Case study report on Labour unrest at Maruti Ayodhya Paikaray Labour Unrest at Maruti

Maruti Udyog Ltd (MUL) is one of India s leading automobile manufacturers and themarket leader in the car segment, both in terms of volume of vehicles sold andrevenue earned. It was established in February 1981, by Sanjay Gandhi, theyounger son of then Prime Minister of India, Mrs Indira Gandhi. It was taken over byGovt. of India in Feb 1982.In October of the year 1983, Maruti entered into the collaboration with SuzukiMotors, by which Suzuki acquired 26% of the equity and agreed to provide thelatest technology as well as Japanese management practices. The commercial production and sales began by the end of 1983. The introduction of the Maruti 800 in 1983 marked the beginning of a revolution in the Indianautomobile industry.In Late 1990 s the company had serious differences with Govt. over appointment of company s managing director. Suzuki referred the case for International arbitrationand finally withdraws the case after an amicable settlement was reached betweenSuzuki andGovernment of India.

Employee Relation

For most of its history, Maruti Udyog had relatively few problems with its labourforce .The company trusts its employees to a greater extent and the employees inturn respond by being totally devoted to the company. Both the managers andworkers of Maruti wore the same uniform and ate at the same canteen even duringthe period of agitation.After recovering from the strike Maruti had a perceptible change in culture. A VRSscheme introduced soon afterwards increased the sense of insecurity amongstemployees, but it was all for a good cause.

Wage Structure

During the 1980s and early 90s the level of employee satisfaction at Maruti wascomparatively higher than most manufacturing companies in the country as they received significantly higher salaries as compared to employees of othercompanies.Generally the Wage rates and earnings of workers at Maruti were result of a seriesof revisions based on bilateral negotiations. The pre-revised (before 2001 strike) labour cost per vehicle in Maruti at Rs. 2,696compared unfavorably with Rs. 1,617 of its closest rival Hyundai.Worker s incentive earning had

been equal to almost their entire basic anddearness. In 2000, the average basic and dearness allowance was Rs. 7,000 and theincentive earnings were around Rs 6,500.With incentives accounting for a more than as usual and sizable proportion of thepay packet, workers badly needed the incentive scheme. Maruti s worked formedpart of middle class, not working class. Over two-thirds apparently ownedflats/houses and cars.

Power and Politics

In MUL the control and power is mostly in the hands of management. During theworkers strike in 2000 the management refused to agree to the workers demands. The officers ran the plant by supervising the operations of the plant and hiringcontractual labour. This made it difficult for workers to sustain the strike. They hadto call off the strike and were in fact forced them to agree to some changes laiddown by the management. The power of Japanese has always been there in an implicit manner. The Japanesehave acted as conflict resolvers whenever there have been any conflicts within orbetween departments. Many times the departments play politics with otherdepartments by trying to use the referent power available due to closeness with Japanese management. With the increase in stake of Suzuki Motor Corp. thelegitimate power of the Japanese management has further increased.

Labour Unrest in 2000

The car market in India become highly competitive in late 1990s with almost allmajor players entering the Indian market with manufacturing of various models. Socompany suffered a decline of market share. As Maruti s salary structurecomparatively higher than most manufacturing companies, due to this competitionand decline in profit, the company could not live up to the expectations of theemployees. As a result worker unrest started to grow in the company.In September 2000 the Maruti Udyog Employees Union went on an indefinite strikeif their demands were not met. The employees were demanding a new incentivescheme, improved pension scheme, better work environment and filling up of supervisory vacancies. However the management refused to accede to thesedemands.Production fell by around 40 % for a period of 3 months. During this period theengineers at the managerial positions manned the assembly lines to ensure thatproduction does not stop completely. The top management of Maruti were undersome pressure to negotiate with the workers. However, the government decided notto interfere directly and the management insisted that the workers stop theagitation and agree to adhere to the code of conduct specified by them. The strike ended in January 2001 with the union members agreeing to by the codeof conduct. About half of the employees (40) suspended/terminated during thecourse of the agitation were not taken back on duty. Thus the managementretained the upper hand after the

strike ended and the work culture at Marutichanged significantly after this. Some of the changes which took place were asfollows: 1.The sense of job security that the workers enjoyed at Maruti diminished. Insubsequent years a number of non-performers were asked to opt for avoluntary Retirement (VRS) and by introducing VRS, 1251 jobs were reduced. 2.De-recognized Maruti Udyog Employees Union (MUEU) by dismissing theunion members and the MUEU was not allowed to conduct a single generalbody meeting after the lockout and recognized new union called MarutiKamgar Union and it was set up in December 2000 with 28 members. 3.The company started relying more on casual (contractual) labor to decreaseits costs. 4.The proportion of variable performance based pay out of the total increasedsignificantly. The major reasons behind labour unrest In the late 90s, Maruti had begun to feel the effects of competition inautomobile industry and this can be attributed as one of the reason forattack on the workers. With the change in management in mid- 1990s, when it becamepredominantly government controlled for a while, and the conflict betweenthe Government and Suzuki may have been the cause of unrest amongemployees. When Management-Union talks broke down in September 2000, the workers start agitation: black badges to start with, and later, hunger strikes, tooldown strikes etc. The management introduced a scheme, where incentives paid would bedependent upon the sales of the company both of cars and spareparts , which are not accepted by the union because productivity incentivecould not be connected with car sales since that were not something theworkers could determine. Introduction of SCANLON type incentive scheme. The union demandedreinstatement of the original incentive scheme which had been in place priorto 1995, according to which 65% of all savings in labour-cost above the normset (at 41.5 cars per worker per year) was to be distributed to workers as anincentive bonus. Death of three persons in October 2000. Mandatory requirement of signing a good conduct undertaking

Conclusion From the whole case study it s very apparent that there was lack of collectivebargaining and the absence of convincing response from the management. The workers lacked the work ethics. Unlike the Japanese and Korean workers, Indianworkers did not care about the impact of their agitation on the viability of thecompany and the attitude of customers. Indian management also seem to havefailed fully grasp and internalize the Japanese management.It

would be in everybody s interest if the management were more sensitive tolabour and labour was equally concerned about the product market development.A win-win situation would be based on the approach where management ceased toinsist on good conduct undertaking and let the workers go to work gracefully and if the union took a long term view of the company s viability and competitiveness,moderated its scheme based on a composite criteria of productivity.