You are on page 1of 10

Case Study

Labor Unrest at Maruti Suzuki India Limited


(Manesar Plant)

11/19/2015
Submitted to: Ms. Ridhi Arora
Submitted
By: Tanu Uppal
Shalu Rajta
SUBMITTED BY:
SUKHMANI KAUR(501404124)
0
SHALU RAJTA(501404117)
RUBAL BANSAL(501404102)

Abstract
This case is about the mishappening in Maruti Suzukis Manesar production plant. The
Assembly Line laborers went on a strike 3 times in 2011 which eventually led to a lockout in
July 2012. The overall situation exacerbated and led to a brutal murder, plants General
Manager of HR burnt alive within the company premises. Due to these 3 strikes the company
incurred a loss of Rs. 25 billion.
This case highlights the circumstances that led to such unfortunate incidents at the Manesar
Plant.
The following were the plights:1. The workers demanded a formation of an independent Labor Union at the Manesar
Plant.
2. The workers on contractual basis were paid a salary 1/3 rd of a regular employee
although the work performed was the same by both set of groups.
3. The severity in the nature of deduction of Days pay on coming even a few minutes
late to the plant.
4. The exasperation among the workers after learning that the union leaders were bought
by the company.
TIMELINE OF EVENTS
On 4 June, 2011 approximately 2000 workers at MSILs Manesar plant went on strike before
the commencement of Second shift of production. The company suffered a production loss of
650 units.
The workers on strike demanded a Autonomous Labor union at the plant which would help
them safeguard and ameliorate their standards of living.
The concerned MSIL authorities did not reciprocate to the demands of the workers as a trade
union already existed named Maruti Udyog Kamgar Union, in the Gurgaon Plant.
MSIL authorities proposed that if the workers demand for another labor union, then it should
be the aegis of the existing Trade Union.

WORKERS GRIEVANCES OR CAUSE OF AGITATION

DISCREPANCY IN PAY
The main reason for this revolt from the workers was the inappropriate nature of apportioning
the growth of revenues and profits made by the company among the management.
1

The wage structure of the workers in the Gurgaon and Manesar factory was nearly the same
but in case a senior permanent employee in the Gurgaon plant had not availed his/her
company assigned leaves for one calendar year, he/she was subjected to a remuneration of
amount Rs. 2.8 lakhs(talking of 2007).
INEQUALITY
Minimal compensations being given to temporary workers at MSILs Manesar plant which
comprise of workers, trainees and apprentices for tasks that were of daily production basis for
both permanent and temporary workers.

Background of Case Study

The case examines the challenges for HR department where the compensation is decoupled
from the performance on the basis of nature of employment in same organization. It
represents a unique situation where two employees performing similar roles are compensated
quite significantly different because of the nature of their association with organization.
Naturally, this is not a straight-jacketed situation rather quite complex and therefore led to
industrial unrest. We will try to study the flexibility of existence of two such systems
parallely in a single organization. It is not an easy situation for an HR department but that is
current reality of the manufacturing sector in India.
Temporary workers in India an average about 40% of industry workforce is temporary. This
has gone up from 30% a few years ago. This change in milieu of the work force is creating a
conflicting scenario which the HR managers are finding it difficult to manage.

Labor Unrest at Maruti Suzuki India Limited


Introduction:
In the 1980s, it was beyond the reach of common man to own an Indian car which could
match the standards of imported ones. The restrictive policy made it impossible to produce
anything without the slow process of permits. In such period, Maruti Udyog Limited was
established. So, in 1983 Maruti was the first car which gave the competition or became an
alternative to the Ambassador of Hindustan Motors owned by Birlas and Premier also known
as Fiat owned by Doshis.

Objective and Scope


The primary objective of this case let is to study the problems which lead to such an unrest at
Maruti, Manesar Plant, how performance is affected and how employees have been
compensated. This paper also highlights the practice of protesting such as strike, unrest and
work slow-down in Indian Automobile Industry. This paper will also try to find out some
practices or processes that will help companies to build up more professional, efficient and
healthy relationship with the workers.

Brief History of Manesar Violence July 2012


On July 18 2012, Marutis Plant at Manesar was hit by aggression and violence as works
attack supervisor, engineers and management personnel and burnt and killed a senior HR
executive, which left 100 managers injured , which included two Japanese expatriates. Mob
of works also injured nine policeman. The GM of Human Resource had both arms and legs
broken by his attackers he was unable to leave the building that was set on fire, and he was
scorched to death. In Indian History it was one of the heinous industrial crime.
From April 2012, union of workers at Manesar plant demanded a fivefold increase in salary,
a monthly conveyance allowance of Rs 10,000, laundary allowance of 3,000, a corporate gift
with every new car launch, and a house for every worker who wants one or cheaper house
loans for those who want to build their own house. In addition to this compensation and
normal weekend/holidays, the union of worker demanded the current four paid weeks of
vacation be increased to 7 weeks, plus each worker to have 40 days of sick leave and casual
leave amounting to 75 days. Maruti claimed that the dispute was not over wage discussions,
but after the workers, union demanded reinstatement of a worker who had been suspended for
physical violence on a supervisor. On the other hand workers claim harsh working conditions
and extensive hiring of low-paid contract workers who are paid about Rs7800 a month, which
was half of the minimum wage paid to permanent employees. Company executives denied
harsh conditions and claim they hired entry-level workers on contract and made them
permanent as they gained experience.
4

Labour disputes are prevalent in the auto industry of India and have affected other
manufacturers. India has strict labour laws, but their application is avoided by hiring lowwage contract workers.

Present Scenario of the Automobile Industry and Workers


The automobile has acquired a turnover of more than USD 35 billion and is source of both
direct and indirect employment to almost 13 million people. Indias increasing per capita
disposable income is expected to rise by 2015 by 106 % which will have a positive impact on
the employment. The Indian Automobile Industry which has over 13 million employees
associated with it, form a part of local and migrated employees. In India the migrants are
from south- east, eastern and northern Himalayan states that are less developed states. Most
of these workers are skilled, semi- skilled and unskilled. These workers are then divided into
groups i.e. the ones who will work as permanent workers and the one who will as contractual
workers for the automobile company. The migrated workers come from the poverty affected
areas and are the only bread earners in the family so they are highly sensitive their job and
financial security. India, as a democratic ensures the right to the formation of Union for the
workers. In Indian Industrial sector workers union is a very conventional phenomenon and
they are supposed to work with the top management for the welfare of the employees.

Methodology
For this case study we have used secondary data and information. The secondary data and
information have been collected through interne and newspapers.
Examples of Recent Strikes/ Unrests
The Indian Automobile Industry, in the recent two years (May, 2009- June, 2011) has
encountered several strikes and unrests.

Here are few examples:May, 2009


In this particular year two strikes/ unrests one at Mahindra and Mahindra and the other at
Hyundai Motors India Limited.
A strike took place at Mahindra and Mahindra plant in Nashik. The 2 weeks stirke completely
stopped the productions of their two best selling cars which are Xylo and Scorpio. These
items were at the peak when the strike happened and all the customers kept waiting who had
booked the cars prior to the strike.
Another strike happened at Hyundai Motors India Limited plant situated near Chennai. The
strike eminently effected the production of their best selling car such as i20. The management
warned the strikers to shift part of the i20 production to Europe in order to keep up with the
demands.

April, 2010
Honda (Honda Siel Cars India Limited) faced the same problem of work slowdown which led
to dramatic low sales. Due to the slow down the supply to the dealers immensely decreased
causing reportedly 50% month on month decrease of hot selling cars, Honda City and Civic.
The workmen being less motivated and thus the quality of work suffered.

March- April, 2011


This time it is General Motors, Halol plant, Gujarat. The striking workers formed a new
union under Indian National Trade Union Congress (INTUC) and alleged they were subjected
to excessive workload and also they were facing health hazards and the company violated the
Provident Fund act, and rules of Industrial Safety and Health Act. The strike happened when
General Motors were collaborating with Chinese partners Shanghai Automotive Industry
Corporation (SAIC).

Reasons Behind The Strike


In most of the cases it is quite evident that it is the worker/ employees union who is leading to
strikes. Sometimes there already exists a central union but still the workers- leaders start
another union on the banner of particular area or facility. Workers use strike as a catalyst in
order to get their demands fulfilled if the top management refuse to recognize it. Workers
most of the times choose to protest when it is the peak or high time of sales or when a new product is to be launched. Some of the major factors leading to strikes or unrests are wage
hikes, recognition of new labor unions, reinstatement of dismissed workers, etc.

Maruti Suziki India Ltd:- All the workers from the lowest rank jobs to the top
management employees used to wear the sae grey uniform and used to have their meals in the
same canteen. Any worker or employee finding any kind of fault anywhere in the assembly
line had the power to ring the bell and stop the process. The concept of Ringiseido provided
the chance to managers and employees to partake an individuals idea but the recent strike
was about the recognition of new labor union which shows that the workers are still not
motivated enough or the management lacked in keeping their employees happy and
contented.
The next factor for the classification of workers is when they are divided into two groups i.e.
Permanent workers and Contact workers. Contract workers are indirect employees hired for
specified period of time for doing specified work and they are hired typically through labor
contractors. There is small core of permanent workers but considerable number of workers
are hired on contractual basis. According to the reports MSIL has 85% of workers working on
contractual basis and 75% in Ford.
Sometimes the management is also not professional enough to motivate the workers.
Sometimes the management is accused to be a catalyst of the strike and unrest. For instance,
in Mahindra and Mahindra the unrest was all about the safety, job security and salary related
which the top management could have easily taken care off.
6

Final Result Of the negotiation between Management and Union of


Workers

Old salary structure of entry level worker-Rs 23,500 per month


New wage structure-Incresed to Rs 37,800 per month
Additional Rs 1,000 in an ad hoc payment to workers, travel allowance of Rs
1200 every month, interest-free personal loans of uo to Rs 20,000 and doubled
insurance coverage to Rs 5,500

Declared that they would stop hiring contract workers


Regularized all contract workers 5 factories in Gurgaon and Manesar
The entire recruitment process is now routed through the companys own human
resource department. Manpower contractors have been removed
Sep 2015 temporary workers finally get 7k+16,800k

Recommendation

The PR by Maruti has not been proactive. Instead, it has been reactionary.

Legal action on accused: show that proactive action is being taken against any
violations of law.

Flexibility in labor law should be allowed

Workers should have initiated other peaceful ways to conduct agitations.

Rebuild Marutis India-Connect: Mentions of increasingly Japanese management at


Maruti was raised during reportage. A campaign to associate Marutis traditional
image with India would have foster unity amongst employees

Government Concern: The increase in labor unrest during the recent years has many a
time raised Governments concern. The matters related to industrial relations, is at
present regulated by three main central enactments: The Trade unions Act, 1926,
Industrial Employment Act, 1946 and Industrial Dispute Act 1947.

The main reason behind any kind of unrest is the communication gap between the top
management and the workers. If the workers feel motivate enough and if the company
is able to make its stakeholders feel contented and happy enough then such situations
can be easily avoided. Here, in this case we can apply the Victor Vrooms Expectation
Theory. The theory deals with three components known as VIE (Valence,
Instrumentality, Expectancy) and focuses on maximum happiness and least pain.

Motivation= Valence x Expectancy (Instrumentality)

The top management should identify what rewards the workers want or what rewards
keep the highest value to them which is called as Valence. Secondly, the managers
7

must motivate the workers to accomplish their tasks in order to receive the desired
rewards. Also, the managers must ensure that the workers get the perfect and
necessary conditions to accomplish the given task and help them to grow selfconfidence and achieve the desired results and get rewarded.

Hiring of welfare officer to counsel the labor union leaders so as they can act as
catalysts rather help as a building bridge between the top management and the
workers.

Formation of joint teams should be there and participation from the labor should be
encouraged in the various management related decisions.

Employee stock options (ESOP) should be there for the employees.

Questions:
1) In your opinion what Maruti could have done to avoid such a situation?
2) According to you which among the three Acts (Trade unions Act, 1926,
Industrial Employment Act, 1946 and Industrial Dispute Act 1947) is best
applicable in the Maruti case?
3) Do you think Maruti should only hire permanent workers in order to avoid
such situations?
4) If you were the HR manager what necessary would you have taken in such a
situation?

References
http://articles.economictimes.indiatimes.com/2012-0722/news/32777541_1_maruti-suzuki-s-manesar-maruti-s-manesar-shinzonakanishi
http://www.icmrindia.org/casestudies/catalogue/Human%20Resource%20and
%20Organization%20Behavior/Labor%20Unrest%20at%20Maruti%20Suzuki
%20India-Case.htm#Happy_Employees_-_Happier_Customers
Vroom, Victor H.; Kenneth R. MacCrimmon (1968). Toward a Stochastic Model of
Managerial Career. Administrative Science Quarterly, 2646