Maruti Suzuki Facing Another Summer of Labor Strife

MUMBAI – Even after a year of unrest culminating in a day of deadly violence, Maruti Suzuki India’s management is unable to pinpoint what is poisoning the labor-management relationship at its Manesar plant.

“We have no idea what triggered this situation,” Chairman R.C. Bhargava says.

A seemingly trivial incident in a corner of the plant between a worker and a supervisor ignited the faceoff.

On July 18, a crowd of 3,000 workers and their supporters suddenly became aggressive, held more than 100 supervisory and managerial personnel captive within the plant, hit them with iron rods, door frames, blunt tools and car parts and set the factory on fire.

The plant’s human-resources manager, identified as Awanish Kumar Dev, was beaten until his hands and feet were broken. Unable to move, he died of suffocation and burns over 100% of his body.

According to several news reports published this week, Dev had submitted his resignation six months earlier in anticipation of labor trouble carrying over from last summer, but it was not accepted by Maruti management.

About 50 managers and nine police officers were injured, according to Reuters. Police made 91 arrests and are seeking more than 50 others involved in the riot, but they have not identified specific persons involved in the fatal assault.

According to the Maruti Suzuki Workers’ Union formed last year, the trouble arose after an employee protesting a supervisor’s remarks against him was suspended. “Bouncers employed by Maruti were called in. It is they who beat the workers and the managers and set the plant on fire,” the union says in a statement.

Bhargava says Maruti Suzuki will not shut down the Manesar plant, which has annual capacity of 550,000 vehicles and accounts for 40% of the auto maker’s builds. But, he says during a weekend news conference: “We cannot start production due to a danger to life and safety. We will not endanger our people any further.

“How long will it take? Ten days? Fifteen days? I don't know. We'll put all our resources to study and help the authorities, but I cannot say when we will be able to restart the plant.

"In my wildest dreams, I never thought that a day would come like this, when our own workers would indulge in this kind of rioting and mob violence.”

The daily loss of production is estimated at 1,500 vehicles valued at Rs900 million ($16 million), leaving Maruti Suzuki far short of its projected output of 1.5 million units this fiscal year. Last summer’s labor disturbances halted operations at Manesar for 59 days at a cost of Rs25 billion ($445 million).

“Maruti will not close its (two) plants at Manesar and (three) at Gurgaon,” Managing Director Shinzo Nakanishi says, adding development of a third plant at Manesar will continue.

But, he tells the Business Standard of New Delhi in an interview: “We are going to de-recognize the 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.

The auto maker is on the defensive about the workers’ demands. It says it recognized the MSWU in February as an entity separate from the union that has represented workers since the facility opened in 1981.

Workers long have opposed the auto maker’s practice of paying the contract employees who comprise 55% of the Manesar workforce a fixed amount without any allowances or facilities. Their compensation adds up to less than one-third of the salary paid to regular workers, but Maruti Suzuki does not consider this unusual.

“Such practices are common all across the Manesar-Gurgaon industrial belt and at all Maruti plants,” a company source says.

Issues regarding salaries, work rules and productivity incentives also are being discussed.  MSWU considers the current two breaks of 7½ minutes each in an 8-hour shift “insufficient and inhuman.” But the auto maker insists the rule has worked well for years.

Management seems eager to talk with the MSWU leaders about the progress of negotiations. “Maruti is willing to talk, but all the union leaders have gone underground,” Bhargava says. “With whom can we talk?”

Counters MSWU in a statement: “The process of negotiation for wages and other demands was under way. However, the management has done its utmost to derail the process and break the back of the spirit of unity of the workers and the legitimacy of the union.”

MSWU blames Maruti Suzuki’s anti-worker, anti-union policies for triggering the crisis. The union accuses the auto maker of ignoring its demands for doubling contract workers’ salaries and employing them permanently at regular pay rates.

The current standoff exemplifies the labor unrest in Gurgaon-Manesar. The local government mainly is interested in bringing about some sort of a settlement at any cost, so that industrial investment in the region is not affected.

But it is too late: Despite its commitment to developing its sixth plant at Manesar, Maruti Suzuki is building an assembly plant in the western state of Gujarat. Several auto makers are locating there because of its peaceable and productive industrial climate and efficient infrastructure.

The suspension of production at Manesar and what will be a lengthy investigation into the riot threaten to destroy Maruti Suzuki’s valuable contributions to India’s industrial development. The auto maker was the country’s leader in year-to-date sales through June, resulting in a 30.8% market share, according to WardsAuto data. But its share was 52% at its peak.