivation go out of the window and it is mostly horse trading.000 in 2005-06 to nearly 8. another 36 after ex-parte enquiry. while hundreds of other employees also took VRS. Suzuki. The Union had to accept the new terms on production linked incentives and bonus. In August. the Maruti Udyog Employees Union (MUEU) sought the Prime Minister Dr Manmohan Singh's intervention to resolve several issues with Suzuki management since the Suzuki management had summarily dismissed 24 Union activists without holding any enquiry. 2 | Dr. which had already increased production from 5. Maruti got the plant started within a week's time.SibramP a g e . In terms of the contract of employment the workmen are duty-bound to adhere to norms of discipline and give normal output". A Maruti spokesperson said the company's Union (formed by ex-employees of the company) had long since been de-recognized and therefore was not representative of the workers. The management meanwhile agreed to drop insistence on individual workers to furnish a good conduct undertaking.work and along with supervisors and managers. following the October 2000 dispute. There was also indirect (political) pressure from the BJP Government on the Union and the issue came up for discussion in Parliament. and 32 more for not signing the undertakings imposed by the management. and stipulated that the law would take its own course in regard to disciplinary action. the strike broke on the management's terms. as the echo of the labour trouble at Honda's facility had barely died down. The PM met them on 3rd August and voiced apprehension in taking up the issue. decided to step up capacity further to one million per annum by 2009. but sought certain safeguards. Why Companies Don’t Like Unions Unions are politicised.50. messy and the management is never quite sure of their motivation. However. The balance rests on a very thin line and most of the times it is a compromise. the 2000-01 confrontation did not die down . 2005.” says a former plant manager of an automotive manufacturing company who did not want to be named. earmarking Rs 9000 crores investment for 2008-2011.000 in 2008-09. Exports had also risen significantly (The Economic Times 5/5/09). Twenty-six were charge-sheeted and "compelled" to take VRS. “Anybody who has dealt with a labour union knows how ridiculous it can get at times. The Union also alleged that Maruti Udyog had replaced over 2000 permanent employees with contract workers. The deadlock continued for 90 days.

the one common demand was to form a union. a gift with every new car launch. In addition to this compensation and normal weekend/holidays. Since April 2012. "you will be beaten up after we get a signal. but after the workers' union demanded the reinstatement of a worker who had been suspended for beating a supervisor. the workers broke up into groups. The company says it already has a union. Maruti's Manesar plant was hit by violence as workers at one of its auto factories attacked supervisors and started a fire that killed a company official and injured 100 managers. a laundry allowance of 3. a monthly conveyance allowance of 10. General Secretary of AITUC. The violent mob also injured 9 policemen. Maruti said the unrest began. and was charred to death. Gurgaon. unable to leave the building that was set ablaze. 3 | Dr. they should come under the MUKU umbrella. said Anil Kumar. From the strike at Maruti in 2000 to the one at Honda Motorcycles and Scooters India (HMSI) in 2005 and the one at Rico Auto in 2009. . The incident is the worst-ever for Suzuki since the company began operations in India in 1983." Thereafter. Shiv Kumar is supposed to be the general secretary of the new union at the company’s Manesar plant. “Labour unions are a reality and companies have to accept it sooner or later”. and a house for every worker who wants one or cheaper home loans for those who want to build their own houses. the Manesar union had demanded a five-fold increase in basic salary. They searched for management officials and proceeded with a barbaric beating of the officials at the site with iron rods.The management insisted that they must wait for completion of inquiry underway before they can take any action on the employee suspended for beating up his supervisor. The new union’s registration is still pending and the Maruti management has made it quite clear that they will not allow a new union. went on to set the shop floor as well as all offices afire. including two Japanese expatriates. Maruti has stated publicly that it does not want to deal with more than one union. the union demanded the current 4 paid weeks of vacation be increased to 7 weeks.SibramP a g e .The company's General Manager of Human Resources had both arms and legs broken by his attackers.000. at its Gurgaon plant and if workers at Manesar want a union. plus each worker have 40 days allowance of sick and casual leave . the Maruti Udyog Kamamgar Union (MUKU). MANESAR VIOLENCE JULY 2012 On 18th July 2012. The management was then told. The workers claim harsh working conditions and extensive hiring of low-paid contract workers .for a total of 75 days. not over wage discussions.000.Almost every strike at the numerous factories in the Gurgaon-Manesar region in the past decade has started with companies refusing to recognize the demand of workers to form a union.

The company further announced that it will stop using contract workers by March 2013. claimed on 21 July that Manesar violence may be the result of a planned violence by a section of workers and union leaders. he said.000-22. while a permanent worker received about 12. The report claimed the worker's action was recorded on close circuit cameras installed within the company premises." The recorded CCTV footage has been used to determine the sequence of events and people involved. "some union leaders may be aware of the facts. The report claimed the salary difference between contract workers and permanent workers has been much smaller than initial media reports . so they burnt down the main servers and more than 700 computers. Satbir. Contact workers complain that they are made to work on all heavy and laborious work while permanent workers don‟t. 1947. The permanent workers are paid more than twice of what the contract workers get. police have arrested 91 people and are searching for 55 additional accused.000 per month. As per the FIR. Haryana Government has started investigation and 90 odd workers have already picked up FIR by Mruti named 55 workers 600 others.the contract worker at Maruti received about 11. The problemis that 21st century Corporations have 15th century mindset when it comes to treating workers”. the company announced a lockout under The Industrial Disputes Act.SibramP a g e . Maruti Suzuki in its statement on the unrest. in its First Information Report (FIR).The police. President of Centre of Indian Trade Unions hope that there should be a fair probe. A Suzuki spokesman said Manesar violence won't affect the auto maker's business plans for India. The workers took several managers and high ranked management officials hostage. which increased in three years to 21. At the same time workers impose their authority on them. citing safety concerns.500 a month at start. 2012. a contractor who was providing contract employees to Maruti claimed the company gave its contract employees the best wage. The responsible Special Investigative Team official claimed. allowances and benefits package in the region. Maruti announced employees would not be paid for the period of lock-out in accordance with labour laws of India. announced that all work at the Manesar plant has been suspended indefinitely. On July 21. The shut down of Manesar plant is leading to a loss of about Rs 75 crore per day. GLOBALIZATION AND CORPORATE CONCERNS 4 | Dr.”The tendency to demonize all workers is not good for industrial relations. On July 26 2012. In a separate report.500 per month.

unprovoked violence." He also announced Maruti plans to continue manufacturing in Manesar. It stands out as one of four strikes that caught the attention of the nation in the past three decades .2%(highest in past 4 years) INDUSTRIALIZATION 5 | Dr. "we are going to de-recognise Maruti Suzuki Workers‟ Union and dismiss all workers named in connection with the incident. bitterly fought Maruti Suzuki strike.At 7.For the quarter ended June 2012 its operating margins slid by more than 200 basis points year-on-year(YOY). now called Tata Motors. went to each victim apologising for the miseries inflicted on them by fellow workers. We will not compromise at all in such instances of barbaric. managing director and chief executive of Maruti Suzuki India.Shinzo Nakanishi.SibramP a g e .the textile strike. and in press interview requested the central and Haryana state governments to help stop such ghastly violence by legislating decisive rules to restore corporate confidence amid emergence of this new 'militant workforce' in Indian factories. the 1989 strike at Telco. The government of India is being asked to recognise that incidents such as Manesar violence indicate a structural sickness which must be solved nationally. with tens of thousands of cases pending for years. FINANCIAL IMPACT Maruti unrest has hit its net realization . The peace of the last twenty years in Industrial Relations (IR) has been ruffled by the current. and the more recent strike at Jet Airways. that Gujarat was an expansion opportunity and not an alternative to Manesar.3% the company reported its lowest Q1 margins in the past 4 years. Government procedures for labour dispute resolution are currently very slow. Input cost(raw material )increased by 25%YOY Employee cost increased by 33% Employee cost/Sales =2. He announced.

particularly in a blue chip company like Maruti Suzuki.They adopted our village but have done little substantial. For industrial organisations to reduce their permanent workforce.” The Factory owners don’t hire them because they are afraid of their community backed disruptive power. Maruti Suzuki did not recognise the union at its Manesar plant and the authorities did not register it. A good buffalo was better than a car for them since it gave them milk. Since they don’t have jobs in the factory the young fellows have no inclination to study. it is only after permission is granted by the Government which often is As per reports. They don’t give us contracts .Maruti stands at the highest end of a technological development which India can be proud of the culture around represents a traditional village culture. management and the society as a whole. a means of transport and livelihood. Consequently. Another factor that predisposes organisations to use contract labour is that although the reduction of workforce or closure is allowed by law.Due to fixed income the villagers never thought of becoming entrepreneurs. except in the State of Maharashtra. 6 | Dr. Maruti Suzuki. like many other companies. Now they are at the mercy of the company. The problem is that in a country with great unemployment. In other words. is understandably high. engages over 50 per cent of its workforce as contract labour and temporary workers. The company is providing a source of income to hundreds of vendor and suppliers. While the right of association is guaranteed by the Constitution of India. As long as the plant an Manesar ran smoothly there was no self-reflection . where the Court decides the representative status. “They(Maruti company) keep us away.SibramP a g e . is found extremely difficult given the legal implications and business obligations. The villagers grumble by saying . Education could improve their mindset. it is not mandatory for the employers to bargain with a union. of which the following are of particular interest. ANALYSIS OF HR EXPERTS AND RESEARCHERS After scutinising the Maruti Suzuki strike has brought to the fore several issues that have been silently plaguing IR over the years. Earlier the local people were the producers. For the people of the village around Manesar whose land was acquired the industrial relations problem created a formidable crisis for workers. there is no concomitant right to represent at the bargaining table. employers have realized that the archaic labour laws of the country are out of tune with the times and changing business environment. This is a common practice used by employers to save on costs. the desire for permanent employment.

There is. It is important to make the employees feel engaged. Multinational organisations operating in the country need to be sensitive to these cultural nuances.after registering a decline in 2011. High level of „control‟ exercised by managements is an anathema to industrial democracy. It calls for willingness to empathetically understand the other point of view and act on it. Any party‟s conduct during the strife is indicative of its corporate persona. The golden rule in resolving conflicts is that even disagreement must be arrived at after an effort is made to understand the position of the other party. Sometimes there are irreconcilable differences. Many industrial organizations have experimented with redesigning jobs of employees to make them meaningful. This gives rise to an opportunity to practice and shape industrial relations proactively.Another reason collective bargaining is not welcome in the Indian context is that unions often have political connections. a greater appreciation of the need to increase productivity. It is imperative. The young workforce in India is marked by high aspirations and flexibility. Gone are the days when increasing productivity was resisted tooth and nail. That several organisations have productivity linked incentives for workmen in new industries around Pune is a testimony to the fact that a new era in industrial relations has arrived. and officials expect the trend to worsen in the coming mongths. that the leadership knowingly takes steps to resolve the dispute. Organisations are increasingly appreciating that not just communication but a dialogue with employees is essential. therefore. This is the enlightened practice of industrial democracy. on the contrary. Moreover. Patience must be shown to talk.The table below gives a the detailed figures: STRIKES &LOCKOUTS PSU FIRMS STRIKES PRIVATE FIRMS STRIKES LOCKOUTS TOTAL STRIKES TOTAL LOCKOUTS MANDAYS LOST YEAR LOCKOUTS 7 | Dr. Research shows that increasing trust between the managers and workforce will lead to strengthening corporate governance. Handling conflict does not end when people return to work. it also creates a mindset which employees at various levels tend to follow. RISE OF INDUSTRIAL UNREST IN INDIA The latest Labour Bureau data point out that industrial disputes leading to strikes and lockouts are on the rise .SibramP a g e . and a certain brand is created in the minds of people at large. and allowing greater discretion in their hands. The soul of proactively managing industrial relations is promoting trust. negotiate and resolve the dispute.

2012. 3. The Times of India. "Maruti violence may be planned: cops". Retrieved July 21. "Manesar Red Alert". Asian Paints. Retrieved 21-072012. "Maruti Suzuki's statement on Manesar unrest".2010 2011 2012(JanMay) 121 63 58 2 0 0 141 118 32 166 36 13 262 176 95 168 36 13 17935637 4967823 960089 Is it the beginning of the end of our dream to be a developed country? QUESTIONS 1.21.Do you see any failure on the part of other bodies . Wikipedia. Sharmistha Mukherjee & Surajeet Das Gupta (July 22. 9. . Indo Asian News Service (21 July 2011). Four Industrial Relations insights from the Maruti Suzuki Strike. 10. New York Daily News. 12. The Wall Street Journal. 2012).11.Published in SHRM INDIA.2011 8 | Dr. 23 July 2012.What are the possible causes for reversing the posititive trend in industrial relations in India. 2.In Maruti ? 2. 4. 5.besides union and management to bring the situation to this level in Maruti Udyog Ltd? REFERENCES 1. 6.Head of HR .particularly. "Maruti Suzuki to Stop Using Contract Workers in Direct Manufacturing". . "Violence at Maruti's Manesar plant: Bloodlust had taken over.Has the social milieu made any impact on the worker and management behavior? 3. "Maruti's Manesar plant closed for third day. Indian Express. The Economic Times. 7. July 26 2012. Vivek Patwardhan. July 26 2012. "Maruti Suzuki declares lockout at Manesar factory". eyewitness says". Business Standard. 11.Maruti Suzuki. Chanchal Pal Chauhan (July 22."We will de-recognise Maruti Suzuki Workers' Union: Shinzo Nakanishi". 23 July 2012. "Police collect CCTV clips from Manesar MSIL plant".SibramP a g e . Rs 210cr loss so far". 8. CNN-IBN. Ex. The Economic Times. "Beyond Maruti: India’s progress calls for a new set of labour laws and labour relations". July 19 2012. The Times of India. 2012). 21 July 2012.

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