Manesar Violence - Industrial Relation - Legal Aspects Of Business

LEGAL MARUTI DISPUTE

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ABHISHEK DHAWAN 12/BBS/0069 0

MANESAR VIOLENCE MARUTI SUZUKI INDIA LIMITED

LABOUR POLICY DISPUTE

SUBMITTED TO – DR RAKESH KUMAR SAINI

DEPARTMENT OF MANAGEMENT STUDIES

DEEN DAYAL UPADHYAYA COLLEGE


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INTRODUCTION

Maruti Udyog Limited was established in February 1981, though the actual production commenced only in 1983. It started with Maruti 800, based on the SUZUKI ALTO, which at the time was the only modern car available in India. Its only competitors were Hindustan Ambassador and Premier Padmini. Originally, the Indian government, and 26% by Suzuki of Japan owned 74% of the company. As of May 2007, the government of India sold its complete share to Indian financial institutions and no longer has any stake in Maruti Udyog. In 1982, a license & Joint Venture Agreement (JVA) is signed between Maruti Udyog Ltd. and Suzuki of Japan. At first, Maruti Suzuki was mainly an importer of cars. In India's closed market, Maruti received the right to import 40,000 fully built-‐up Suzukis in the first two years, and even after that the early goal was to use only 33% indigenous parts. This upset the local manufacturers considerably. There were also some concerns that the Indian market was too small to absorb the comparatively large production planned by Maruti Suzuki, with the government even considering adjusting the petrol tax and lowering the excise duty in order to boost sales.Finally, in 1983, the Maruti 800 is released. This 796 cc hatchback is based on the SS80 Suzuki Alto and is India’s first affordable car. Initial product plan is 40% saloons, and 60% Maruti Van.[15] Local production commences in December 1983.[11] In 1984 the Maruti Van, with the same three-‐cylinder engine as the 800, is released. Installed capacity of the plant in Gurgaon, reaches 40,000 units.


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JOINT VENTURE REALED ISSUES Relationship between the Government of India, under the United Front (India) coalition and Suzuki Motor Corporation over the joint venture was a point of heated debate in the Indian media until Suzuki Motor Corporation gained the controlling stake. This highly profitable joint venture that had a near monopolistic trade in the Indian automobile market and the nature of the partnership built up till then was the underlying reason for most issues. The success of the joint venture led Suzuki to increase its equity from 26% to 40% in 1987, and further to 50% in 1992. In 1982 both the venture partners had entered into an agreement to nominate their candidate for the post of Managing Director and every Managing Director will have tenure of five years

Suzuki did not attend the Annual General Meeting of the Board with the reason of it being called on a short notice. Later Suzuki Motor Corporation went on record to state that Bhaskarudu was "incompetent" and wanted someone else. However, the Ministry of Industries, Government of India refuted the charges. Media stated from the Maruti Suzuki sources that Bhaskarudu was interested to indigenize most of components for the models including gearboxes especially for Maruti 800. Suzuki also felt that Bhaskarudu was a proxy for the Government and would not let it increase its stake in the venture. If Maruti Suzuki had been able to indigenise gear boxes then Maruti Suzuki would have been able to manufacture all the


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models without the technical assistance from Suzuki. Till today the issue of localization of gearboxes is highlighted in the press. INDUSTRIAL RELATIONS Since its founding in 1983, Maruti Udyog Limited experienced problems with its labour force. 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 United Front 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. Employees used slowdown in October 2000, to press a revision to their incentive-‐linked pay. In parallel, after elections and a new central government led by NDA alliance, India pursued a disinvestments policy. Along with many other government owned companies, the new administration 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 subsidised by the Government, and the union has better protection while the company remains in control of the government.


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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. MANESAR VIOLENCE-‐BACKGROUND 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. 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.


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PREMISE 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. Initial reports claimed wage dispute and a union spokesman alleged the incident may be caste-‐related.


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COMPANY’S STAND According to the Maruti Suzuki Workers Union a supervisor had abused and made discriminatory comments to a low-‐caste worker. The company and the police denied these claims. The supervisor alleged was found to belong to a tribal heritage and outside of Hindu caste system; further, the numerous workers involved in violence were not affiliated with caste either. 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 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 the company deployed bouncers.


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FURTHER DEVELOPMENT India Today claimed that its interviews of witnesses present at the plant confirm the dispute was over the suspended worker. 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 beating of the officials at the site with iron rods. 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. Per the FIR, police have arrested 91 people and are searching for 55 additional accused.


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LEGAL OBLIGATION AND ACTION 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 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.


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ACTION TO NORMALISATION 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. 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. The company dismissed 500 workers accused of causing the violence and re-‐opened 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.


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COMPANY STATEMENT ON LOSS Shinzo Nakanishi, managing director and chief executive of Maruti Suzuki India, said this kind of violence has never happened in Suzuki Motor Corp's entire global operations spread across Hungary, Indonesia, Spain, Pakistan, Thailand, Malaysia, China and the Philippines. Mr. Nakanishi 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.


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CONCLUSION Labour disputes are endemic in the auto industry of India and have affected other manufacturers. India has strict labour laws, but their application is widely sidestepped by hiring low-‐wage contract workers.

Manesar violence adds to India's recent incidents of labour disputes turning to violence. Analysts claim recent incidents like Manesar violence suggest a need for urgent reform of archaic Indian labour laws, the rigid rules on hiring and layoffs, which harm the formal sector and discourage investment in India. Government mandated 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.


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Date post:	07-Aug-2015
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Manesar Violence - Industrial Relation - Legal Aspects Of Business

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