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LABOUR UNREST AT MANESAR

INTRODUCTION

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. Avanish Kumar

Dev, 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.

ISSUES IDENTIFIED

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, wasmade chairman. Two, Maruti and the India market are also becoming increasingly important forSuzuki 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 hasincreased. Agreed, it has an Indian chairman but Bhargava is 78 years old. It does have many seniorIndian executives who have been 'lifers' at Maruti. But insiders who will speak on the condition ofanonymity 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 arevery different. Some loss of connect with Indians is expected.

Leaner, Meaner Pressures

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 bringdown costs and improve productivity. Most have contract labour to bring in flexibility andreduce costs. At Maruti's Manesar factory, 40% workers are on contract and their salarycould 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 andmore 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 Manesarplant, that churns out two top-selling models in the Maruti stable Swift and Dzire is atthe heart of all the strife.

Young & Restless Workers

Since April 2012, the Manesar union had demanded a three-fold increase in basic salary, amonthly conveyance allowance of 10,000, a laundry allowance of 3,000, a gift with everynew car launch, and a house for every worker who wants one or cheaper home loans for thosewho want to build their own houses

http://economictimes.indiatimes.com/topic/Shinzo%20Nakanishihttp://economictimes.indiatimes.com/topic/Shinzo%20Nakanishihttp://economictimes.indiatimes.com/topic/Shinzo%20Nakanishihttp://economictimes.indiatimes.com/topic/Shinzo%20Nakanishi

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In Haryana, young blue-collar workers have seen dramatic changes around them. Land priceshave surged as Gurgaon has become a commercial hub. Overnight, people have become richand their lives have transformed simply because they made a killing selling their land. Suchchanges have re-calibrated worker expectation who have seen their sleepy little hamlettransform 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 toachieve it. Poor wage hikes and raging inflation have queered the pitch further, resulting in animpatient, militant workforce, which believes in aggressive posturing. Sonu Gujjar, the leaderof the labour unrest at Maruti plant last year, represents that generation. In his 20s, Gujjarorganised a concall with analysts to put forth the workers' point of view and made headlines

Lack of control and discipline

A Japanese manufacturing plant even if it located in outskirts of delhi, is expected to followan announced code of discipline which was not so in the case of manesar plant.

Discrimination Between LabourA permanent worker gets Rs. 17000 as salary while a contract labour gets only Rs.7000-8000. Also the working condition of manesar plant is different from its Gurgoan plant.

ANALYSIS

Impact of Manesar tragedy

Loss of revenue

Analysts said that the shutdown was costing the company 1 billion rupees ($18 million) a day andcosting the company market share.

Good for labour

Contract workers today work out to be almost 40% cheaper than regular ones, estimates the Mumbai-

based HR head of a leading auto company. Thanks to the flexibility and cost efficiency it offered, use

of contract labour in the manufacturing sector today is very high. In the automobile sector alone, it is

estimated that nearly 50% of plant workers would be contractual.The company officials had

announced that Maruti would scrap the practice of hiring contract workers and that the workers

currently on temporary contracts would be made permanent. It would begin the process of hiring new

workers on a permanent basis from September 2, 2012

Gain to other companyAlmost all car companies competing in the segment fromHyundaito Ford toSkodageared up

to make the most of the lockout at the Maruti plant.

This case leads the production loss of around 65,000 units and facts reveals that around 26,000-

30,000 customers opt ed for another brand.

Conclusion

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The labour unrest at Maruti Suzuki's Manesar plant will have significant financial implications for the

company. But the unrest will also have its ripple effect within and outside the automobile industry.

Perhaps the biggest is an overhang of fear and anger among the HR fraternity.