ASSIGNMENT 1

[MARUTI SUZUKI : CASE ANALYSIS ]

VIEW POINT OF: MANAGEMENT WORKERS

SHAFALI MBA- HR ROLL N0 - 30

INTRODUCTION TO CASE:
Since its founding in 1983, Maruti Udyog Limited experienced few problems with its labour force.

TIMELINE OF EVENTS:
I983-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,

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

. In 2011, there had been at least three confrontations in June, September and October -- between the workers and the management. All were totally non-violent. The workers had been agitating for an independent union in place of the ineffective company union the Maruti Udyog Kamgar Union (MUKU).

After a lot of struggle, they registered the Maruti Suzuki Employees Union (MSEU) in October last year. But in the same month, the management reportedly got rid of the troublesome leadership of this union by offering them a VRS-type settlement.

The workers then formed a new union, the Maruti Suzuki Workers Union (MSWU) with a new set of committee members. It was this union which had been negotiating with the management through 2012 for wage increases, for transportation facilities, slowing down the robotic pace of work, and regularisation of leave benefits. But with the MSWU apparently making little headway in the negotiations, discontent was simmering among the workers. And on July 18, when a floor supervisor allegedly misbehaved with a Dalit worker (Jiyalal), and instead of the supervisor getting pulled up, the worker got suspended, the new union was expected to deliver to get Jiyalal reinstated. And when it began to look like they wouldnt be able to, violence broke out.

Passenger car sales

For Maruti, this shutdown comes at a time when the passenger car sales seem to be recovering after the slowdown of 2011-12. As against a modest 4.5 per cent rise in volumes last year, passenger car volumes have grown by 9.7 per cent in the first quarter of 2012-13. July car sales too have been encouraging. But, for now Maruti will not be able to take advantage of the reviving demand.
Double whammy

That the shutdown occurred at Manesar is a double whammy. Manesar produces the Swift, Dzire and SX4, all of which are available in diesel versions too. In the last one year, with the gap between petrol and diesel prices widening, diesel cars and utility vehicles have been the driving force for car makers. In the models in which the diesel version is available, they make up over 75 per cent of vehicles sold. Overall, diesel vehicles (Swift, Dzire, SX4 and Ritz) contribute 20-25 per cent of the total vehicles sold for the company. With the budget holding off widely expected taxes on diesel vehicles, diesel car sales have received a further fillip. But the shutdown effectively prevents Maruti from taking advantage of this window of opportunity. This shutdown has financial implications too. First, the plant has a capacity to produce 1,900 units a day.
Lacklustre results

According to the company, a months shutdown will result in a revenue loss of about Rs 2,700 crore. The company has already had a lacklustre first quarter. Net sales increased by 27.5 per cent to Rs 10,529 crore, helped by improved volumes and higher realisations from diesel vehicles. But net profits plunged by 23 per cent to Rs 243 crore the reason being lower margins from currency fluctuations in the payment of royalty and in payments to vendors and higher interest costs due to ongoing expansions.

The second quarter performance could be worse. The cushion from volumes and realisations will not be available because of the shut down. Operating margins, at 7.3 per cent currently, would take a further hit. More so, if currency fluctuations (rupee vs yen) continue to haunt it, or if the company decides to offer discounts to boost festival season sales. Also, even after the plant commences operations, the wait period for models such as Swift or Dzire would be further extended. With the festival season fast approaching, people may not be willing to wait for extended periods. This could result in market share losses even after normal operations commence. Finally, the company has already had shutdowns on and off from June to October 2011, indicating that labour troubles have been brewing for more than a year now. So, instead of ad-hoc solutions, the company will now be forced to arrive at a more permanent solution to smoothen labour management relations. This could result in higher employee costs.
Financial implications

The month-long shutdown will also impact Maruti's financial performance in the second quarter as well as third quarter of this fiscal. In all, it is estimated to lose at least Rs 2,700 crore in revenue on a loss of production of about 47,500 units. Re-starting operations is critical as the diesel models of Swift and Dzire face waiting period of up to six months and the festival season demand is right round the corner bookings begin by end-August.
Competitors may gain

Any delay would help rivals make strong gains. The carmaker, which sells two out of every five cars sold in India, is also likely to lose market share by two per cent if production stops for 4-5 weeks, though this will be a temporary blip, say analysts. Trends in market share will depend on how quickly other carmakers ramp up diesel vehicle output, which may not be easy.

Labour issues have been plaguing the company for the last two years now. However, Marutis waning dominance in the domestic car market over the last few years was primarily attributed to other factors such as unavailability of models in fast-growing segments such as compact SUVs.
Market share

Due to these reasons, the companys market share has slid from 50 per cent in 2009 to 47 per cent in June, 2010 and 40 per cent today. With increased competition and multiple models coming in every quarter, both analysts and company officials say that the market share may now stabilise, provided Maruti is able to produce the models that are in demand.

Four reasons behind Maruti Suzuki's Manesar problems

The bad old days of militant trade unionism are back. The violence at Maruti Suzuki's Manesar factory, which killed one senior employee and injured close to 100 others, bodes ill for the future of not just Maruti but also the industrial hub of NCR. This is not the first time that Maruti is fighting trouble in Manesar. 1)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, was made chairman. Two, Maruti and the India market are also becoming increasingly important for Suzuki 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 has increased. Agreed, it has an Indian chairman but Bhargava is 78 years old. It does have many senior Indian executives who have been 'lifers' at Maruti. But insiders who will speak on the condition of anonymity 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 are very different. Some loss of connect with Indians is expected.

2)Leaner, Meaner Pressures The challenges of running manufacturing outfits have surged. 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 bring down costs and improve productivity. Most have contract labour to bring in flexibility and reduce costs. At Maruti's Manesar factory, 40% workers are on contract and their salary could 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 and more 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 Manesar plant, that churns out two top-selling models in the Maruti stable Swift and Dzire is at the heart of all the strife. 3)Young & Restless Workers In Haryana, young blue-collar workers have seen dramatic changes around them. Land prices have surged as Gurgaon has become a commercial hub. Overnight, people have become rich and their lives have transformed simply because they made a killing selling their land. Such changes have re-calibrated worker expectation who have seen their sleepy little hamlet transform 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 to achieve it. Poor wage hikes and raging inflation have queered the pitch further, resulting in an impatient, militant workforce, which believes in aggressive posturing. Sonu Gujjar, the leader of the labour unrest at Maruti plant last year, represents that generation. In his 20s, Gujjar organised a concall with analysts to put forth the workers' point of view and made headlines. 4)Return of the Red Flag

From its peak in the 1980s, trade unions have been on a decline in India. Trade union bodies across the board from Citu to AITUC have been seeing a steady decline over the years. It does not help that a large percentage of workers in Indian factories are foot-loose contract workers. Over 90% of the Indians are employed in the unorganised sector where the trade unions have been finding it difficult to make inroads. They have made many efforts to spread their network among white collar workers like BPO employees, but with little success. Expectedly, they are tapping into every possible opportunity they can get to grow their base. Their involvement in Maruti's labour unrest signals that. WORKERS VIEW POINT: The permanently temporary worker At the heart of this whole mess is India Inc.s love for contract labour. My research tells me that manufacturing cars is not a seasonal enterprise it happens round the year; nor is assembling a car in a factory incidental to the making of a car it is not like gardening or mopping the factory floor; nor is it something that can be done with a few dozen workers. According to the law of the land the Contract Labour (Regulation and Abolition) Act, 1970, and Contract Labour (Regulation and Abolition) Central Rules, 1971, it is illegal to employ contract labour where work is perennial and must go on from day to day, where the work is necessary for the work of the factory, and where the work is sufficient to employ considerable number of whole time workmen. It is the employers responsibility to follow the law, and the governments responsibility to ensure that it is not violated. Not even the MSIL management can deny that they have been using temporary workers for permanent, core, production work. And this is not something that happens in this one plant of Maruti Suzuki. In the entire NCR region in Manesar, Gurgaon, Faridabad, Ghaziabad, Noida where there are thousands of factories of all sizes that carry out manufacturing work round the year, the average percentage of permanent workers in the total workforce is 15%. About 85% of the workforce is made up of non-permanent labour. And nonpermanent labour includes contract workers, apprentices, trainees, etc. --- add all of them and the percentage of temporary workers becomes as high as 95% in many factories. And these workers

remain temporary for years and years. I guess you could say that corporate Indias favourite worker is the permanently temporary one. It wasnt always this bad. The percentage of contract labour as a proportion of the total workforce doing core manufacturing work has been steadily rising since 1991, the year liberalisation began, and today, the informalisation and fragmentation of what used to be formal or organised labour has reached absurd levels. What this means, in human terms, for the workers, is exploitation of a kind that is not much different from slave labour.

MY VIEWPOINT
I. These are nothing but attempts to utilise the Maruti incident to further increasing the attacks on the rights of the workers including their right to organise and collective bargaining, which cannot be condoned. What this campaign seeks to mask is the blatant flouting of labour laws by the employers, particularly by big multinational corporations like Maruti, Honda, Hyundai, Foxconn etc in various parts of the country. These multinational corporations refuse to abide by the laws of the land. Workers are denied their basic right to organise and collective bargaining. There are several instances where they have refused to even attend conciliation proceedings initiated by the labour department. Of course, intolerance to workers getting organised is not only confined to

the multinational corporations. There are many instances of Indian corporations like Reddy Labs, Regency Ceramics etc resorting to victimisation and large scale repression to prevent unionisation. II. Such open and widespread violation of labour laws with the connivance of the government machinery is resulting in simmering discontent and dissatisfaction among the workers in many industries. Today, employment of casual and contract workers, even for permanent and perennial jobs, has become a common practice. It is reported that in contract workers comprise more than 55% of the workers in the public sector. In many private sector industries their share is even more. In an Israeli company manufacturing off road tyres in Thirunelveli, all the workers were contract workers. Thus the work place in many factories presents the picture of two categories of workers doing the same job but in entirely different working conditions. While the permanent workers get better wages and benefits, the contract workers get meagre wages and no social security benefits. This fact and the growing discontent among the workers due to such inequalities and discrimination at work place is now being acknowledged by the senior officers in the labour ministry and even some employers organisations. III. But the government is more concerned about attracting investment and protecting the interests of the employers. The amendment of the Contract Labour Act on payment of equal wages and benefits to the contract workers as the permanent workers in the industry, which was agreed upon by the state governments and the trade unions in the Indian Labour conference is pending since the last more than two years. It is not likely to be placed in the Parliament even in the ensuing monsoon session. In the name of curtailing inspector raj employers are allowed self certification about implementation of labour laws IV. V. . There is a huge shortage of staff and of labour inspectors in the labour departments.. If the government is really concerned about preventing industrial unrest, it has to ensure that the labour laws are strictly implemented and those violating labour laws are punished. It has to ensure that the right to association and collective bargaining of the workers are honoured by the employers.

VI.

It is commendable that the workers' union in Maruti's Manesar plant not only included the demands of contract workers but also stood firm, despite the management's attempts to dissuade the union from taking up the demands of the contract workers and to create a division among the permanent and contract workers. After the violence, Maruti chairman RC Bhargava was compelled to say that the company would phase out contract workers and stop using contractors to employ casual labourers. He also said that the company would directly hire workers and give priority to contract workers for permanent jobs in the future.

It is heartening to note the determination of the workers to unite and continue their fight for their rights. On 25th July 10000 workers from around 30 plants including Hero MotorCorp, Honda Motorcycle, Suzuki Powertrain, Rico Auto, Omaxe Auto, MESL, Suzuki Motorcycles, Maruti Gurgaon, Mark Exhaust, Hi Flex, FCC Rico etc in the area gathered together to observe Mazdoor Ekta Divas and commemorate the struggle fo the Honda workers in 2005. VII. The Hooda administration has clamped section 144 to prevent the meeting; the mahapanchayat of vested interests threatened that they would stop the meeting using force if necessary. But the workers were undeterred. Addressing the gathering Satvir Singh, president of Haryana state committee of CITU demanded release of all the innocent workers, reopening of the plant and reinstatement of the workers at the earliest. The Trade Union Council of the unions from these plants has sent a memorandum to the Haryana chief minister demanding action against wrongful police detention, against the bouncers and company people involved, protection of innocent workers, raising of the minimum wages from Rs 4200 to Rs 15000, strict action against labour law violations, clearance of old cases pending with Honda and conversion of contract labour into permanent workers. VIII. Government should conclude the enquiries on the Maruti incident at the earliest in a free and fair manner and the guilty should be brought to justice and punished severely Absence of quick and severe action by government and police or any "delays in bringing the guilty to justice will only embolden the unruly elements and give them courage to resorting to violence in future also.

IX.

Government should ensure the safety of the employees working in industry by effectively enforcing law and order and by creating a peaceful work environment. Asking for strong action against the culprits, The central as well as state governments need to send this strong message to the entire industrial community workers, unions as well as to the managements."

X.

The recent developments in relation to labour behavior are creating an atmosphere which is not conducive for development of the industry.

Incidents like these are noticed globally by industry as well as investors, thereby vitiating the investment climate and damaging the overall image of the country as an investment destination, it added

It would be sad if the ghastly violence at Maruti Suzukis (MSIL) Manesar plant on July 18, 2012, in which a HR manager died, were to be understood simply as a murderous workers vs rational management kind of an incident. There is a history and a context to this violence, and how that is understood, and acknowledged, by India Inc. will indicate how serious we are about preventing such incidents in the future. The entire working class and democratic movement in the country must stand united in solidarity with the workers of Maruti Manesar.

REFERENCES:1. http://ganashakti.com/comments/comments-single-view/article/on-the-recent-violence-inthe-manesar-plant-of-maruti-suzuki.html 2. http://articles.economictimes.indiatimes.com/2012-07-22/news/32777541_1_marutisuzuki-s-manesar-maruti-s-manesar-shinzo-nakanishi 3. http://www.thehindu.com/news/states/other-states/article3665746.ece 4. http://smartinvestor.business-standard.com/market/Features-127347-FeaturesdetSIAM_demands_quick_inquiry_into_Marutis_Manesar_violence.htm