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A case study on Maruti Suzuki

Labour Unrest
To be free, the workers must have choice. To have choice they must
retain in their own hands the right to determine under what
conditions they will work.SAMUEL GOMPERS, "The Worker and the Eight-hour Workday", American Federationist:
Official Magazine of the American Federation of Labor

This case is about the labor troubles facing the Manesar plant of Maruti
Suzuki India Ltd, the subsidiary of Suzuki Motor Corp( SMC). In many ways,
the 13-day strike at Maruti Suzuki India Ltd, Indias largest automobile manufacturer, was a
wake-up call for the Indian corporate sector. Not only did it illustrate the unity among the
companys workers, but with workers and unions across states voicing support, it threatened
to flare up into a wider industrial dispute, giving strong signals of a resurgence of trade union
activity in the country.
It wasnt a wage hike or improvement in working conditions but the right to form a union
something of a rarity in the new industrial ecosystem in Indiawhich saw 3,000 employees
of Marutis Manesar plant in Haryana striking work on June 3. The plant workers wanted to
register a new unionthe Maruti Suzuki Employees Union (MSEU)and had already
applied for registration, something the management was opposed to.

Maruti Suzuki India Limited, formerly known as Maruti Udyog Limited, is an
automobile manufacturer in India.[8] It is a subsidiary of Japanese automobile and
motorcycle manufacturer Suzuki.[7] As of November 2012, it had a market share of
50% of the Indian passenger car markets. [9] Maruti Suzuki manufactures and sells
popular cars such as the Alto, Ritz, Celerio, Swift, Wagon R, Zen Zen Estilo, Swift
DZire, Ciaz, Kizashi, SX4,etc.

On 18 July 2012, 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, including two Japanese expatriates. The violent mob also
injured nine policemen.[30][31] The company's General Manager of Human Resources
had both arms and legs broken by his attackers, unable to leave the building that
was set ablaze, and was charred to death. The incident is the worst-ever for Suzuki
since the company began operations in India in 1983. [32]
Since April 2012, the Manesar union had demanded a three-fold increase in basic
salary, a monthly conveyance allowance of 10,000, a laundry allowance
of 3,000, a gift with every new car launch, and a house for every worker who wants
one or cheaper home loans for those who want to build their own houses. [33]
According to the Maruti Suzuki Workers Union a supervisor had abused and
made discriminatory comments to a low-caste worker.[35] These claims were denied
by the company and the police.[31] Maruti said the unrest began, not over wage
discussions, but after the workers' union demanded the reinstatement of a worker
who had been suspended for beating a supervisor.[32] The workers claim harsh
working conditions and extensive hiring of low-paid contract workers which are paid
about $126 a month, about half the minimum wage of permanent employees.
Maruti employees currently earn allowances in addition to their base wage.
Company executives denied harsh conditions and claim they hired entry-level
workers on contracts and made them permanent as they gained experience. It was
also claimed that bouncers were deployed by the company.[33]
The police, in its First Information Report (FIR), claimed on 21 July that Manesar
violence is the result of a planned violence by a section of workers and union leaders
and arrested 91 people.[37][38] Maruti Suzuki in its statement on the unrest,
announced that all work at the Manesar plant has been suspended indefinitely.
The shut down of Manesar plant is leading to a loss of about Rs 75 crore [40] per
day.[41] On 21 July 2012, citing safety concerns, the company announced
a lockout under The Industrial Disputes Act, 1947 pending results of an inquiry the
company has requested of the Haryana government into the causes of the disorder.
Under the provisions of The Industrial Disputes Act for wages, the report claimed,
employees are expected to be paid for the duration of the lockout. [40] On 26 July
2012, Maruti announced employees would not be paid for the period of lock-out in
accordance with Indian labour laws. The company further announced that it will stop
using contract workers by March 2013. The report claimed the salary difference
between contract workers and permanent workers has been much smaller than initial
media reports - the contract worker at Maruti received about 11,500 per month,
while a permanent worker received about 12,500 a month at start, which increased
in three years to 21,000-22,000 per month.[42] In a separate report, a contractor
who was providing contract employees to Maruti claimed the company gave its
contract employees the best wage, allowances and benefits package in the region. [43]
The company dismissed 500 workers accused of causing the violence and reopened the plant on 21 August, saying it would produce 150 vehicles on the first day,
less than 10% of its capacity. Analysts said that the shutdown was costing the
company 1 billion rupees ($18 million) a day and costing the company market share.


In July 2013, the workers went on hunger strike to protest the continuing jailing of
their colleagues and launched an online campaign to support their demands. [47]

Four reasons behind the unrest

The Missing India connect

Since 2007, two important changes have happened at Maruti. One, Shinzo
Nakanishi, the current MD of Maruti Suzuki, took over the reins from Jagdish Khattar.
RC Bhargava, who was a director, was made chairman. Two, Maruti and the India
market are also becoming increasingly important for Suzuki Motors. Till recently,
Maruti contributed more than half of the parent's profits.
As Maruti's contribution to Suzuki has increased, the latter's tendency to control India
operations has increased. Agreed, it has an Indian chairman but Bhargava is 78
years old. It does have many senior Indian executives who have been 'lifers' at
Maruti. But insiders who will speak on the condition of anonymity say the Japanese
voice counts and often tends to dominate crucial decisions. Culturally, Indians and
Japanese are far apart. Their sense of discipline, punctuality, employee connect too
are very different. Some loss of connect with Indians is expected.
Leaner, Meaner Pressures

The challenges of running manufacturing outfits have surged. Costs and wages have
increased and sales are poor & volatile. Doing business is difficult. Doing profitable
business is even more difficult. Every company is figuring out ways to bring down
costs and improve productivity. Most have contract labour to bring in flexibility and
reduce costs. At Maruti's Manesar factory, 40% workers are on contract and their
salary could be half of the regular workers. Maruti is among the better pay masters.
Amid all this, competitive intensity in the marketplace for Maruti has never been as
severe. Being a volume player, the only way for it to survive and flourish is to churn
out more and more cars. All this has translated into relentless pressure to improve
productivity and margins at all levels. For Maruti, this pressure is particularly high.
Not surprisingly, the Manesar plant, that churns out two top-selling models in the
Maruti stable Swift and Dzire is at the heart of all the strife.
Young & Restless Workers

In Haryana, young blue-collar workers have seen dramatic changes around them.
Land prices have surged as Gurgaon has become a commercial hub. Overnight,
people have become rich and their lives have transformed simply because they
made a killing selling their land. Such changes have re-calibrated worker expectation
who have seen their sleepy little hamlet transform into a city of high rises and malls
in a decade.
They are less tolerant and fairly aggressive in their expectations and how they want
to achieve it. Poor wage hikes and raging inflation have queered the pitch further,

resulting in an impatient, militant workforce, which believes in aggressive posturing.

Sonu Gujjar, the leader of the labour unrest at Maruti plant last year, represents that
generation. In his 20s, Gujjar organised a concall with analysts to put forth the
workers' point of view and made headlines.
Return of the Red Flag

From its peak in the 1980s, trade unions have been on a decline in India. Trade
union bodies across the board from Citu to AITUC have been seeing a steady
decline over the years. It does not help that a large percentage of workers in Indian
factories are foot-loose contract workers. Over 90% of the Indians are employed in
the unorganised sector where the trade unions have been finding it difficult to make
inroads. They have made many efforts to spread their network among white
collar workers like BPO employees, but with little success. Expectedly, they are
tapping into every possible opportunity they can get to grow their base. Their
involvement in Maruti's labour unrest signals that.

MSIL Manesar facility is responsible for 45 percent of its overall production in
the country, manufacturing 1,600 cars per day. The unrest thus, has majorly hit
production operations causing losses of up to Rs. 70 crores a day. That
translates into a cumulative loss of Rs. 210 crores thus far. For a company, that
is already grappling with the threats posed by increasing fuel prices, rapidly
changing consumer sensibilities and dynamic competitors in a fluctuating
marketplace; MSIL can ill afford to compromise on its production if it is to hold
on to its dwindling market share. Add to that the losses incurred due to
vandalism and arson, and the picture gets that much bleaker. Thus, its
production capacity has been hugely dented as a result.
Furthermore, the violence caused grievous harm to human life, killing one and
injuring over a 100 executive managers. The company would find it difficult to
rally its troops after an incident of this nature. Mounting losses, damaged
management-worker relationships and a band of various external and internal
pressures have left MSIL vulnerable in an unforgiving market.

The road ahead

Granted the fact that there existed major flashpoints of segregation when it
came to key issues between the management and workers perspectives, but
violence of this nature cannot be condoned under any circumstance. There is
absolutely no excuse for such acts that disrupt the industrial sanctity of a region
in such a brutal manner.
The Haryana Government has already instituted an inquiry into the incident,
while the company has set up an internal committee of its own to investigate the
deplorable chain of events. For starters, the perpetrators ought to be dealt with
suitably. Furthermore, negotiations are in order to resolve the ongoing conflict
between the management and the workers union. Despite the severity of the
situation, MSIL can salvage something out of this scenario, provided its
corporate honchos act with calibrated alacrity and pragmatism.
Only time will determine the fate of those workers involved in the fracas
and whether MSIL can institute a framework to deal with incidents of this
nature in the future.

submitted by: Shubhra Sinha 15bsp2437

& Bandana Gautam 15bsp2468