Labor Unrest at Maruti Suzuki India Limited
| Case Code: HROB160 Case Length: 17 Pages Period: 2011-2012 Pub Date: 2013 Teaching Note: Available |
Price: Rs.500 Organization: Maruti Suzuki India Limited Industry: Automotive Countries: India Themes: Industrial Relations, Collective Bargaining, Ethics |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
A Strike...Dissidence?
On June 4, 2011, around 2000 workers at MSIL's Manesar plant struck work from the second shift of the day, leading to a production loss of around 650 units – the Manesar factory manufactured 1,200 cars in two shifts. The protesting workers wanted the acceptance of a new union - the Maruti Suzuki Employees Union - constituted by the Manesar factory workers. MSIL openly stated that it was not willing to deal with another union. It pointed out that there was an existing union, the Maruti Udyog Kamgar Union, at its Gurgaon factory and if the Manesar plant workers wanted a union, it had to be under the aegis of the Maruti Udyog Kamgar Union...
The Workers' Grievance
The protesting workers at MSIL's Manesar plant felt that the constitution of an autonomous union would safeguard their rights and improve their standard of living.
According to some experts, an important cause of the workers' anger could be the acutely inappropriate way of apportioning the increasing revenues and profits of MSIL among the management and workers over the years. In case a senior permanent worker of the Gurgaon factory - the wage structures of workers belonging to Gurgaon and Manesar factories were nearly the same - had not availed of leave for a year, the maximum remuneration he could have taken home per annum in 2007 was Rs.280,000...
In an unabashed breach of the spirit of the country’s labor regulations, the temporary workers at MSIL's Manesar plant comprising casual or contractual workers, trainees, and apprentices, were given minimal compensation for tasks that were regular...
A Basic Right
The Maruti Udyog Kamgar Union was the lone company recognized union at MSIL. Some experts felt that MNCs such as MSIL ignored the fact that the Indian Constitution guaranteed the fundamental right to association which also implied the formation of trade unions. The Trade Unions Act of 1926 bestowed upon the workers the right to form a trade union. The Indian Trade Unions Act stated that the Registrar of Trade Unions of any State could not decline to register a trade union if the prospective members’ application for it fulfilled the technical stipulations of the law...
Right Cause, Wrong Means?
On August 29, 2011, MSIL directed all its Manesar factory workers to sign a 'good conduct bond' prior to entering the plant. This directive came on the heels of quality problems reportedly surfacing the previous week. The 'good conduct bond' required an undertaking from the workers that they would not slow down their work, damage the output, or engage in acts that would obstruct normal manufacturing at the factory. The workers who did not agree to sign the bond were not allowed to enter the plant. MSIL's management claimed that the quality and number of cars manufactured at the Manesar plant had gone down after the workers had wound up their 13-day strike...
The Plot Thickens
On August 30, 2011, MSIL suspended 16 additional permanent workers and terminated the jobs of 12 trainees. With regular workers not entering the plant premises, on August 31, MSIL engaged the services of 120 Industrial Training Institute (ITI) trained workers at Manesar. It had also previously brought in 50 engineers attached to the company's Gurgaon factory and nearly 290 supervisors for manufacturing tasks at the factory. By August 31, only 36 permanent workers had signed the 'good conduct bond'. Nearly 2,000 casual and permanent workers stayed put outside the Manesar plant premises...
Only an Temporary Truce
On October 7, 2011, nearly 2,000 workers of MSIL's Manesar factory and 6,000 workers from various plants in the Gurgaon-Manesar industrial region, such as Suzuki Powertrain India Ltd and Suzuki Motorcycle India Pvt. Ltd. began a sit-in-strike in their respective plant premises. The striking workers demanded the constitution of a new union at MSIL's Manesar plant and the reappointment of its 1,200 contract workers who had backed the earlier labor protest and who were not included in the previous week's agreement...
Another Truce and a Betrayal
The 14-day strike ended on October 21, 2011, after a tripartite agreement was reached between the Manesar factory workers' representatives, the MSIL management, and the Haryana Government. According to the agreement, MSIL would reinstate 64 permanent workers, but stick to the suspension of 30 additional workers against whom the allegations were grievous - these 30 workers were to be subjected to inquiry and disciplinary steps...
Portend Wider Ramifications?
Some media reports alleged that Sonu Gujjar and Shiv Kumar had actually received Rs.4 million each. Their exit was expected to severely weaken the flourishing workers' movement at the factory. Some workers also apprehended that it could give the company a shot in the arm in future negotiations with them...
Picking Up the Pieces
However, the Manesar plant workers got their act together and applied again for registration of the workers' union with a new set of office bearers. On February 27, 2012, the workers' union at MSIL's Manesar factory was officially registered under the name the Maruti Suzuki Workers' Union. Analysts also expected MSIL to act more effectively given the company's performance in the third quarter of FY 2012 and for FY 2012 as a whole...
Going for the Kill?
Since the formation of the new union, there were protracted deliberations on a three-year pay settlement for the workers. MSIL had been promising a hike in wages since January 2012; however, notwithstanding the burgeoning costs of living, the labor force was kept waiting. This tardy progress over fresh wage deliberations frustrated the workers. The workers wanted a monthly wage increase of Rs.15,000 to Rs.16,000, but the offer from the company's side was a hike of Rs.10,500...
After Effects
On July 21, MSIL announced an indefinite lockout at its Manesar plant, driving down its share prices even lower. The stoppage of manufacturing resulted in revenue losses of around Rs 700 million per day for MSIL. Suppliers suffered daily losses of Rs 550 million...
Exhibits
Exhibit I: MSIL's Financial Performance (2005-2012)
Exhibit II: Contract Workers in India: A Systemic Malaise
Exhibit III: MSIL's Stock Price Movement (June 1, 2011-August 1, 2012)
Exhibit IV: A Note on the Losses Suffered by MSIL Due to a Series of Strikes at the Manesar Plant
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