Labour Unrest at Honda Motorcycle & Scooter India (Private) Ltd

Abstract:

The case study focuses on the IR problems faced by Honda Motor Cycle & Scooters India (HMSI). The case discusses the
various reasons which led to dispute between the management and employees of HMSI. It elaborates the incidents, which
led to the strike at the company that resulted in HMSI workers being severely beaten up by the police. Labor strife and the
management's inability to deal with it effectively had resulted in huge losses for the company due to the fall in the
production level at the plant. In addition to this, the company also received a lot of negative publicity as newspapers and
TV channels gave wide coverage to the violence of the action. The case highlights the growing number of instances
of clashes between the employees and the management of companies in India, which is often guided by external parties
such as trade unions and political parties.

The violence near the Honda plant at Gurgaon was instigated by outside forces who had misled the workers." -
Spokesperson, Honda Motorcycle & Scooter India Pvt. Ltd., in 2005.

"The incident was a disadvantage for India's image as a foreign investment destination and also gave a negative image of
Japanese management. - Yasukuni Enoki, Japanese Ambassador to India, in 2005.

Introduction
It's hard to imagine that two-feet-long canes can inflict this kind of damage. But the signs are there in two wards of the
civil hospital in Gurgaon, Delhi's upstart satellite, where 33 workers are still recuperating from their public 'police
encounter'. Bandaged, stitched-up skulls, arms and legs in plaster, a mummified man with a glucose tube, and many
strapping young men, accustomed to eight-hour shifts of back-breaking work at assembly lines, wincing in pain as they
turn in their scrubby beds. Televised scenes of the police thrashing workers from the Japanese-owned Honda Motorcycles
and Scooters India (HMSI) and their supporters from other automobile factories, for most, recalled the worst colonial and
feudal aspects of our law enforcement machinery. The scenes were so brutal it invited the combined wrath of the Centre,
the Left parties and the Opposition. Haryana chief minister Bhupinder Singh Hooda was forced to order a judicial inquiry
by retired justice G.C. Garg. Two top officialsGurgaon's deputy commissioner Sudhir Rajpal and SP Yogender Nehra
were asked to go on leave as the issue rocked Parliament.

HMCL and HMSI

Soichiro Honda, a mechanical engineer, established the 'Honda Technical Research Institute' in Hamamatsu, Japan, in
1946. His idea was to develop and later produce small two-cycle motorbike engines. Honda's first product, an A-type 50cc
bicycle engine, was produced in 1947. In 1948, HMCL was incorporated with a capital of 1 million. Thereafter, the
company started to design and produce lightweight motorcycles. Honda's first motorcycle, the D-type two-stroke 98cc,
was produced in 1949.
HMSI was established on August 20, 1999, and a plant was set up at Manesar, Gurgaon to manufacture two-wheelers for
the Indian market. HMCL made an initial investment of Rs. 3 billion to establish the plant which had an annual production
capacity of 200,000. HMSI was a wholly-owned subsidiary of HMCL

Labor Unrest at HMSI

The Gurgaon plant of HMSI had peaceful labor relations for the first few years after it was set up in October 1999. The
management entered into labor contracts with individual laborers, which covered the basic wage structure and detailed
parameters specifying the work conditions for workers. In 2005, the management of HMSI, encountered violent protests
from workers that disrupted production at their plant in Gurgaon. HMSI workers were severely beaten up by the police,
and newspapers and TV channels gave wide coverage to the violence of the action. The protest followed six months of
simmering labor unrest at the HMSI factory in which the workers also resorted to job slowdown (since December 2004
when the workers' demand for an increase in wages was rejected by the HMSI management). Some analysts charged that
the incident of 2005 was fallout of the long-term oppression and malpractices at the Gurgaon factory by the HMSI
management. They alleged that HMSI's management had violated certain laws relating to the welfare of workers.
In December 2004, the workers at HMSI's Gurgaon plant started demanding that the management increase their wages
commensurate with the company's growth in the market. It was reported that a worker had allegedly been kicked by a
Japanese manager on the shop floor due to this. The services of four other workers who had come to his rescue were
allegedly terminated.
But workers say they began to realise by January, 2005 that it would only get worse for them. "The breaking point came
when a notice was put up that the 2,000 of us who were recruited as trainees would not automatically be absorbed as
employees after our training period was over. They were planning to get fresh batches of trainees to replace us," explains
Sundeep. "That is when we decided that it was time to form a union."
The management did not take it lying down. Even before the trade union could be registered on May 30, 2005 , they had
dismissed four workers and suspended 13. In all, 50 workers have been suspended so far for being associated with the
union, according to Sachdeva. "Granted, these workers were a little impatient and made some mistakessuch as going on
a go-slowbut the adamancy the management has shown at every stage, its insistence on raising the bar every time the
workers wished to negotiate and get back to work, is what has brought matters to such a head. They wouldn't dare do this
if the state government and police were not openly supporting them."
With their demands being rejected by the management, the workers tried to form a trade union and this resulted in a
confrontation with the management. Fifty workers of the production team were suspended and four others dismissed in
May 2005. Apparently there was a show of strength between the management and the workers. While management
alleged that the workers were resorting to 'go-slow' tactics and were threatening not to return to work until their colleagues
had been reinstated, the workers alleged that the management was using pressure tactics such as victimization of active
union members and a 'lock-out' to break the back of the union.
On July 25, 2005, the workers of the plant were demanding reinstatement of the suspended employees when some
workers allegedly attacked policemen on the plant premises. This led to police intervention and a violent tussle
ensued between the police and the workers in which workers protesting peacefully were also beaten up. The police were
reported to have overreacted and it was alleged that they had been overzealous in protecting the interests of the HMSI
management, even without any direct request from the company's management.

The Blame Game

What exactly went wrong with Gurgaon's first 100 per cent Japanese-owned automobile factory is a minefield of
contention. There are various interpretations. The management's version is, as a letter from HMSI director general affairs
Masayuki Kato states: "From the beginning of June, the company faced intermittent strikes resulting in loss of crores of
rupees... and (we are) concerned that unsocial outside elements are continuing to instigate and provoke our employees to
indulge in disruptive activities." But workers insist that the "unsocial" elements were inside the factory: the management
itself. "They broke down the doors of the lavatorieseven the women's lavatoriesso they could keep an eye on us,"
says Balbir Sharma, a worker from Panipat. "They sometimes slapped or kicked us, and once a Sardar's turban was even
knocked off."
It was this disillusionment, fuelled by the reported arrogance of the management, that bubbled over. The workers, skilled
technicians from ITIs rather than plain labour, felt the managers were flexing their muscles only because they were not
unionised. This amorphous, 'powerless' workforce was like putty in their hands. Sundeep Kumar, an employee says, "They
didn't understand us and we couldn't understand Japanese and the go-between were Indian managers who were also the
interpreters. All they were interested was in meeting the targets or else their own promotions were on the line. They didn't
care how hard we were working (eight-hour shifts with 10 minutes tea break and half-hour for lunch). And for so little
how can you support a family in Gurgaon where room rent alone costs Rs 1,500 on the stipend they were paying (Rs
4,200 ). I can't even afford enough milk for my two children, let alone send them to good schools."

"The real trouble started in HMSI not because of low wages but because of mistreatment," agrees D.L. Sachdeva,
secretary of the AITUC, the man behind the HMSI workers' efforts to form a trade union in the factory. "Most auto
companies do their best to stop workers from forming trade unions, and the HMSI workers would never have approached
me if things hadn't got so bad in their company," he feels.

The management and the workers traded allegations and counter allegations on what the root cause of the dispute was.
They blamed each other for the situation that ultimately took an ugly turn on July 25, 2005. The management held the
workers responsible for indiscipline and for slowing down production, while the workers insisted that there had been no
indiscipline on their part and that the management was bringing up this issue only to prevent the formation of a trade
union at HMSI.

Final Settlement
Striking workers and the management of Honda Motors finally reached a truce pact brokered by the Haryana government
under which dismissed and suspended workers would be reinstated, but only after all of them give an undertaking that
they would not raise fresh demands for the next one year.

The agreement to end the month-long dispute, which at its peak resulted in clashes between the police and workers, was
reached in the small hours between the Honda management and the union leaders at chief minister Bhupinder Singh
Hoodas residence.

Hours later, the workers about 500-600 of them went to the companys plant at Manesar in nearby Gurgaon and
signed the undertaking. The workers, who get to retain the union, promised in the undertaking not to engage in
indisciplinary activities and ensure normal production levels at all time. The remaining about 2,500 workers, who
include line associates, apprentices and trainees, also joined later. Expressing happiness at having reached an amicable
settlement, HMSI President and CEO Yukihiro Aoschima said the dispute had ended and both sides had agreed to work
together. Hope this agreement will prove that this is the best we can reach.

Workers union leader Suresh Gaur also sounded happy. So many people tried to resolve the issue earlier. But it reached
this stage. But we are happy that now it is resolved, he said. The management later said in a statement that it had taken
one-time measures to normalise the overall situation and in the interest of the entire industrial region.

Could this Ugly Situation have been Averted?

Before reaching the settlement, the company had all along refused to take back the suspended and dismissed workers. The
unrest had seen the company, the market leader in the scooter segment, suffer losses of Rs 120 crore with production
levels severely going down from the peak output of 2,000 units daily.

For companies, the incident brought to the fore the need to maintain sound industrial relations to ensure productive and
profitable operations. Several factors can lead to a conflict between the workers and the management of any company, and
as such, companies should be prepared to trace the root cause of the problem and solve it. Industry experts opined that
with proper understanding of the industrial laws and causes of disputes, the management and the workers of any company
could avoid incidents such as the one at HMSI
Recent Developments

Plagued by continued labour unrest and strikes, Honda Motorcycle and Scooter India in 2009 threatened to shut its factory
at Manesar in Haryana and move to an alternate location, although the workers' union has denied that they were on strike.

"Our production has come down to 50 per cent in the last two months due to go-slow strike by workers. No company can
go on like this forever. We have requested the state authorities for help , Vice-President General Affairs Mohan Deepak
said. Deepak said the company has also approached the Punjab and Haryana High Court seeking to direct the workers'
union not to disrupt normal production and prosecute those who have violated law.

HMSI Employees Union President Ashok Yadav, however, denied that the workers were on strike and said the decline in
production was due to non-availability of components as some supplying factories were on strike. Production at our
factory is low but it is not that we are on strike or we are going slow. The ongoing labour strike in Rico, Sunbeam and
some other ancillary companies have led to drop in component supplies," Yadav said.

After the violent strike at HMSI that rocked Gurgaon in 2005, HMSI and the workers union had signed a long-term
agreement in 2006, which expired in July 2009. The workers and the management are re-negotiating the terms and
conditions. Also, Haryana Labour Commissioner has been engaged to arrive at a solution. Deepak claimed that about 100-
odd workers have prevented installing a third production line under the instruction of the Union and also even threatened
engineers and managers who tried to carry out the work.

With the situation that we face now, we have to rethink but we expect the government to intervene and bring a solution,"
he said but adding that Honda won't shy away from moving out in case things don't improve. Earlier this year Honda
Power Products had shifted its plant from Rudrapur in Uttarakhand to Greater Nodia after labour unrest. HMSI currently
has 1872 workers, who are a part of the union and another 2500 who are on contract.

Is this just an isolated incident, as Prime Minister Manmohan Singh claims, or yet one more sign that MNCs are being
allowed to violate Indian trade union laws in the guise of welcoming foreign investment, as CPI MP Gurudas Dasgupta
asserts? "All MNCs have different labour problems, but their nature is the same," says Sachdeva, who has been leading
trade unions for over three decades now. "The competition is stiff so they want to cut costs, and it is the workers who have
to bear the burden of thishe is their first target when it comes to cutting costs."

It's a wake-up call for both the employers and the trade unions, according to Sachdeva. "The employers have to learn to
respect workers' rights: it's not just machines that make wealth, they will have to understand the Indian ethos. And
workers too have to learn patience, and understand that collective bargaining has both rights and responsibilities." It's a
lesson that workers like Sundeep are only too well aware of. With no salary for two months, and no job in sight, Sundeep
has already borrowed Rs 4,000 to support his family which he doesn't know how to repay. "But there is no going back
now," he says quietly. "Other companies will behave the same way too"

This incident has brought to light the need to look at labor laws afresh. We cannot have archaic labor laws in a
liberalized economy." Surinder Kapur, Chairman, Sona Group, in 2005.