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DEBI S. SAINI

PEOPLE MANAGEMENT FIASCO IN


HONDA MOTORCYCLES AND
SCOOTERS INDIA LTD
At the onset of 2006, the president of Honda Motorcycles and Scooters India Ltd (HMSI),
who was also its chief executive officer, had to make some radical decisions on a number of
issues confronting the company following the July 2005 altercations with its workers. Not
only did he have to repair the damage to the companys image, but he also had to develop a
strategy for long-term co-operation with its employees. As he reflected upon the bitter
memories of the last twelve months, he wondered if the company could achieve targets laid
out in the aggressive expansion plan developed before the unrest. This included tripling the
Gurgaon plants production capacity to 0.6 million motorcycles and 1.2 million two-wheelers
by the end of fiscal 20072008.

Neither he, nor perhaps any of the members in his managerial team, could have imagined that
workers seemingly minor grievances would turn into a war-like situation, as they did in July
2005. The company, despite all its efforts, had not been able to prevent the union formation,
that too with an affiliation to All India Trade Union Congress (AITUC), which was the trade
union wing of the Communist Party of India. With the events taking a nasty violent overtone,
the adverse publicity might have done perhaps irreparable harm to the public image of the
company. In addition, the drop in the companys sales was also worrying. The company had
suffered a production decline resulting in a loss of Rs 1.3 billion1 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 at stake than just the monetary loss. While choosing the companys
logo of the wings, the company had aimed to fly high by taking a dominant role in the Indian

1
US$1 = 45 INR on May 1st 2005.

Dr. Debi S. Saini, professor and chairperson, HRM at Management Development Institute (MDI), Gurgaon, India, prepared this
case for class discussion. This case is not intended to show effective or ineffective handling of decision or business processes.
The author thanks the many people who helped in construction of this case. The three union office bearers of the HMSI union
who visited MDI at his request twice to give interviews; Mr. M. R. Patlan, the Deputy Labour Commissioner of Gurgaon, and his
staff, who shared information and provided other help to reconstruct some of the nuances of the case; some anonymous persons
who also shared useful information that facilitated cross-checking of the claims of the HMSI union and in building several new
formulations. The author also thanks Rakhi Sehgal, a doctoral scholar in sociology, American University, Washington, for
helping him establish contacts with many respondents.
2006 by The Asia Case Research Centre, The University of Hong Kong. No part of this publication may be reproduced or
transmitted in any form or by any meanselectronic, mechanical, photocopying, recording, or otherwise (including the
internet)without the permission of The University of Hong Kong.
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407-065-1
06/309C People Management Fiasco in Honda Motorcycles and Scooters India Ltd

two-wheeler industry, simultaneously taking advantage of the rapidly growing Indian


economy. Given the unexpected turn of events, would the CEO be able to successfully
implement strategies that would not only wash away past wounds but would also lay the
foundations of a soaring future?

HMSI: Products and Workforce


HMSI was a wholly-owned subsidiary of Honda Motor Company Limited (HMCL), Japan.
The Tokyo-headquartered HMCL was one of the worlds leading manufacturers of
automobiles and power products. With more than 120 manufacturing facilities in 30 countries,
it was also the largest manufacturer of two-wheelers in the world. HMCL was known to have
excelled in the adoption of the post-Fordist production system (also called the Toyota
Production System).

HMSI was established on October 20th 1999 with an aim to produce world-class scooters and
motorcycles in India. The state of the art HMSI factory, located in Gurgaon, was spread over
52 acres. The initial installed capacity was 100,000 scooters per year, which was scheduled to
reach 600,000 scooters by the end of 2005. HMSI operated on the principles that were
followed by all Honda companies worldwide. Maintaining a global viewpoint, HMSI was
dedicated to supplying products of the highest quality, yet at a reasonable price to ensure
complete customer satisfaction. These two-wheelers, manufactured with Honda-tested
technology, were backed with after-sales service in line with Hondas global standards.
Instead of being just vehicles for transportation, HMSIs products were intended to be
vehicles for change: change in the way people worked, the way they travelled and the way
they lived.

HMSI had about 3,000 employees in all; of these 2,000 were in the worker2 category, 1,300
were confirmed workers while 700 were contract workers. The other 1,000 employees
belonged to the supervisory and managerial staff. In addition, 700 persons were working as
trainees and 300 were apprentices under the Apprentices Act 1960. Almost every worker or
trainee held a certificate from an Industrial Training Institute (ITI) in India. All trainees, after
completion of their training, normally got absorbed into the regular workforce, whereas only
about 15% of the apprentices were able to get a job with the company after their
apprenticeship. Considering the region-cum-industry averages, HMSI had the reputation of
being a comparatively good paymaster. In October 2005, monthly wages for workers ranged
from Rs 8,150 for unskilled workers to Rs 11,200 for skilled workers, which included a Rs
2,000 allowance for home rental.3

Human Resource Policies at HMSI


The human resource (HR) policies of HMSI were in alignment with the philosophy of its
parent company, HMCL. The latter considered itself a unique organisation, having adopted
some distinctive employment and production practices. It also had certain fundamental beliefs,
which, among others, included the value of each individual. HMSIs philosophy advocated
two fundamental beliefs: respect for individual differences, and the Three Joys that it
wanted to promote for all organisational members.

2
Under the Factories Act 1948, a worker is a person employed directly or by or through any agency (including a contractor)
in any manufacturing process or in cleaning any part of the machinery or premises used for a manufacturing process or in any
other kind of work incidental to, or connected with, the manufacturing process .
3
In the state of Haryana, India, the minimum wage rates for unskilled, semi-skilled, skilled, and highly skilled workers in the
month of May 2005 were Rs 2360, Rs 2470, Rs 2615, and Rs 2920 respectively.

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Respect for the individual stemmed from initiative, equality and trust. The company believed
that it was the contribution of each employee that was responsible for a companys success,
and which would take the company into the future. Based on its philosophy, respect for the
individual translated into independence of 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 individuals capacity to think, to reason and, most
importantly, to dream.

In line with its parent Hondas philosophy, HMSI conducted all its daily activities in pursuit
of the Three Joys: the joy of buying (ie, the joy of using world-class products), the joy of
selling (ie, the joy of selling world-class products), and the joy of manufacturing (ie, the joy
of producing high-quality products). In addition, as an extension of its key mission, the
company had imbibed the joy of creating as an important value for itself. The management
believed that the joy of creating, which helped staff derive happiness from their daily work,
thrilled its employees the most.

The company also promoted association among different categories of employees through
provision of similar uniforms and common canteen facilities for all. In fact, all employees
were called associates. 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. It was commonly understood that the Honda way
meant human behaviour or way of thinking based on Honda philosophy. For example, one
of the prominent Honda ways was perseverance to ensure safety and quality in all aspects.
The HR department was expected to organise training programmes and facilitate
internalisation of culture-building so as to promote the Honda way among the employees.
Apart from training in Honda philosophy, the company organised other types of training, such
as TQM (total quality management) training, training for building team leaders, ISO 9000
training, and 5S training.4

The company also published a six-page quarterly newsletter, Dream Team. Its focus,
among others, was on covering the companys achievement in terms of awards, contracts,
recognitions, quality certification, new dealers, and kaizen activity. Employee-related matters
were restricted to sports competition results and announcements of marriages and childbirths.5

Performance Appraisal System


HMSI had a performance appraisal system for all its employees, including those in the worker
category. Appraisal was performed by the section head and the shift in charge, who graded
the employee on a rating scale. From this grade, workers were divided into five categories
with increments ranging from Rs 400 to 1,400 per month. The company announced all
appraisal results and salary-hikes immediately on the end of the fiscal year. Thus on April 1st
of each year, all employees would receive their pay-hike or promotion letters. The promotion
opportunities for workers ranged from worker to sub-leader to assistant executive to executive.
Since almost no employee was covered by the Payment of Bonus Act, 1961, the company had

4
The training department, which was a part of its human resource department, was supposed to be headed by an assistant
manager; but this position lay vacant for a long time.
5
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 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.

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institutionalised a policy of giving an ex gratia of one months gross pay to every employee
as incentive pay around the Diwali festival.6

Works Committee
Since April 1st 2004, the company had constituted a works committee under the Industrial
Disputes Act, 1947 (IDA), consisting of 15 workers and 5 management representatives.7 The
management had also constituted some other committees consisting of workers and
management representatives. Some of these were the canteen committee, the transport
committee, the health committee and the sports committee. Nominations to these committees
were done by the management based on the perceived interest of different persons.

Employee Welfare
In line with its HR policies, all employees at HMSI, including the managers, wore similar
uniforms. The company provided two sets of uniforms, one company cap and one pair of
shoes to each employee every year. HMSI had also taken several initiatives in the area of
employee welfare, which ranged from subsidised canteen facilities to attractive hospitalisation
reimbursement for all employees. Besides the canteen, another key initiative in this regard
was transport facilities to and from workers residences, provided at subsidised rates. The
company also had a sports club for employees use at Sukhrali village in Gurgaon, which had
facilities for both outdoor and indoor games. Workers used these facilities to organise
matches with employees of other companies in a variety of sports including football,
volleyball, table tennis, chess, carom board, badminton, tug of war, high jump and long jump.
In the initial years, the company used to invite workers families to celebrate the foundation
day, but as the size of the workforce increased, the practice was discontinued.8

Most of the HMSI workers did not qualify for the Employees State Insurance scheme under
the ESI Act, 1948, as their salaries had crossed the maximum salary limit for coverage. The
company covered such employees under the Paramount Health Care facility. In addition to
out-patient department facilities, this scheme provided re-imbursement for hospitalisation
expenses. Till September 2005, a worker and his or her spouse and up to two children were
covered for Rs 75,000 each for hospitalisation insurance, while the workers mother and
father were covered for Rs 150,000 each9 per annum. In addition, to provide support to an
associate at times of financial need, the company had a policy of paying, in cash, Rs 2,100 for
the birth of a child (limited to a maximum number of two children) and Rs 3,100 on an
employees marriage. Rs 5,000 was given to the family of an employee on his or her death
and Rs 3,000 on the death of an associates spouse, child or parent. The company also met its
liabilities under various labour laws.

Seeds of Unionisation and After


For a couple of years after commencement of production, things ran smoothly. However,
despite all the HR initiatives, it seemed all was not as it had appeared. The first signs of
acrimony were voiced in November 2004, when workers expressed resentment at receiving
Diwali gifts valued at Rs 600 apiece. Union leaders were quoted to have said, in the past
years also, the value of the Diwali gift was of about Rs 400 to Rs 500. Looking at the stature

6
Diwali is the most important and most widely observed festival of Hindus, who constitute more than 80% of the Indian
population. Festivities include gift exchanges and purchases of new clothes and household items. The exact date of the festival is
decided according to the Hindu calendar, normally falling in the month of November, and, on occasion, in the last week of
October.
7
After the union came into being, the works committee had become merely symbolic.
8
The practice was reinstated in late September 2005 after union negotiations.
9
Subsequently, after the union intervention these rates were enhanced.

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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 exacerbated by
additional rumours that Hero-Honda,10 a competitor of HMSI, was giving a refrigerator each
to its workers as a Diwali gift. In the end, 99% of the HMSI workers refused to accept the
Diwali gift, and the company took it back. As an alternative, it offered a coupon of Rs 600,
with which workers could buy any gift item of their choice from certain specified dealers, but
that too was turned down by the workers. Ten days after Diwali, this money was transferred
to their bank accounts.

Other resentments were also festering amongst the workers. They were made to sign a
movement sheet whenever they took a break to go to the toilet or drink water. In a much-
cited incident, a worker was once denied permission to go to the toilet. When he could no
longer bear it, he pulled the line chain to stop the conveyor belt and rushed to relieve himself.
When he returned some minutes later, he was dismissed. Also, as in the post-Fordist
production system, workers were often required to attend to more than one machine
simultaneously; this increased stress levels on the shop floor. The company was also very
strict in granting leave. Even when a workers close relative was seriously ill or circumstances
were otherwise serious, leave would not be granted. Apparently, while denying the leave,
managers would lecture the employees. Sometimes they would be told to leave the company
permanently if they could not perform up to expectations. If a worker wanted to change a shift
temporarily for some obligatory reason, it was almost never granted. Almost every day, some
worker or another would get a threat of termination. Because there was considerable fear of
managements authority, nobody dared to speak up or seek a grievance redressal.

Workers also perceived that many managers showed partiality in matters related to job
postings. Their favourites were posted in jobs outside the production line. Production-line
jobs were far more exerting than any other postings. The enormity of the problem took on
serious proportions, and led to considerable bickering among workers. It seemed that while
this practice was in place since the beginning, the Japanese top management knew little about
it. The Indian managers would not let the workers meet the top management to share their
grievances, but rather encouraged the scenario, as it prevented workers from uniting. Union
leaders reinforced this view and claimed that managers did so to create friction amongst the
common workers. They wanted these postings to be done on the basis of seniority.

At the same time, workers were also unhappy with the idiosyncratic attitude of the vice-
president of manufacturing (a Japanese national), who was a strict Honda disciplinarian.
Known for his unpredictability, he had a reputation for saying anything to anybody at any
time. He was often seen patrolling the shop floor with a 14-foot-long stick that was used for
measuring the heights of trolleys. Most workers took a dim view of him and cracked jokes
about him behind his back. Once, a worker returned two minutes late from the teatime break.
To show his disapproval, the VP kicked this worker in the leg, albeit in a friendly manner. At
the time, neither the concerned worker nor the other workers around him reacted at all.
However, by evening, the news had spread amongst the others and slogans were raised
against the VP. The next day, the VP apologised in front of the workers gathering.
Subsequently, the Indian managers asked some 15 workers to have a meeting with them on
the issue. The incident resulted in production stopping for a day and a half. A similar incident
occurred when a Sikh officer of the company was wearing a different-coloured cap and not
the usual company cap.11 The VP gave a push to his cap, knocking it off him. Although the
official concerned felt insulted, he kept quiet.

10
Hero-Honda is an Indian company, which is a joint venture between the Hero group of companies and HMCL. It is a separate
entity and has no connection with HMSI. Hero-Honda also produces motorcycles and scooters. It has two plants, one at Gurgaon
(Haryana) and the other at Dharuhera (Haryana). While there is no union in the Gurgaon plant, the Dharuhera plant is unionised.
11
Sikhs, as a part of their religion wear turbans as a part of their normal daily attire.

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Although the errant VP was later sent back to Japan, no other action was taken against him.
Not satisfied with a mere apology from the VP, in the last week of March 2005 the workers
came out with a charter consisting of more than 50 demands. These included: an increase of
Rs 2,500 per month in wages; a 20% annual increment in wages; house rent allowance to be
pegged at 70% of wage; conveyance allowance of Rs 1,500 per month; a 20% bonus on wage
plus a dearness allowance; provision for free distribution of one kilogram of milk and
kilogram of gur (jaggery) per worker everyday; provision for a union office on the company
premises along with all incidental facilities including a telephone; a loan of Rs 200,000 for
marriage of a sibling or child; provision of a library on the company premises and the
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). Reluctantly,
on April 1st 2005, the management offered the workers a compensation package comprising
an increment of Rs 3,000 per month, on the condition that the workers not form a union. They
refused to accept the managements offer.

When the management did not yield, the workers started collecting money for funding union
activities. HMSI management suggested that the workers form an internal committee instead.
When workers declined this suggestion, many were individually called into a managers room
and exhorted not to join the union. Letters were sent to certain workers homes, claiming 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 with political parties), HMSI workers began making
efforts to form a union, and subsequently moved an application for registration of the union to
the registrar of trade unions in Chandigarh.12 The management, not wanting the formation of a
union in the organisation, tried its best to stop the union registration. It resorted to various
means like lobbying with the government of Haryana to help prevent the formation and
subsequent registration of the union. As a result, the registrar allegedly denied registration of
the union on the ground that the proposed workers action was initiated in bad taste. The
registrar also claimed that it would result in disharmony of relations between the industry and
workers in the region at large and would prove detrimental to the growth and development of
the industrial belt in and around Manesar.13

Consequent to this, the workers resorted to a slowdown of work (go-slow) and refused to put
in overtime to complete production targets. The management viewed the new stand of the
workers as a serious 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. These 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 14 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 the gherao and resulting violence resulted in 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.

12
Gurgaon falls in the Indian state of Haryana. Chandigarh is the capital city of Haryana, which houses all state offices.
13
Manesar is an industrial belt of Haryana which includes sections of Gurgaon
14
Gherao is a Hindi word. It means to encircle. It is often used by employees against managers or officers as a pressure tactic.
Persons indulging in a gherao surround the person concerned (usually one or more managers) and do not let him/them move at
all. Technically, it is illegal as it violates the provisions of the Indian law of crime. It leads to illegal confinement of the person
gheraoed. But in case any other violence is not practiced, normally no action is taken against those indulging in a gherao in the
interest of industrial peace.

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Interestingly, in regard to the importance of local laws, the global philosophy of Honda stated
as follows:

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
individuals 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. It was only when the cause of the workers and
their application for registration was supported by a letter from AITUC chief Gurudas
Dasgupta, a member of Indian Parliament, that the HMSI labour union registration finally
took place. This letter, dated May 20th 2005, was addressed to the chief minister of Haryana
and requested that he look into the matter to secure early registration of the proposed union.
The newly-formed union, while adopting the demands raised earlier, also added additional
demands to their charter.

Conciliation Failure and the Intensity of Workers Action


Eventually, the dispute landed itself for conciliation. Conciliation proceedings were initiated
on May 26th 2005 by the deputy labour commissioner of Gurgaon, who served as 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 3rd,
17th, 28th, and July 8th, 14th and 19th 2005. The HMSI management was represented by two
managers belonging to the companys HR department. They remained quiet almost
throughout the proceedings. The only contention the management raised 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 commissioner
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 19th 2005.

Concurrently, pending the outcome of the conciliation proceedings, the management asked
the workers to sign a statement of good conduct. This statement stipulated that the workers
return to work unconditionally and remain disciplined while on the factory premises. The
statement also contained a clause stipulating non-pursuance of union activities by the workers
while at work. It was this clause that became contentious and which compelled workers not to
sign the statement. The management, in retaliation, refused to let the workers enter the factory
premises without their signatures on the good-conduct bond.

In order to maintain production schedules, the management hired some temporary workers
from its vendor companies. These temporary workers were asked to stay in the factory
premises and requisite facilities were provided to them within the factory. Eventually, in June
2005, the management and the union reached an agreement 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 or reinstated. Furthermore, it was decided

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that the workers would be allowed entry into the factory premises in batches of 400 and that
too only if they signed good conduct bonds. However, further apprehensions continued to
plague the management. A few years prior at Hero-Honda Motorcycles Ltd, Dharuhera,15 a
similar situation had arisen and temporary workers from vendor companies were called in to
continue the production. The management of Hero-Honda Motorcycles Ltd, under
circumstances similar to those faced by HMSI, had entered into an agreement with their
employees and 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 similar consequences at their factory.

While the workers agreed to the management proposition, on the following day, they put up
the union flag at the factory gate. HMSI management became cautious and decided to allow
only batches of 100 workers to enter the factory premises. Later, the management further
retracted and announced that it would take back workers in batches of no more than 50.
Anguished workers agreed yet again, but the management eventually decided not to allow any
worker to enter the factory. The management also requested and received a good degree of
police protection. The potentially explosive situation in the factory resulted in a fear in the
minds of the temporary workers who had come from the vendor companies. Many of these
workers fled from the factory premises. On June 18th 2005, only 38 temporary workers
reported to work. At 1:30 p.m., the management was forced to shut down production for the
day.

All these disruptions, in addition to the go-slow tactics adopted by the workers after the union
registration, severely affected daily production at the plant. During the months of May, June
and July 2005, production dropped to a mere 10% of normal levels, from 2,000 scooters per
day to around 200. This was a grave cause for concern to the management, causing HMSI to
place a newspaper advertisement for the recruitment of new workers.

The Dance of Violence and its Aftermath


On July 25th 2005, workers from HMSI and some from neighbouring industries staged a rally
at offices of the district authorities to press their demands 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, who was beaten mercilessly. They also set fire
to the vehicle belonging to the sub-divisional magistrate. Eventually, the police succeeded in
controlling the mob. The incident was covered by the television media and generated a great
deal of public sympathy for the police. The identity of the masked men was not confirmed,
and HMSI workers denied that anyone from their ranks was among them.

After this much-publicised 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. Once inside the enclosure, on some slight provocation, the police resorted to
the use of brute force against the unarmed workers, reportedly in retaliation for the earlier
attack on the police. The constabulary forced workers indiscriminately to kneel holding their
ears while they were thrashed. The number of workers injured was initially claimed to be 700.
While most workers were discharged after first-aid, 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 Haryana police also booked the legal counsel of the HMSI union on
15
See footnote number 9.

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charges of attempt to murder. The media reported that this use of the worst possible police
brutality on the workers, though inexcusable, was not exactly unprovoked [see Exhibit 1 for
media pictures of the event]. The television images of the savagery exhibited by the police in
their attack on the workers brought to many minds the savagery of General Dyers army at
Jalianwala Bagh, perpetrated in the interest of their British masters. P. Sainath, a journalist for
the Hindu, an English language 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.
- P. Sainath, journalist for the Hindu

While it was admitted that some police officers were beaten by the mob before the police
responded with its brutality, the HMSI union maintained that it was done by outsiders.
Violence continued on the next day, reportedly sparked off by enraged members of the public
who turned up at the civil hospital and could not find their relatives. Some of these were
whisked away by the police and were charged with the previous days violence. This inflamed
matters even further. The police action on workers was severely protested by the print and
television media and by politicians in and outside the Parliament. As a result, the inspector-
general of police conceded that the incident was an act of gross negligence on the part of the
police. The deputy superintendent of police and the sub-divisional magistrate 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 verified by the records of HMSI.

On July 26th 2005, the day after the unprecedented violence, HMSI closed operations for half
a day, but it did not declare a lockout. Consequent to severe protests in different circles, on
July 27th, 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.16 The
terms of reference provided for, among others: completing the inquiry within a period of three
months; examining the role of outsiders in the incident; examining whether the force used by
the police was justified or excessive; and whether the means available to the police were
adequate to control the crowd. The Haryana chief minister was also directed by Congress
president Sonia Gandhi to hold discussions with the HMSI management and its workers. For
more than two weeks, 61 workers remained in jail. They were subsequently released on
August 11th 2005.

The Truce and the Role of the State


On July 30th 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, August 1st 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 well as the four
union leaders whose services had been previously terminated. However, the employees would

16
Punjab and Haryana are two Indian states which share the Union Territory of Chandigarh as their capital.

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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 settlement contained a clause stipulating 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 employees and, if the employees were found guilty, the management had the right to
transfer them to any other department other than the manufacturing department. The
agreement also provided for termination of any employee of HMSI who was convicted in any
of the court cases that had been initiated against them by the city administration in connection
with the July 25th 2005 incident. The workers were awarded full salary for the months of May
and June, 2005. However, from June 27th onwards, the principal of no work, no pay would
be implemented.17 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, 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 decided that the agreement be considered as final conciliation in respect
to all demands raised by the workers and that, in the future, both the parties would maintain
cordial relations.

UnionManagement 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 25th 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 was able to convince the management that the
company should stick to the agreement. 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.

The management had also informally allotted a temporary room to the union leaders, though
it was not sufficiently big, and promised them a proper union office after some time. There
was also an informal understanding that the union leaders would have the freedom not to
work on the shop floor as long as several industrial relations issues were still pending. For
example, police had registered cases against 63 workers, including all the seven union office-
bearers, for the July 25th violence. This necessitated running around contacting different
people to build a sound defence. Meanwhile, the injured workers had their own problems,
requiring the intervention of the union. Of the 50 workers who had suffered major injuries, 15
cases were very serious and involved 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. According to union leaders, they had to struggle to ensure that their salaries are paid
regularly.

They also had to monitor the workersupervisor relations closely to see that workers were
treated better. Another area of the union leaders involvement was the issue of absorption of
trainees into regular positions. Even as the absorption of all persons who had completed their
training into regular service formed part of the tripartite settlement, the management was
initially refusing to take most of them on different pretexts. As these trainees had supported

17
In accordance with an earlier ruling of the supreme court of India in the case of Bank of India v. T.S. Kelawala (1990),
Labour law Reporter, 313

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the workers struggle, the union got all of them absorbed into regular jobs. Speaking of the
change, S.K. Shafi, the secretary of the union, observed:

Now, when a worker asks for leave, managers speak with much restraint;
their response being far more positive. Workers are able to adjust a 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 Governments economic policies. Our
union, however, observed the day as strike. Though the management felt bad
to know its decision, the union compensated the loss by working on a Sunday
- S.K. Shafi, secretary of the HMSI workers union

Another major achievement by the union was the hike in the coverage of the workers and
their family members under the medical insurance scheme. This was a result of negotiations
following an incident in September 2005, when the hospitalisation expense of a workers wife
cost him Rs 135,000. Although the worker was in extreme distress over the death of his wife,
the management refused to pay the excess of the coverage limit. Earlier, nobody would have
dared to talk about such an incident with the management. In the changed circumstances, the
union negotiated the issue and made the management agree to a family floater coverage
scheme of Rs 175,000. This overall limit could be utilised by one or more or all the family
members. If the expenses still exceeded this amount, the company agreed to pay up to Rs
100,000. This agreement was reached not through any written settlement with the union, but
by way of a change in management policy at the insistence of the union, and came into effect
on October 1st 2005.

Another new development was that, whenever there was a workers-related problem or issue,
the management invited all seven of the union office-bearers for discussion. This had never
been done earlier. For example, the management faced a problem of increasingly stressed
workers who had to work overtime to meet the production targets. Overtime was being paid at
the rate of double 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 at work, thus hampering overall productivity. The unions help was sought
and a decision was taken to scrap overtime completely, except under exceptional
circumstances.

In a landmark incident on September 9th 2005, the A-shift in assembly achieved its target of
1000 scooters for the first time after the union formation. Prior to the unrest, the target was
achieved in almost every shift. Union leaders said that the targets could not be achieved due
to various interruptions. However, they could not satisfactorily explain why these
interruptions had not affected the target achievement earlier. On hearing the target
achievement that day, the vice-president of manufacturing, along with the general manager of
production, came to the shop floor during the lunch time and commended the achievement of
the workers. The next day, sweets were distributed to all workers.

The scheme of inviting workers families on the founders day had been stopped as the
number of employees had increased, and the practice was becoming unmanageable in view of
the fact that Honda workers were from more than 20 different states of India. This practice
was revived in late September 2005. Thereafter, family members were invited to the factory at

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the companys expense in batches and were shown the conditions under which their loved
ones worked.

The Diwali gift for the year 2005 was also settled through negotiations. Each employee was
given a gift of Rs 2,000 and an incentive bonus in the form of a bank account credit of Rs
4,000. This included all managerial staff. Ironically, unlike the one months gross pay
disbursed for the year 2004, the bonus money for the year 2005 was smaller. The
management was able to convince the union that the factory had suffered huge losses and thus
the ex gratia bonus had to be cut down. The biggest sufferers from this agreement were the
managerial employees, who received substantially less than their one month of gross salary in
previous years.

Despite these developments, there were still some odd incidents reminiscent of the previous
unrest. One took place on September 2nd 2005, when two supervisors in the aluminium
machine shop treated workers authoritatively and in a provocative manner, just as they had
done before. 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 halted work for around 15 minutes. A union leader later 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.

Expatiating on the dynamics involved, C.D. Tikar, the general secretary of the union,
observed:

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 if he is asked to become transparent in his
working, this will prevent him from realizing his hidden objectives including
favouring his chosen few. 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 as 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.
- C.D. Tikar, general secretary of the HMSI workers union

Looking Back and Planning for the Future


The company had been performing extremely well since beginning, and had shown promising
results on several fronts [see Exhibit 2]. the TNS Automotive Dealers Satisfaction Study,
2004 ranked HMSI as the leader in the two-wheeler category in India with 108 points,
followed by Hero-Honda with 96 points. The company also received several recognitions in
other spheres. But in the post-July 25th scenario, the company took quite some time to absorb
the shock of what had happened. The management wanted to know what had gone wrong and

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where, and how things could be improved. Some of the issues at hand that needed attention
were summarised by an anonymous manager of HMSI as follows:

The company had a total lack of direction on the 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, which were known to be much more
tolerant. The company also has a lot of problems of hierarchy consciousness.
The present GMOperations 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 DirectorGeneral Affairs, who also is responsible for
overall HR management, came with a lot of ideas, but he could not
understand the organisational 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 July 25.

As one of the direct consequences of the unrest, the company revamped and intensified its
training function. Managers were sent out to attend management development programmes
(organised by, among others, the Confederation of Indian Industry and the All India
Management Association. Training areas included inter-personal skills, negotiation skills,
team-building and conflict management, and leadership building. Interestingly, however, the
position of assistant manager of training remained vacant.

In view of the damage done to the companys reputation, HSMI was also busy in an image-
building exercise. Earlier, the managers were under the impression that Honda products
would sell because of the companys image as a global brand. Now it had come to realise that,
following the July 25th violence, its advertisements were no longer effective. The company
was forced to consider new ways of enhancing their market image. In an innovative attempt, a
week-long drive was organised during which henna tattoos of the HMSI logo were applied on
womens hands.18 In its endeavour to reach the far-flung masses across the country, HMSI
also ran road shows of two of its popular two-wheeler models, Eterno and Unicorn.

A strategic meeting of the top management and the department heads took place at a country
resort to decide the future course of action. They were well aware that, in addition to the
assistant manager of training position, the posts of senior manager of industrial relations and
senior manager of administration were also lying vacant. An outcome of the meeting was the
decision to appoint a new person as the senior manager for both these functions. In September
2005, all union office-bearers were trained by the HR department on building co-operative
industrial relations. External trainers were also invited to participate 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.

18
The application of henna tattoos is a popular Indian ritual undertaken by women on happy occasions such as weddings or
festivals.

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The short but bitter history of industrial relations of HMSI had shaken the companys top
management. Its CEO was wondering what impact this would have on the ambitious
expansion plans that he had drawn out just a few months before the July 25th violence. In
preparation for the move forward, he was looking for ways to undo the bitter feelings
amongst the workers, while at the same time deliberating what steps he should implement, not
only to repair the damage to the companys image, but also to maintain and enhance
productivity.

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EXHIBIT 1: PRESS IMAGES OF THE JULY 2005 UNION INCIDENT

Picture 1: Police beating HMSI workers on July 25th 2005

Picture 2: An angry relative of an injured worker


attempting to hit a policeman for his role in beating
HMSI workers

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Picture 3: HMSI union leaders meet Mrs. Sonia


Gandhi, president of the ruling Congress Party, to
seek help against the police action

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EXHIBIT 2: 2004 DEALER SATISFACTION STUDY


RANKING OF TWO-WHEELERS

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

Source: TNS Automotive Dealers Satisfaction Study, 2004, as published in Dream Team, HMSI
Newsletter, April-June 2005.

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