ANALYZING THE ORGANIZATION: Maruti Suzuki India Limited

THE CASE

A subsidiary of Suzuki- a Japanese automobile and motorbike manufacturer, Maruti Suzuki

India Limited is an Indian automobile manufacturer. It is the most well-known and well-
recognised automobile manufacturer in India. This Indian automobile company is popularly
known as Maruti, which used to be called Maruti Udyog Limited at the time of its inception.
Maruti Udyog Limited was founded by the Government of India in 1981, only to merge with
the Japanese automobile company Suzuki in October 1982. The first manufacturing factory
of Maruti was established in Gurgaon, Haryana, in the same year. Mr. R.C. Bhargava is the
chairman of the company and Mr. Kenichi Ayukawa is the CEO and Managing Director.

About Maruti Suzuki Pvt Ltd.

Maruti Suzuki India Limited (Formally known as Maruti Udyog Ltd) was established in
1981, February 24th. It was organized as a legal corporation beneath the provision of the
Indian Companies ACT, 1956 to converge the rising demand of personal transportation by
the lack of an efficient public transport system. It is the largest car manufacturing company in
India accruing over 50% domestic car market. Suzuki Motor Corporation is the largest
manufacture of mini passenger vehicles in Japan. According to Automotive Intelligence,
Suzuki is eleventh largest vehicle manufacturing company in the world and fourth in Japan in
terms of worldwide sales. The company offered different range of cars from passenger cars to
sports cars. From 1982, Maruti Udyog was a subsidiary of Suzuki Motor Corporation of
Japan. They licensed and joint venture agreement had been made between two companies on
October, 2 1982.

Maruti was also involved in various businesses like manufacturing, sales and purchasing of
motor vehicles and parts of automobiles. Other activities of Maruti were facilitation of pre-
owned car sales, fleet management and car financing. They have seven subsidiary companies
in India are Insurance Business Agency Ltd, Maruti Insurance Distribution Services Ltd,
Maruti Insurance agency Solution Ltd, Maruti Insurance Agency Network Ltd, Maruti
Insurance Agency services Ltd, Maruti Insurance Agency Logistics Ltd. all these were
affianced with promotion and selling motor insurance policies to motorcycle owners and the
seventh one True Value Solution Ltd were in business of sales of certified pre-owned
motorcycles under the brand ‘Maruti True Value’. They have four manufacturing units in
different areas in Haryana state.

The first commercial car from the joint venture company was launched in 1983 called Maruti
800 which was very popular. In 1984 they launched Maruti Omni which fits one full size
family. In 1985 they introduced Maruti Suzuki Gypsy. In 1997 company exposed to foreign
market and imported 500 cars to Hungary. In 1990 they launched three box cars with 1000cc
engine; this was the major transformation in the company. In 1992 Suzuki Motor Corporation
increased its share value to 50% in Maruti. Later year they launched with Maruti Zen and in
1994 they introduced Maruti Esteem into the market.

Maruti has inaugurated its second plant in 1995. In 1997, Maruti started Maruti Service
Master as model workshop to take care of its sales in India. In 2002, Suzuki Motor
Corporation increased the share in Maruti to 54.2%. By 2002 they established 10 finance
companies in which 8 of them were finance companies and two were joint ventures. They
started a new business strategy for its purchase, sales and trade of old cards is Maruti True
Value. With the first worlds strategic model with the help of Suzuki Motor Corporation they
launched ‘the SWIFT’ in 2005.

Maruti started working on new car plant and the diesel engine facility at Manesar plant,
Haryana in 2006-07. They opened a new institute of Driving Training and Research (IDTR)
in 2006 is a mutual project with Delhi Government for better Research in the field of
automobile. They introduced diesel cars like Swift and SX4 luxury sedam in 2007. Maruti
launched Multi Utility Vehicle (MUV) called Grand Vitara stylish, muscular and 5 setter car
in 2007. Formerly they changed their name from Maturi Udyog Ltd to Maruti Suzuki India
Ltd in 2007. After this they made an joint venture agreement with Magneti Marelli
Powertrain SpA, both turned into Magneti Marelli Powertrain India Pvt Ltd and they were
manufacturing Electric Control Units for cars. They also went into other joint venture
agreement with Futaba Industrial Co Ltd and formed FMI Automotive Compoments Ltd for
manufacturing Exhaust System Components. In 2008-09, they introduced a new A2 segment
car, A-star in India and in Europe as new alto. They also raised their production capacity to
1million cars. In 2008, they launched a dual fuel called Maruti 800 Duo which runs on
Liquefied petroleum gas (LPG) as well as petrol.

Report submitted by commission of government in 1982 discloses among the major goals
with maruti is to modernization of the Indian automobile industry, Fuel efficient vehicles
production, to manufacture huge number of vehicles, gain from foreign technology, and the
production of ‘people’s car’ was suitable for Indian people and the climatic conditions which
creates possibility of earning foreign exchange by exporting Maruti products and improving
employment by starting new industries in the market. By improving the research in the
market is determined by manufacturing of better cars would be in demand in Indian market.
The main aim of the Maruti Suzuki production is to take help from Japanese company in its
working model, working culture and in Indian industry they mainly focus on hierarchical
discrimination, inadequate labor, low labor involved, and labor conflict and low recognition
with the company.

Maruti Suzuki has created history in automobile industry through going keen on production
record in 13 months. It is top number of car manufacturer in Asia, outside Japan and Korea
having manufactured about 5 million vehicles by may 2005. It also should a remark as most
booming automobile company as joint venture and they keep on making profits since
inception till 2000-01. Maturi also produced in service profits on an income of Rs 92.5 billion
high reduction on new products that have launched resulted in a book loss.

Maruti’s profit increase to 98% rise in its economic second quarter net profits and they are
planning to invest $32.3 million. It is going to improve the Gurgaon factory to northern state
of Haryana increasing the facilities to improve 79,000 cars in year. They are trying to
modernize its factory to produce cars faster. As the quarterly profit is benefited there is a
huge demand from local market as well as international market.

Maruti Suzuki models on road

 Maruti Suzuki Omni

 Maruti Suzuki Alto
 Maruti Suzuki Gypsy
 Maruti Suzuki Wagon- R
 Maruti Suzuki Vitara
 Maruti Suzuki Swift
 Maruti Suzuki Swift Dzire
 Maruti Suzuki Ciaz
 Maruti Suzuki Stingray
 Maruti Suzuki Ertiga
 Maruti Suzuki Eeco
 Maruti Suzuki Ritz
 Maruti Suzuki Balleno

Maruti Suzuki shareholders and its activities:

Maruti Suzuki India Ltd is one of the Indian leaders in automotive construction. Net sales
break down by activity as follows:
- sale of vehicles (86.9%): personal, commercial and multi-segment vehicles especially
commercialized under the brands Maruti 800, Ritz, A star, Swift, DZire, SX4 and Grand
Vitara. In 2018/19, the group sold 1,862,449 units including 1,753,700 in India;
- production and sale of diesel engines, components and spare parts (9.6%);
- other (3.5%).
At the end of March 2019, Maruti Suzuki India had 2 production plants in India.
India accounts for 93.3% of net sales.

The list of managers is as follows:

The shareolder pattern is as follows:
Japanese Management strategies:

Initially, it maintained the image of being a model employer paying high wages integrating
employees into the production process (Sen, 2010). Respect of law, ethics and human beings
was the integral part of its policy. It practised the policy of teamwork and recognition and
believed that each employee’s growth runs parallel to the company’s growth. It was
concerned with the discipline of individuals and of organization. Its focus was on increasing
the productivity of labour and capital and priority was to improve quality and reduce cost. It
was customer orientated company (Nair & Rao ,1990). All these things were to realize the
goals. Are goals concerned with bottom line only? Can bottom line be achieved if even a
single section of the team is disgruntled?

History of Strikes:

Maruti faced management-worker issues several times which significantly impacted its
production and stifled its financial growth. Before coming to the recent Maruti Manesar
July,2012 violence, it will not be out of place to mention a few serious disturbances at Maruti
organisation.

Strike 2000-01 September –January: In September 2000 the MUEU started a relay hunger
strike. The workers stopped wearing uniforms and there were a few gheraos. It started with a
daily tool-down strike for two hours. The demand was a negotiated settlement on various
issues. The management responded with the demand for a good conduct .The union
compared the labour productivity in 1992 with that in 2000. In 1992 ,4000 workers were
producing 100,000 cars and in 2000, 4400 workers were producing over 400,000 cars.
According to the Centre for Workers' Management analysis within 5 years Maruti's shop
floor productivity and labour productivity had improved by 40% and 25% respectively, and
production by 50% But employment had increased 11% and wages had nearly doubled
(Venkata Ratnam 2006). In October, the employees of MSIL, boycotted work, reducing daily
output by 86 per cent as the company forbade entry to workers who protested the company's
demand for an undertaking of good conduct. Ultimately it ended in a 26- day strike. (Das
2011). If wages nearly doubled, were the workers wrong in going for agitation or was this
interpretation game of words? After a struggle of four months, the strike was called off in
January 2001.

Impact: production was badly hampered. With making just 200 cars ,against the normal
production level of 1,500 cars a day, with thin staff for many days it registered a net loss of
just Rs 269 crore in 2000- 01 on a total revenue turnover of Rs 9219.6 crore (Sen ,2010)

Action: In September 2001, the company took action and announced a VRS package, which
was opposed by the union. The general secretary of the union was sacked in October 2001.

After the action the company started recuperating. In 2001-02 the company’s net profit was
Rs 55 crore on a total turnover of Rs 9295.3 crore. Regarding 2000-2001 worker’s strike, Mr
Khattar said, “The workers had taken to agitation in 2001 for pay perks and working
conditions. (The same issues were part of 2012 grievances. ) If we were to give in to
agitators, we would not have been what we are today. Salaries would have shot up, too many
manpower and less of efficiencies, cost of production would have escalated, and our
competitiveness would have been wiped out. (economictimes.indiatimes.com). " Isn’t it a
lesson for the management even today.?

New Strategies

In the wake of its diminishing profits and loss of market share, Maruti initiated strategic
responses to face competition in the Indian market. Maruti launched new car models.
Focused on cost reduction and increasing operating efficiency. For this it focused on
maximum possible indigenization for all the models. This helped save foreign currency and

also stabilize prices that fluctuate with exchange rates. The number of contract workers was
increased. This helped reduce cost and increase productivity.The company improved
customer services and efficiency and was known for customer care. Thus, with the program
of organizational redesign, rationalization of cost and enhanced productivity, Maruti bounced
back to competition with 50.8% market share and 40% rise in profit for the FY2002-2003

2012 Manesar Violence

Background

At the beginning of 2010, recovering from the slowdown Maruti experienced a good raise in
booking it was not prepared for the sudden jump in bookings. The situation worsened
because the company had not invested much in manufacturing capacity during the slowdown.
‘The longer wait period for Maruti's models meant rivals started cannibalising market share.
To handle the situation the company introduced several strategies. One strategy was to
increase the number of contract workers to reduce the cost and improve the production. At
the workplace, the relentless drive to cut costs increasingly saw the replacement of permanent
workers by non-permanent workers through measures like voluntary retirement schemes as
well.

Economic Disparity: On the other hand a temporary worker carries home average salary of
about 7,000 a month. In Maruti’s Manesar factory more than two-third of the workers were
temporary ones who could not tolerate the fact that while both of them did almost the same
work their salaries were much lower than those of permanent workers. “The ideal use of
temporary or contract workers is to manage spikes in demand, but manufacturing companies
in India use them for an entirely different reason”, said former labour secretary Chaturvedi
.He continued, “Companies hire contract workers for exploitation rather than bringing any
flexibility to their production just because they come cheap,” he said. “By not giving them
social security and proper working conditions, how do you expect them to be loyal to you
(livemint.com ).”They are also not eligible for various benefits given to permanent workers.
“Owing to the disparity in the pay structure and socio-economic status, there is a discontent
among the contractual workforce that may eventually culminate in a labour crisis,”said,
XLRI’s Sarkar (livemint.com) .Thus, there was a strong sense of being exploited, among
contract workers .Besides, it was also brought into light that contract workers, though not part
of the union, had strong connections with the permanent workers.

Working Conditions - Although the company is economically strong yet the working
conditions at the shop floor where the main work is done were pathetic. Even the basic
facilities like washrooms, water coolers etc. were not properly provided to the workers.
According to available information they did not get sufficient time even to answer nature's
calls. The total tea break time used to be 7.5 minutes and lunch break was scheduled for 30
minutes and he was told that he needs to train and discipline his body, in order to work in a
'modern factory'.

Inside the organisation there are workers like Munna and Radhey, perspiring and trying to
manage their lunch time. They have to do several basic and essential things: go to washroom,
have lunch ,breathe fresh air, get a bit of relaxation and of course have some discussion with
their colleagues : ‘Do these white collar officers suffer from the same dilemma?’,asks Munna
and Radhey replies, ‘ Our dilemma is about basic needs while their dilemma is about luxury.
There concerns are: More production, more profit, resulting promotion, bonus and salary hike
in proportion to growth.’ He continues, ‘They are human beings: have needs and feeling.
Perhaps we are not.’ ‘Yes, that is why, we get impolite and apathetic treatment at their hands
and are deprived of basic needs and concern at the work place.’,says Sonu while joining
them. Thus, the workers, if ever they could manage time during lunch time, had discussions
and informal talks amongst themselves, or discussed the issues after the duty hours. They
shared views regarding their requirements, basic needs, problems ,hygiene conditions and of
course their ambitions. They realised that their issues in one way or the other were generally
common ones. This brought them together and raised their aspirations and grievances. They
discovered the common points among them were some kind of distrust, dissatisfaction and
depression; while according to other section ,it was over ambition. On the other hand the
managers and the supervisors who have to meet the targets are concerned only about
production and profit. The worker has no role in planning and feels that decisions are thrust
upon him.
After the incident

The company began to buckle under the fresh assault. The Manesar plant was locked out for
almost a month. Maruti's share of the passenger vehicles market plunged to nearly 38 per
cent, a far cry from the vertigo-inducing 55.5 per cent in the year 2000. Net profit after tax
fell 5.4 per cent in the July-September quarter of 2012.

Competition began to snap at Maruti's heels. Hyundai had always been a formidable
challenger, albeit always a distant second. Toyota gained ground with its Etios and Liva, both
of which mostly sold diesel variants. In the ensuing months, things got worse as Honda
launched the Amaze, a small diesel-powered sedan striking at Maruti's core of DZire.
Renault-Nissan was getting ready to storm Maruti's bastion of small cars (A segment) with its
Datsun brand.

The opposite has happened. Maruti's sales have grown 1.3 per cent during April-November,
while the market has shrunk 5.6 per cent. In December, car sales fell 4.52 per cent, but
Maruti's rose 5.5 per cent, giving it a market share of 41.3 per cent for the nine months of this
financial year. Osamu Suzuki, patriarch Chairman of Japan's Suzuki Motor Co, which holds
56.2 per cent equity in Maruti, has told his managers in India to keep it above 40. All the
financial indicators are going up.

The company has pulled off a coup by doing away with contract workers, who were seen to
be at the root of the unrest at Maruti and several other manufacturing companies. It has
moved to a system of hiring workers who would be laid off if the demand went down and the
company had to reduce production.

There is a modern research and development facility being set up in Rohtak in Haryana,
which will design, develop and test new vehicles for India and some overseas markets.
Spread over 700 acres, it will be bigger than the Manesar factory (600 acres) and more than
twice the Gurgaon factory (300 acres). The capital expenditure earmarked for it is Rs 1,500
crore over two years.

The Gurgaon factory has been free of labour trouble for nearly 14 years. However, Manesar
has been a different story; it was even a different company: Suzuki Powertrain India, which
was merged with Maruti in 2012/13. It also had its own system of recruitment, conducted
through two external agencies.

The workers stayed in small, rented accommodation, often four to a room, and had nothing to
do after work. Manesar also had a high percentage of workers provided by contractors, over
50 per cent as per some estimates. The workforce there was new to the company, its age
profile young. In consonance with the ambition of their generation, they were restless.

That was in contrast to Gurgaon, where many of the workers have been working for 20 years
or more and take pride in their uniform, which gives them a high status in their villages. The
large number of seasoned workers in Gurgaon kept the ambition of the young in check.
"Your time will come," they told their juniors.

Manesar did not have such a calming influence of seniors.

It does now, to an extent. About 150 senior workers from Gurgaon, who lived near the
Manesar factory, have been transferred there. Still, the average age of Manesar's 4,800
workers is 29; for Gurgaon's 7,200 it is 35.

There is a lot more happening. "We have done away with the recruitment companies and the
contractor. We have gone back to the system we had in Gurgaon. We do a complete
background check - we look at where the candidate comes from, how is his family.
Candidates are first taken as apprentices and watched for a whole year. The apprentice then
takes an examination and is selected as trainee for two years. The most important thing is the
attitude," says Chairman Bhargava.
A portion of the recruitment is being done under a new system. If there is a fall in demand,
some of them will be retrenched. The person who joined last will be the first to go. If the
demand picks up, the guy laid off last will be the first to come back. All regular workers'
vacancies will be filled from this cadre, unless somebody turns out to be a bad apple.

Eventually, the new system will account for about 30 per cent of the total workforce, which is
also the percentage of demand swing that occurs every once in a while. In the first decade and
a half of its existence, Maruti had facilitated housing for its workers in the nearby villages of
Chakrapur and Bhondsi. Over 2,000 houses, all owned by workers, were constructed. The
company now wants to revive the system.

DISTRIBUTION STRATEGY OF MARUTI SUZUKI INDIA LIMITED

Distribution is an important marketing mix. In earlier days the consumers used to book for a
car and wait for more than a year to actually buy it. Also the concept of Show rooms was
non-existent. Even worse thing was the state of the after sales service. With an objective to
change this scenario & to offer better service to customers, Maruti took initiative. To gain
competitive advantage, Maruti Suzuki developed a unique distribution network. Presently the
company has a sales network of 802 centres in 555 towns and cities, and provides service
support to customers at 2740 workshops in over 1335 towns and cities. The basic objective
behind establishing the vast distribution network was to reach the customers even in remote
areas and deliver the products of the company. The company has formed the Dealer
territories and the concept of competition amongst these dealers has been brought about.
Periodically corporate image campaigns in all dealership are carried out. In 2003, to increase
the competition the company implemented a strategy for its dealers to increase their
profitability levels. Special awards were sometimes given by company for sales of special
categories. Maruti Suzuki had given an opportunity to dealers to make more profits from
various avenues like used car finance and insurance services. In 2001, Maruti started an
initiative known as ‗Non Stop Maruti Express Highway‘. As a part of this initiative Maruti
developed 255 customer service outlets along with 21 highway routes by 2001-02. Also with
an intention to provide fast service in less time Maruti had offered Express Service Facility.
In the year 2008, Maruti had near about 2,500 rural dealer sales executives, among the total
15,000 dealer sales executives.

Changes in Government Policies Until the early 1990s, the automotive sector in India was
highly protected. This was in the form of steep import tariffs and measures that restricted the
participation of foreign companies. Hindustan Motors (HM) and Premier Automobile (PAL)
that were set up in 1940's dominated the vehicle market and industry. In the 1950s, the arrival
of Tata Motors, Bajaj Auto, and Mahindra & Mahindra led to steadily increasing vehicle
production in India, while the 1960s witnessed the establishment of the two- and three-
wheeler industry in India. However, the automotive industry witnessed tremendous growth
after the entry of Maruti Udyog in the 1980s. In 1983, the government permitted Suzuki - for
some time, the only FDI player - to enter the market in a joint venture with Maruti - a state
operated enterprise at the time. Ten years later, as part of a broader move to liberalize its
economy, India de-licensed passenger car manufacturing and opened it up further to foreign
participation. That brought a wave of FDI to India's vehicle industry. Import barriers have
been progressively relaxed. Today, almost all of the major global players are present in India.
The policy framework surrounding the Indian automotive industry has evolved from a
heavily regulated one until the 1970s, to a partially liberalized one in the 1980s, and to a
liberalized one from 1991 onwards. This strongly indicates that the government policies have
played a clear role in the growth of India’s automotive industry. Hence, to obtain an insight
into the role of government in industry development in general and that of the Indian
government in the development of India’s automotive industry (including auto components)
in particular is necessary. In line with the overall purpose, we will identify and understand the
government policies those have influenced the development of Indian automotive industry.
Some important policy decisions in the liberalization phase (1991 onwards) and their
influence on the development of India’s automotive industry are as follows:

 In 1991-93, de-licensing of all automotive segments led to higher industry growth. India
has been moving up in its world ranking for production of commercial vehicles and cars.
Production of vehicles in India crossed the 10 million mark in 2006. The New Industrial
Policy of 1991 abolished the licensing requirement for commercial vehicles, public transport
vehicles, automotive two wheelers, three wheelers and automotive components and
ancillaries. However, passenger car was de-licensed in 1993. Now, no license is required for
setting up of any unit for manufacture of Automobiles except in some special cases.

 In 1997, automatic approval for FDI up to 51% equity led to increased competition and
rising industry standards. 17 new ventures involving foreign players had come up after 1993.

 In 2002, automatic approval for FDI up to 100% equity stimulated the demand and
increased internationalization. 100 per cent Foreign Direct Investment (FDI) is permissible
under automatic route in automotive sector including passenger car segment. FDI in Indian
automotive sector grew at a CAGR of 77% over the period 2004-05 to 2007-08.

 In 2002, higher incentives and push for local R&D increased spending on R&D. The import
of technology or technological up gradation on the royalty payment of 5 per cent without any
duration limit and lump sum payment of US $ 2 million was also allowed under automatics
route. This liberalization has helped this sector to restructure itself, absorb newer
technologies, and keep pace with the global developments realizing its full potential. Local
R&D centers were announced by Maruti Suzuki and Hyundai.

 Since July 2004, 150% deduction of R&D expenses from taxable income has been allowed.
This scheme is valid till March 2012.

 In 2006, the government reduced excise duty on compact cars from 24% to 16%, giving a
clear signal that it wants to encourage investment in this segment and develop India into a
global manufacturing hub for small cars. This move by the government presented both
challenges and opportunities for Maruti.

CONCLUSION

Automobile market today is very dynamic & competitive with a range of players and
products. There are many reasons for the impressive growth of the Indian passenger car
Industry. Some of these are easy availability of vehicle finance, attractive rate of interest and
convenient installments. In today‘s cutthroat competition it is very difficult to survive. Stiff
competition has forced manufacturers to be innovative and responsive to customer demands
and needs. Maruti Suzuki India Limited is a leading company in Indian Automobile sector
which occupies prominent place due to its innovative strategic marketing, promotional, Brand
positioning, advertising strategies. In today‘s scenario the success of company lies in
structuring and restructuring the marketing strategies and continuous innovation of product
and services.

REFERENCES

[1] Bhargava R.C, ―Assembling a Dream‖, The Maruti Story, Collins Business
(HarperCollins Publishers), 13, 2010.

[2] CMIE, Prowess database (Fig 1.1, 1.2), Prowess.cmie.com

[3] Dr.Garg R.K & Jain Sumit, Business Competitiveness: Strategies for Automobile
Industry, Global Competition & Competitiveness of Indian Corporate, Kozhikode, Kerala,
India, 2009, retrived from dspace.iimk.ac.in

[4] Dr.Lokhande M.A & Rana V.S, ―Scenario of Indian Automobile Industry‖, Vision
Research, volume-I, Issue1, P.no 80, July 2011.

[5] Maruti Suzuki India Ltd, Annual Report 09-10, retrieved from www.marutisuzuki.com.

[6] Nayyar Anita, ―Brands need to build sustainable power‖, Nov 2010, Indiatelevision.com
team (article)
Analysis:
In the Manesar violence, it was evident from the beginning that the core reason
for labour unrest at Maruti is the difference in pay, allowances and assets among the
workers. On the one hand, a permanent worker draws over three times the salary of a
contract worker and also enjoys several facilities like medical, insurance and retirement
benefits. On the other hand, the future of a contract worker always hangs in balance
because of the impending day on which he will be confirmed as a permanent employee
or thrown out of work for whatever reason.

A local Haryanvi Manesar worker now is a wary, caste sensitive, politically

aware, physically fit, communally active person who is unhappy because of the waning
dominance of local people in the area. To put it plainly, the local populace, especially the
working class is not new to violence and disturbance. There is also an element of trust
deficit among both the contracted and regular workers towards the senior HR executives.
Most of what they are privy to may be hearsay but the damage done by rumour mongering
and vested interests taking advantage of the unstable situation is already known. Across
India, political parties always vie to gain control of local labour unions and Maruti is no
exception. Due to the importance given by the NCR Delhi government, Maruti Suzuki till
date has enjoyed the benevolent gestures of the Central Govt in successfully
preventing local politicians from disturbing peace at Maruti Udyog, Manesar. However,
when there is sympathy in the environment towards those who are unhappy for whatever
reason, a little spark is enough to trigger a major uprising.

Specifically in this case study we have seen how Maruti has come a long way for
the last thirty years and most of their business practices in all their locations have been
exemplary and lasting. Presently having 44% of car market share in India and nearly the
same percentage in the export of cars, every problem faced in the three decades by the
company seems to be a blip in its long time existence. There were times when experts
commented that the dominance of Maruti Suzuki in car market is over etc but the company
every time takes a new rabbit out of the bag to surprise and dominate again in a short time.
Major competitors to Maruti Udyog have been Hyundai with its Santro, Tata with its
Indica share the second and third positions respectively. All others put together still form a
small percentage of the market share.

From the business perspective, the management as well as the labour force have the
assurance and confidence that Maruti Udyog as an employer is a safe bet and has a long
future.

Difference in Indian Work Culture and Japanese Work Culture

Japanese work environment is based on a “simultaneous recruiting of new

graduates” (Shinsotsu-Ikkatsu-Saiy) and “lifetime-employment” (Syushin-Koy) model used
by large companies as well as a reputation of long work-hours and strong devotion to
one’s company. This environment is said to reflect economic conditions beginning in
the 1920s, when major corporations competing in the international marketplace began to
accrue the same prestige that had traditionally been ascribed to the daimyo-retainer
relationship of feudal Japan or government service in the Meiji Restoration. At the very
top, the most prestigious companies would recruit and retain the best workers by
offering better benefits and truly lifetime job security. By the 1960s, employment at a
large prestigious company had become the goal of children of the new middle class, the
pursuit of which required mobilization of family resources and great individual perseverance
in order to achieve success in the fiercely competitive education system.

In the Indian context, there is a simmering discontent among the senior executives at
Maruti Udyog that the decision making portfolios have been gradually been taken over by the
native Japanese executives once Suzuki gained majority stake in the last fifteen years. The
initial tussle between the Indian Government and Suzuki before 1997 was about the senior
most positions and now with absolute power to hire and fire, the second rung of senior
decision makers have been gradually changed with a bias towards Japanese executives. It
is a known tactic in the corporate corridors to apparently retain the job titles and offices
undisturbed but remove the responsibilities one by one and vest it with another position.
This has been done both overtly and covertly over the last twelve years. Several senior
executives have bid farewell to Maruti Udyog due to this reason.

As to the Manesar workers adjusting to the Japanese work culture, there is

absolutely no issue in this regard and the workers are proud to be part of the culture. They
have embraced the new found methods of working hard, gaining respect on the work floor
and enjoying the fruits of their labour with the praise by the media received year on year
about the market share, product quality and the value given to after sales service. In fact it
has greatly influenced their life style at home and the quality of product and the awards won
by the company in India are evidence to the fact that the average Maruti Udyog worker’s
sense of belongingness to his employer is unquestionable.

Analysing the Possible Causes of the 2012 Labour Unrest at Maruti Udyog Manesar Plant

Several factors have come into play in this labour unrest. Listing few of them
based on the facts mentioned above gives a clear perspective .

1. Wage disparities between the regular and contracted workers. Uncertainty in the minds
of the contracted workers regarding their future as employees of Maruti Suzuki.

2. Lack of trust between the HR staff and the workers. The workers perception of HR
executives is a major cause for concern, They take it for granted that the HR executives are
there to make sure that the demands of workers whatever it is not met at the end. That is,
they picture a HR executive being an agent of the management and not as a well wisher
of the employees in general. This clearly points to a long term discontent which has
surfaced now in the most violent way.

3. Lack of connectivity and active communication between the management and workers.
As explained above, the Japanese industrial culture does not have any alternative in the
lines of what took place at Manesar. The management was clue less about the extent to
which a section of workers were enraged. That means, there was no inkling of such a
degree of discontent with the management.

4. Lack of intelligence and information. Though the management was aware of those ring
leaders and instigators, it did not have any concrete and actionable information about the
intentions of the striking workers to kill and burn. It is evident that the action of breaking an
executives limbs and leaving him to burn to death was a murder and it certainly was not an
accident. Normally, such crimes are planned and within the group of several workers with
criminal intentions, such plans are discussed. The management did not have any
mechanism to collect informal information through its network of informants.

5. Possible collusion of local police, retrenched workers and politicians. The

management did express their suspicions regarding the nature activities involving local
politicians and police but it was without any substantiation. Hence, the doubts were laid to
rest. However, it is not ruled out that local politicians and retrenched workers who lost their
Maruti job in the last few years colluded with the local police to create a charged atmosphere.

6. Workers, both permanent and contracted feel that they are not being given their due
share of the huge profits Maruti Udyog is making with the highest market share in the car
industry. Though the automobile industry in India is said to be in a temporary
recession, the car industry is seeing an unprecedented growth in the last few years and for
over 28 years, Maruti has been the market leader. The profits and balance sheets are in
public domain. An educated and aware worker is also aware that his salary and
allowances have not risen in proportion to the rise in profits of the company. They have
been expressing this feeling for several years and there have been salary rises but never in
the kind of scale and proportion which the workers were demanding. On the day of starting
the strike, average Maruti Udyog, Manesar worker was still one of the best paid automotive
factory worker in India, but not paid in proportion to what the management was earning
through them.

Implications of the 2012 Labour Unrest at Maruti Udyog, Manesar

The obvious implications of this unrest are enormous. Not only did this unrest open
a new grim chapter in the history of industrial relations in India but it also gave the
indications as to what prospective entrants from among the MNCs will do in this scene.
Foreign Direct Investment in India have come mainly in the area of IT, Telecom, ITES,
Services and Automobile sectors. The long time players among the MNCs will change their
strategy due to these incidents occurring at the home of Indian Government. Few of the
implications of this labour unrest are as under:-

1. Investors in labour intensive sectors will demand a protective and clear policy environ
ment from the Indian Government before entering into India.

2. Given the state of Indian labour laws which are highly biased towards the workers,
there will be pressure on the Government to modify and tweak the laws in accordance
with the need of these times. Labour unions in the manufacturing sector have always
been politically oriented and wherever the political orientation is absent, the political
leaders and parties fight with each other to gain dominance or create a strong hold. Since it
is not against the law for workers to affiliate themselves to political parties, creation of
multiple unions, resulting clashes and internecine rivalry become the norm.
3. There is no place for physical violence and criminal act anywhere in running an industry.
Assurance of exemplary punishments will be sought by the management for the workers
caught in the act. In effect this will increase the distance between the management and the
labour unions even further.

4. State Governments have played a major role in creating a conducive environment in

the states of Gujarat, Tamil Nadu, Karnataka, Maharashtra, Andhra Pradesh, Rajasthan
and Goa in addition to several union territories. There will be a move to shift bases or start
new ventures in those states where there is no history of labour unrest in the past. Already,
mutual interest has been expressed by Maruti management and the Gujarat Government
in this direction.

It is a major lesson for HR executives in general and the benefits will go a long way in
investigating the role of each worker or person involved in these incidents. This murder not
being the first one in the last 2-3 years, there is an urgent need to introspect and bring about a
change in the theory oriented study which the HR executives are prone to follow. It
is a known fact that in this electronic era of mobiles, computers and internet, the
easiest path for an executive irrespective of his domain, is to remain aloof from the smelly,
sweaty and rough shop floor level environment.

This kind of shell always results in that shell being broken violently by the frustrated
workers. In the Armed Forces, officers always remain close to their subordinates under
command by being with them all the time during training, operations and during
professional, personal difficulties. That is the very reason why the soldiers are always
ready to lay down their life at the word of their superior. Workers no longer consider their
superiors as role models in the manufacturing sector, the relationship remains one of
profession oriented which crumbles at the first spark of mistrust. The bonhomie,
friendship etc end at the gate of the factory and the entire role playing begins inside the
factory gates next morning. Among the executives and workers, the ‘us and them’
attitude starts from the beginning of their service. The contempt grows and at a crucial
moment explodes shattering the entire set up.

5. Salaries being more than twice in the IT/ITES sector among the executives for the
same level of qualifications and service, manufacturing sector suffers from non
involvement of the executives in the leadership role. There is already an aversion among
the engineering graduates to avoid joining manufacturing sector and this incident has
contributed immensely for this feeling. No executive wants to get into the rut of industrial
disputes, labour unions, dispute resolution, pay roll arbitration and all such activities
normally related to manufacturing sector. Even in future, the exodus of the engineering
graduates towards ‘clean’ sectors like IT/ITES, Telecom etc will continue.

Conclusion

The entire episode presents a strong case for HR executives to increase their
involvement at the floor level with the workers in addition pursuing their professional
education and career development. As part of the initial training for the junior manager
while joining service, it is important to make it a part of study the nature of an average
worker, their social structure, the previous history of union activities, the study of
resolutions and decisions taken and the comparison of the facilities given to the worker
vis a vis the workers of the competitors.

The present peace at Maruti Udyog, Manesar is a brokered peace between the
Haryana Govt and the Maruti management. This certainly is not going to be a permanent
solution. As mentioned earlier, an average Haryanvi worker is a hard fighter and it is
pointless for the management to encourage, develop and nurture an anti labour stance among
their executives. Communication of intention at all levels plays an important role in
reducing trust deficit. Rather than the unions coming to know about their company’s
expansion plans through rumours, news paper or the Television, it is in the interest of
the company that the management takes the union into confidence about their establishing
new facilities in Gujarat or elsewhere. This will go a long way in building confidence
among the workers about the honesty and forthrightness of the management.

With increasing raw material prices, and increasing competition and increasing
environmental concerns, the road is not smooth for Maruti. Already foreign players are
entering the market with their environmental practices which more often than not, surpasses
what are prevalent in India, placing them in a much more advantageous position in terms of
operating cost reductions and reputation in front of public. Technological advancement of
foreign players also places them in a favorable position in meeting the strict emission
standards set by the government. But there is a growing market for environmental friendly
Hybrid electric vehicles which have an alternate fuel arrangement along with the traditional
one, saving a lot on emissions and increasing fuel efficiency. It also places lesser burden on
the petroleum based natural resources. Another opportunity is to bring in the state of art
technologies followed by foreign players, thus saving a lot on the long run.

References

The Hindu- Survey of Indian Industry 2011 edition.

Annual report of Maruti Udyog Limited- Jun 2012 for FY 2011-12.

Economic Times, 20 Jul 2012, " Stand off at Manesar plant may hit investment" by
Pankaj Doval.

Economic Times, 22 Jul 2012, " Four Reasons behind MUL- Manesar Problems" by Malini
Goyal.

Economic Times, 29 Aug 2012, " Maruti Suzuki share holders chide management of poor
handling of labour unrest" by Chanchal Pal Chauhan.

The Hindu, 21 Jul 2012, " Violence at Maruti symptomatic of simmering worker discontent"
by Aman Sethi.

The Wall Street Journal, 01 Sep 2012, " Maruti Suzuki sales hit by labour unrest, others gain"
by Anirban Chaudury.

The Hindu Business LIne, 07 Nov 2012, " Maruti Suzuki Continues to Walk the labour
tight rope" by Roudra Bhattacharya.

Business Standard, 15 Sep 2011, "