Case Study: Labour Unrest at Manesar Plant of Maruti Suzuki in 2012

Maruti Udyog Limited Brief Histor

A Brief History of Industrial Relations at Maruti Udyog Limited Founded in 1983, Maruti
Udyog Limited had few problems in its labour relationships. The locally hired workforce
accepted the Japanese work culture and the modern manufacturing processes. In 1997, with
the changed ownership, Maruti came under government control. From there on, the conflicts
between the United Front Government and Suzuki started. Labour problems started under the
management of the Indian government. In 2000, a major IR issue began and employees of
Maruti Udyog went on an indefinite strike, demanding major revisions of their wages,
incentives and pensions. Employees resorted to ‘slowdown’ in Oct 2000, to force a revision
to their pay and perks. After the elections were held and a new central government led by the
NDA alliance took command, pursuant to the disinvestments policy, the new administration
proposed to sell part of its stake in Maruti Suzuki in a public offering through a red herring
perspective.
The workers opposed this public offer plan on the grounds that the company will lose a
major business advantage of being subsidised by the Government and that the workers are
better protected under the Govt control.. The cold war between the union and the
management continued through 2001. The management did not pay heed to the union
demands because of increased competition in the automotive sector and lower profit margins.
The central government prevailed and privatized Maruti Udyog in 2003. Suzuki of Japan
became the majority owner of Maruti Udyog Limited with 51% share with the public holding
12.5%. In late 2011 and early 2012, labour unrest started in the Manesar Plant with Sonu
Gujjar, a local labour leader demanding right to establish an alternative labour union due to
non-alignment of a large section of workers with the existing union. The problem was solved
in a rather sneaky way by the management by sending off Sonu Gujjar and twelve others with
a Golden Handshake scheme which lacked transparency.

Manesar Violence July 2012

On 18 July 2012, Maruti’s Manesar plant was hit by violence as workers at one of its auto
factories attacked supervisors, engineers and other management personnel and burnt and
killed a senior HR executive, injured 100 managers, including two Japanese expatriates. The
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 he was charred to death. The incident is the worst-ever for Suzuki since the company
began operations in India in 1983 and one of the most heinous of industrial crimes in the
history of India.
The Events of July 18, 2012:

An altercation On the Shop Floor Between A Floor Supervisor and Jiya Lal, One of The
Approximately 1500 Permanent Workers at The Maruti Suzuki Manesar Plant, Led To The
Suspension Of The Worker. While the Management Alleged That Jiya Lal Had Assaulted
the Supervisor, The Workers on Floor Maintained That the Supervisor Had Abused Jiya
Lal With Casteist Slurs. The Union Began Negotiating with The Human Resources Team
at The Plant. It Is Alleged by The Management and The Investigation That When the
Negotiations Broke Down Without A Compromise, Violence Broke Out with Workers
Attacking the Staff, Including Senior Officials, With Iron Rods and Other Objects. The
Workers Strongly Object to This Position and Claim That A Lot of Private Security Was
Already Present Inside the Premises and They Instigated the Violence. In the Melee, Fire
Broke Out in The Campus and Gutted Down A Section of The Factory. The General
Manager (HR), Awanish Kumar Dey, Lost His Life and About 90 Others Were Treated for
Minor Injuries.

The Police Rounded Up the Factory Workers And, By the Next Day, had arrested  over 90
People Including All the Newly-Elected Union Leaders. They Slapped Conspiracy
Charges Against the Union Leaders and Workers and Started A Massive Manhunt for
Other Workers on The Charges of Rioting, Arson, And Murder of The HR Manager. In
Total, The Police Arrested and Charged 148 Workers for The Incidents of July 18 th And
Imprisoned Them in The Gurgaon Jail. All the Injured Persons Were Discharged in Less
Than A Week. The Company Locked the Factory for A Brief Period and Reopened It On
21st August 2012 After sacking Nearly 500 Permanent Workers. With Over 1500 Police
Officers Deployed, The Manesar Plant Was Temporarily Converted into A Veritable
Fortress.

But the Events of July 18  Had Deep Roots in A Year of Unrest That Began with Workers
at The Manesar Plant Attempting to Form an Independent Union of Their Choice.

Workers Demand
From April 2012, the Manesar plant workers’ union demanded a fivefold increase in salary, a
monthly conveyance allowance of 10,000, a laundry allowance of 3,000, a corporate 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 house. In addition to this compensation and normal
weekend/holidays, the union demanded the current four paid weeks of vacation be increased
to 7 weeks, plus each worker to have 40 days of sick leave and casual leave amounting to 75
days. There were some reports claiming that the wage dispute, as per a union spokesperson,
may be caste-related. According to the Maruti Suzuki Workers Union, a supervisor had
abused and made deriding comments on a low-caste worker. These claims have been denied
by Maruti Udyog management and the police. The supervisor alleged to have made those
comments was found to belong to a tribal heritage and outside the Hindu caste system;
further, the numerous workers involved in violence were not affiliated with that caste either.
Maruti said that the dispute was not over wage discussions, but after the workers’ union
demanded the reinstatement of a worker who had been suspended for physical violence on a
supervisor. The workers claim harsh working conditions and extensive hiring of low-paid
contract workers who are paid about US $130 a month, which works out to half the minimum
wage paid to permanent employees.
Maruti Udyog 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 bouncers were
employed by the company off and on.
India Today, the weekly magazine claimed that its interviews of witnesses present at the
plant confirms the dispute was over the suspended worker as mentioned earlier. The
management insisted that they must wait for completion of inquiry which was underway
before they can take any action on the employee suspended for manhandling his supervisor.
Thereafter, the workers broke up into groups, went on to set the shop floor as well as all
offices on fire. They hunted down management officials and proceeded on with methodically
injuring officials at the factory site with iron rods and heavy tools.

The local police, in its First Information Report (FIR), claimed on 21 July that Manesar
violence may be the result of a carefully planned violence by a section of workers and union
leaders. The report claimed the worker’s action has been recorded on close circuit cameras
installed within the company premises. The workers took several managers and high ranked
management officials as hostages. The responsible Special Investigative Team (SIT) 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. As per the FIR, police have arrested 90 people and
are searching for 62 more. Maruti Suzuki management, in its official statement on the unrest,
announced that all work at the Manesar plant has been suspended indefinitely.

The Impact
A Suzuki spokesman said Manesar violence won’t affect the auto maker’s business plans in
India. The shutdown of Manesar plant is leading to a loss of about Rs 75 crore per day. On
July 21, 2012, citing safety concerns, the company announced a lock-out under The Industrial
Disputes Act, 1947 pending results of an inquiry which the company has requested by the
Haryana government to determine the causes of these heinous incidents. Under the provisions
of The Industrial Disputes Act on wages, the report claimed, employees are expected to be
paid for the duration of the lockout. On July 26, 2012, Maruti Udyog announced that
employees would not be paid for the period of lock-out in accordance with labour laws of
India. 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. 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.
Labour disputes are endemic in the auto industry of India and have affected other
manufacturers. India has strict labour laws, but their application is routinely avoided 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
universally.

The company dismissed roughly 500 workers accused of causing the violence and re-opened
the plant on August 21, saying it would produce 150 vehicles on the first day, that is, 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 in terms of market share and market cap.
A week earlier, company officials had announced that Maruti would scrap the practice of
hiring contract workers and that the workers currently on temporary contracts would be made
permanent. It would begin the process of hiring new workers on a permanent basis from
September 2, 2012.