1. MARUTI’S LANKA—A SENSATIONAL IR CASE IN AN INDUSTRY
By Dr. Sibram Nisonko,Associate Professor(MBA),IBMR
college,chinchwad,Pune,09272337048,snisonko@sify.com.
Maruti Suzuki is a subsidiary company of Japanese automaker Suzuki Motor Corporation. It has a market
share of 44.9% of the Indian passenger car market as of March 2011. In February 2012, the company
sold its 10th million vehicle in India. It is India and Nepal's leading automobile manufacturer and the
market leader in the car segment, both in terms of volume of vehicles sold and revenue earned. Until
recently, 18.28% of the company was owned by the Indian government, and 54.2% by Suzuki of Japan.
The government of India held an initial public offering of 25% of the company in June 2003. As of 10
May 2007, the government of India sold its complete share to Indian financial institutions and no longer
has any stake in Maruti Udyog.
The Indian labour it hired readily accepted Japanese work culture and the modern manufacturing
process. In 1997, there was a change in ownership, and Maruti became predominantly
government controlled. Shortly thereafter, conflict between the Government and Suzuki started.
Labour unrest started under management of Indian central government. In 2000, a major
industrial relations issue began and employees of Maruti went on an indefinite strike, demanding
among other things, major revisions to their wages, incentives and pensions.
After elections in 2000 the new central government pursued a disinvestments policy. It
proposed to sell part of its stake in Maruti Suzuki in a public offering. The worker's union
opposed this sell-off plan on the grounds that the company will lose a major business advantage
of being subsidized by the Government, and the union has better protection while the company
remains in control of the government.
The standoff between the union and the management continued through 2001. The management
refused union demands citing increased competition and lower margins. The central government
prevailed and privatized Maruti in 2002. Suzuki became the majority owner of Maruti Udyog
Limited.
Maruti-Suzuki workers went on strike first on 12th October 2000 when nearly 4,700 employees of
Maruti Suzuki (MSIL), formerly Maruti Udyog Limited boycotted work, protesting the company's demand
for an undertaking from them .Daily output was cut by 86% as the company forbade entry to workers
not signing the undertaking. The MU Employees' Union treasurer said that signing it would have meant
losing their fundamental rights. It was also a protest against the management's decision to link bonus
and incentives to productivity and efficiency. The primary concern of the management was that
production should not stop on account of the agitation. Workers from suppliers were roped in to do the
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2. work and along with supervisors and managers, Maruti got the plant started within a week's time. There
was also indirect (political) pressure from the BJP Government on the Union and the issue came up for
discussion in Parliament. The management meanwhile agreed to drop insistence on individual workers
to furnish a good conduct undertaking, but sought certain safeguards, and stipulated that the law would
take its own course in regard to disciplinary action. The deadlock continued for 90 days. Finally on 9th
January 2001, the strike broke on the management's terms. The Union had to accept the new terms on
production linked incentives and bonus. The face saver was that no undertaking had to be given.
However, the 2000-01 confrontation did not die down .
In August, 2005, the Maruti Udyog Employees Union (MUEU) sought the Prime Minister Dr Manmohan
Singh's intervention to resolve several issues with Suzuki management since the Suzuki management
had summarily dismissed 24 Union activists without holding any enquiry, another 36 after ex-parte
enquiry, and 32 more for not signing the undertakings imposed by the management. Twenty-six were
charge-sheeted and "compelled" to take VRS, while hundreds of other employees also took VRS. The
Union also alleged that Maruti Udyog had replaced over 2000 permanent employees with contract
workers, following the October 2000 dispute. The PM met them on 3rd August and voiced apprehension
in taking up the issue, as the echo of the labour trouble at Honda's facility had barely died down.
A Maruti spokesperson said the company's Union (formed by ex-employees of the company) had long
since been de-recognized and therefore was not representative of the workers. The workmen had been
notified that only those workers could enter the factory who gave an undertaking in writing that they
would not indulge in any activity which adversely affected the production and discipline and that
"workmen who do not give the undertaking would be deemed to be on illegal strike. In terms of the
contract of employment the workmen are duty-bound to adhere to norms of discipline and give normal
output". Suzuki, which had already increased production from 5,50,000 in 2005-06 to nearly 8,00,000 in
2008-09, decided to step up capacity further to one million per annum by 2009, earmarking Rs 9000
crores investment for 2008-2011. Exports had also risen significantly (The Economic Times 5/5/09).
Why Companies Don’t Like Unions
Unions are politicised, messy and the management is never quite sure of their motivation. “Anybody
who has dealt with a labour union knows how ridiculous it can get at times. The balance rests on a very
thin line and most of the times it is a compromise. All your theories of motivation go out of the window
and it is mostly horse trading,” says a former plant manager of an automotive manufacturing company
who did not want to be named.
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3. Almost every strike at the numerous factories in the Gurgaon-Manesar region in the past decade has
started with companies refusing to recognize the demand of workers to form a union. From the strike at
Maruti in 2000 to the one at Honda Motorcycles and Scooters India (HMSI) in 2005 and the one at Rico
Auto in 2009, the one common demand was to form a union. . Maruti has stated publicly that it does
not want to deal with more than one union. The company says it already has a union, the Maruti Udyog
Kamamgar Union (MUKU), at its Gurgaon plant and if workers at Manesar want a union, they should
come under the MUKU umbrella.
Shiv Kumar is supposed to be the general secretary of the new union at the company’s Manesar plant.
The new union’s registration is still pending and the Maruti management has made it quite clear that
they will not allow a new union.
“Labour unions are a reality and companies have to accept it sooner or later”, said Anil Kumar,
General Secretary of AITUC, Gurgaon,
MANESAR VIOLENCE JULY 2012
On 18th 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 9 policemen.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.
Since April 2012, the Manesar union had demanded a five-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. In addition to this compensation and normal
weekend/holidays, the union demanded the current 4 paid weeks of vacation be increased to 7
weeks, plus each worker have 40 days allowance of sick and casual leave - for a total of 75 days.
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. The workers
claim harsh working conditions and extensive hiring of low-paid contract workers .The
management insisted that they must wait for completion of inquiry underway before they can
take any action on the employee suspended for beating up his supervisor. The management was
then told, "you will be beaten up after we get a signal." Thereafter, the workers broke up into
groups, went on to set the shop floor as well as all offices afire. They searched for management
officials and proceeded with a barbaric beating of the officials at the site with iron rods.
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4. The police, in its First Information Report (FIR), claimed on 21 July that Manesar violence may
be the result of a planned violence by a section of workers and union leaders. The report claimed
the worker's action was recorded on close circuit cameras installed within the company premises.
The workers took several managers and high ranked management officials hostage. The
responsible Special Investigative Team official claimed, "some union leaders may be aware of
the facts, so they burnt down the main servers and more than 700 computers." The recorded
CCTV footage has been used to determine the sequence of events and people involved.
As per the FIR, police have arrested 91 people and are searching for 55 additional accused.
Haryana Government has started investigation and 90 odd workers have already picked up FIR by Mruti
named 55 workers 600 others.
Satbir, President of Centre of Indian Trade Unions hope that there should be a fair probe.”The tendency
to demonize all workers is not good for industrial relations. The problemis that 21st century Corporations
have 15th century mindset when it comes to treating workers”, he said.
Maruti Suzuki in its statement on the unrest, announced that all work at the Manesar plant has
been suspended indefinitely. A Suzuki spokesman said Manesar violence won't affect the auto
maker's business plans for India. The shut down of Manesar plant is leading to a loss of about Rs
75 crore per day. On July 21, 2012, citing safety concerns, the company announced a lockout
under The Industrial Disputes Act, 1947.
On July 26 2012, Maruti announced employees would not be paid for the period of lock-out in
accordance with labour laws of India. 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. 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.
Contact workers complain that they are made to work on all heavy and laborious work while
permanent workers don‟t. At the same time workers impose their authority on them. The
permanent workers are paid more than twice of what the contract workers get.
GLOBALIZATION AND CORPORATE CONCERNS
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5. Shinzo Nakanishi, managing director and chief executive of Maruti Suzuki India, went to each
victim apologising for the miseries inflicted on them by fellow workers, and in press interview
requested the central and Haryana state governments to help stop such ghastly violence by
legislating decisive rules to restore corporate confidence amid emergence of this new 'militant
workforce' in Indian factories. He announced, "we are going to de-recognise Maruti Suzuki
Workers‟ Union and dismiss all workers named in connection with the incident. We will not
compromise at all in such instances of barbaric, unprovoked violence." He also announced
Maruti plans to continue manufacturing in Manesar, that Gujarat was an expansion opportunity
and not an alternative to Manesar.
Government procedures for labour dispute resolution are currently very slow, with tens of
thousands of cases pending for years. The government of India is being asked to recognise that
incidents such as Manesar violence indicate a structural sickness which must be solved
nationally.
The peace of the last twenty years in Industrial Relations (IR) has been ruffled by the current,
bitterly fought Maruti Suzuki strike. It stands out as one of four strikes that caught the attention
of the nation in the past three decades - the textile strike, the 1989 strike at Telco, now called
Tata Motors, and the more recent strike at Jet Airways.
FINANCIAL IMPACT
Maruti unrest has hit its net realization .For the quarter ended June 2012 its operating margins slid by
more than 200 basis points year-on-year(YOY).At 7.3% the company reported its lowest Q1 margins in
the past 4 years.
Input cost(raw material )increased by 25%YOY
Employee cost increased by 33%
Employee cost/Sales =2.2%(highest in past 4 years)
INDUSTRIALIZATION
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6. Maruti stands at the highest end of a technological development which India can be proud of the
culture around represents a traditional village culture. For the people of the village around Manesar
whose land was acquired the industrial relations problem created a formidable crisis for workers,
management and the society as a whole. Earlier the local people were the producers. A good buffalo
was better than a car for them since it gave them milk, a means of transport and livelihood. Now they
are at the mercy of the company. The company is providing a source of income to hundreds of vendor
and suppliers. As long as the plant an Manesar ran smoothly there was no self-reflection .Due to fixed
income the villagers never thought of becoming entrepreneurs.
The villagers grumble by saying , “They(Maruti company) keep us away. They don’t give us contracts
.They adopted our village but have done little substantial.” The Factory owners don’t hire them because
they are afraid of their community backed disruptive power. Education could improve their mindset.
Since they don’t have jobs in the factory the young fellows have no inclination to study.
ANALYSIS OF HR EXPERTS AND RESEARCHERS
After scutinising the Maruti Suzuki strike has brought to the fore several issues that have been
silently plaguing IR over the years, of which the following are of particular interest.
Maruti Suzuki, like many other companies, engages over 50 per cent of its workforce as contract
labour and temporary workers. This is a common practice used by employers to save on costs.
The problem is that in a country with great unemployment, the desire for permanent
employment, particularly in a blue chip company like Maruti Suzuki, is understandably high. For
industrial organisations to reduce their permanent workforce, is found extremely difficult given
the legal implications and business obligations. Consequently, employers have realized that the
archaic labour laws of the country are out of tune with the times and changing business
environment. Another factor that predisposes organisations to use contract labour is that although
the reduction of workforce or closure is allowed by law, it is only after permission is granted by
the Government which often is
As per reports, Maruti Suzuki did not recognise the union at its Manesar plant and the authorities
did not register it. While the right of association is guaranteed by the Constitution of India, there
is no concomitant right to represent at the bargaining table. In other words, it is not mandatory
for the employers to bargain with a union, except in the State of Maharashtra, where the Court
decides the representative status.
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7. Another reason collective bargaining is not welcome in the Indian context is that unions often
have political connections. Multinational organisations operating in the country need to be
sensitive to these cultural nuances.
The young workforce in India is marked by high aspirations and flexibility. This gives rise to an
opportunity to practice and shape industrial relations proactively. Gone are the days when
increasing productivity was resisted tooth and nail. There is, on the contrary, a greater
appreciation of the need to increase productivity. That several organisations have productivity
linked incentives for workmen in new industries around Pune is a testimony to the fact that a
new era in industrial relations has arrived.
Organisations are increasingly appreciating that not just communication but a dialogue with
employees is essential. It calls for willingness to empathetically understand the other point of
view and act on it. This is the enlightened practice of industrial democracy.
High level of „control‟ exercised by managements is an anathema to industrial democracy. The
soul of proactively managing industrial relations is promoting trust. Research shows that
increasing trust between the managers and workforce will lead to strengthening corporate
governance.
Many industrial organizations have experimented with redesigning jobs of employees to make
them meaningful, and allowing greater discretion in their hands.
The golden rule in resolving conflicts is that even disagreement must be arrived at after an effort
is made to understand the position of the other party. Sometimes there are irreconcilable
differences. Patience must be shown to talk, negotiate and resolve the dispute.
Any party‟s conduct during the strife is indicative of its corporate persona, and a certain brand is
created in the minds of people at large. Moreover, it also creates a mindset which employees at
various levels tend to follow. It is imperative, therefore, that the leadership knowingly takes steps
to resolve the dispute.
Handling conflict does not end when people return to work. It is important to make the
employees feel engaged.
RISE OF INDUSTRIAL UNREST IN INDIA
The latest Labour Bureau data point out that industrial disputes leading to strikes and lockouts are on
the rise ,after registering a decline in 2011, and officials expect the trend to worsen in the coming
mongths.The table below gives a the detailed figures:
STRIKES &LOCKOUTS
PSU FIRMS PRIVATE FIRMS TOTAL TOTAL MANDAYS
YEAR STRIKES LOCKOUTS STRIKES LOCKOUTS STRIKES LOCKOUTS LOST
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8. 2010 121 2 141 166 262 168 17935637
2011 63 0 118 36 176 36 4967823
2012(Jan- 58 0 32 13 95 13 960089
May)
Is it the beginning of the end of our dream to be a developed country?
QUESTIONS
1.What are the possible causes for reversing the posititive trend in industrial relations in
India,particularly,In Maruti ?
2.Has the social milieu made any impact on the worker and management behavior?
3.Do you see any failure on the part of other bodies ,besides union and management to bring the
situation to this level in Maruti Udyog Ltd?
REFERENCES
1. Indo Asian News Service (21 July 2011). "Maruti violence may be planned: cops". New
York Daily News.
2. "Police collect CCTV clips from Manesar MSIL plant". The Times of India. 21 July 2012.
3. "Maruti Suzuki's statement on Manesar unrest". CNN-IBN. July 19 2012.
4. Chanchal Pal Chauhan (July 22, 2012). "Maruti Suzuki declares lockout at Manesar
factory". The Economic Times. Retrieved July 21, 2012.
5. "Maruti's Manesar plant closed for third day, Rs 210cr loss so far". Retrieved 21-07-
2012.
6. "Maruti Suzuki to Stop Using Contract Workers in Direct Manufacturing". The
Wall Street Journal. July 26 2012.
7. "Violence at Maruti's Manesar plant: Bloodlust had taken over, eyewitness says".
The Times of India. July 26 2012.
8. .Maruti Suzuki, Wikipedia,
9. Sharmistha Mukherjee & Surajeet Das Gupta (July 22, 2012),"We will de-recognise Maruti Suzuki
Workers' Union: Shinzo Nakanishi". Business Standard.
10. "Manesar Red Alert". Indian Express. 23 July 2012.
11. "Beyond Maruti: India’s progress calls for a new set of labour laws and labour relations". The
Economic Times. 23 July 2012.
12. Vivek Patwardhan, Ex- Head of HR , Asian Paints. , Four Industrial Relations insights from the
Maruti Suzuki Strike,Published in SHRM INDIA,21.11.2011
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