06 August 2012 Business maruti flare-up

The Autopsy Report

A foreign management ethos divorced from labour realities inflamed Manesar
The Autopsy Report
T. Narayan
The Autopsy Report
outlookindia.com
-0001-11-30T00:00:00+0553

When Osamu Suzuki, the patriarch of Suzuki Motors, left India after his first visit in the early 1980s, he promised the newly formed senior management of Maruti Suzuki a “gift” on his return to Japan. When several large packages that finally arrived were opened, out came time-clocks to be punched by all employees. Thus was born the modern Indian corporation. Many practices Indian companies take for granted today—mandatory attendance, relentless punctuality and perpetual productivity—began with Maruti. So did the company uniform, the common canteen for all employees and even common toilets for workers and managers. As Maruti’s people’s car sales soared up the charts, its workers became the subjects of envy. Wearing the uniform became a matter of pride.

Sure, there were some labour issues at the automaker, and a few major strikes—one in 1988 and a three-month biggie in 2000—but nothing that upset the image of Maruti being a worker-friendly company. Obviously, something has dramatically changed since. The $7.5-billion Maruti Suzuki is since 2007 a fully-owned Japanese company that still lords over 50 per cent of the Indian car market. It made $290 million in profits in 2011-12. But its massive unit at Manesar, 91 km from Delhi, has been such an unhappy place over the past year or so that you could be forgiven for thinking it’s another company.


The ancillary economy A 100 villages around Manesar hold a mahapanchayat over the Manesar violence. (Photograph by Manoj Kumar)

Ask both workers and managers at Manesar, and they agree it has been a matter of “unbearable tension” to work there. There have been two strikes in the past 13 months. And now, the factory has been in a lockout since the July 18 outbreak of labour violence that claimed the life of HR manager Awanish Kumar Dev and sent over 100 professionals and workers to the hospital. In the villages in and around the area, economic gloom is slowly setting in. Most of the 3,000-odd workers at the unit are in hiding, and the police, in a bid to catch the culprits, have started picking up family members of workers to exert pressure.

What has gone so terribly wrong at what was once considered one of the best places to work in India? While we still don’t have a complete picture of what exactly led to matters going out of control, by all accounts Manesar was a combustion waiting to happen. Fuelled by a deteriorating working environment, abusive supervisors and bouncers, employees were under pressure, depressed and scared. Why, even the deceased Dev had wanted to quit the company! Many blame the Japanese management for its insensitivity and inability to understand or handle a situation that was careening out of control. While relentlessly chasing higher production targets, they seemed oblivious to the urgent signals being sent out by restive workers. “The management did not quite know how to deal with a new band of people representing workers,” says Tamaki Tsukada, minister (economic), Japanese embassy, New Delhi.

“In hindsight, Maruti Suzuki should have been more cautious. They were not aware of the pent-up emotions among workers.” Tamaki Tsukada, Minister (economic), Japanese embassy “Earlier unrests were restricted to stopping work; now they turn violent. It’s being reported more in the auto and auto parts industry.” P.P. Sahu, ISID, New Delhi

“The underlying problem is of too much contract labour. 29 per cent of our labour force is on contract due to India’s stupid labour laws.” Manish Sabharwal, CEO, Teamlease “There are reports that several political appointees are working in Maruti. Such workers have their own vested interests.” Ravi Wig, Chairman, Council of Indian Employers

“For two months, the same workers were in the plant, and there was no violence. How can they resort to mindless violence sans provocation?” Tapan K. Sen CITU, general secretary “The middle management is being forced to impose inequitable policy and violate the policy of equal pay for equal work.” Sudha Pillai, Ex-member-secy, Planning Commission

At the heart of the problems facing the company has been the workers’ demands for better wages and working conditions. Over the last 15 months or so, the workers have been complaining about the huge disparity in salary between contract and permanent workers. While the permanent workers earn between Rs 16,000 and Rs 21,000, contract workers get just around Rs 6,000. Since both groups do the same work, the demand for pay parity has grown strong with every passing month, given the rising prices and inflation. “The middle management,” says former Planning Commission member-secretary Sudha Pillai, “is being exposed to the danger of having to impose inequitable policy and violation of the policy of equal pay for equal work.”

That’s not all. The workers have often complained of inhuman treatment at the hands of supervisors who have the sole mandate of extracting as much as possible from them. The result was constant confrontation and abusive behaviour from the supervisors, and cases of retaliation from workers when matters reached a flashpoint. “If someone is late for a shift, supervisors behave abusively with them. It amounts to a big mental stress for all of us,” says one of the workers in hiding who spoke to Outlook.


Body blow Injured Maruti employees in a Gurgaon hospital

Since a majority of the workforce is under contract—that is over 2,000 out of the 3,000-odd workers at the Manesar unit—the company has always managed to rein in labour activism. Hiring contract workers also helps reduce the wage bill and buck India’s archaic labour laws that prevent companies from easily hiring and firing employees. Last year, the management even pushed the workers to sign a Good Conduct Bond, where the workers had to agree that they would maintain decorum in the factory. Only a few signed.

Meanwhile, working conditions were being stretched. The workers say they were provided two 7.5-minute breaks within which they had to travel a good half a kilometre to either the canteen or the toilets and get back to work on the dot. The contract labour was also aware that despite being hired in large numbers, no effort was being taken to impart additional skill to them. Says P.P. Sahu, a professor with the Institute for Studies in Industrial Development in Delhi, “The labour situation is getting very bad. No one is thinking of the worker; the industry has created a class of pseudo-workers or supervisors who are tasked with carrying out management policy, including exploiting workers, and take home fat salaries.”

Last October, things reached a head when the company management refused to register a union of the workers’ choice and imposed one of its own. This angered workers and led to a two-week closure. “This led to the employees feeling their problems were not being taken care of by the management. The trust deficit started building up when the management refused the formation of a union,” says Mahantesh Sabarad, senior VP, Fortune Equity Brokers, who tracks the Maruti stock. From the management’s perspective, it was a simple matter of discipline. The workers, however, saw it as an infringement of their right. The matter was resolved when the state government intervened and a tripartite agreement was signed under which the company agreed to allow the union and for it to negotiate new wages.

Clearly, the Japanese management has not been able to pick up from there and resolve issues with its workforce. Its Indian operations are one of Suzuki’s few profit zones—so it is desperate to keep it going that way. On the other hand, with the arrival of the global automotive biggies in India and increased competition, Maruti Suzuki’s marketshare, though still the largest in India, has been losing heft. The company sold a staggering 11.34 lakh units in 2011-12, down 10.8 per cent thanks to the Manesar shutdown and the shift away from petrol cars.

If you add factors like increased local and import costs, it is evident that Maruti Suzuki has been completely out of the comfort zone it has enjoyed in India for a long time. So the management has been pushing workers and continuously making demands to increase their productivity through increased workload (measuring workers, for instance, by new systems like “actions per minute”). In the last few years, while production figures and profits have increased, workers have remained more or less in the same place. The last wage revision took place in 2009.

It is not a coincidence then that the labour issues have heated up in the past few years, soon after Maruti Suzuki became a fully Japanese company. An auto sector veteran agrees that the absence of Indian management could have played a role here. Says an HR official who works in the automobile sector, “Unlike Koreans who work together with the workers on the shopfloor, Japanese are not present, and observe from a distance only.” This cultural factor could have had an impact on worker-management relations, with the supervisors bearing the brunt of it on the shopfloor. Labour problems have been surfacing in other Japanese and Korean firms of late, but that could also have to do with a more demanding workforce.

Maruti’s bosses have, of course, asserted that the company was making every effort to look at the workers’ demands and was in the process of wage negotiations both at Manesar and Gurgaon (see box). It is not clear then why the present agitation, with wage revision as one of its main demands, erupted at all. Analysts feel there was a gap between the management’s understanding of the labour issues in India in general and the Manesar plant in particular. “Recent labour issues at the Manesar plant are totally different from previous strikes on many aspects that reflects more psychological issues rather than being mere materialistic issues,” says a report on the developments by Karvi Stock Broking. Manesar does have a younger workforce than Maruti’s other plant in Gurgaon (which also has more permanent employees).

Many in the auto industry also feel that, like any other industrial belt, political influence is casting its long shadow over Maruti’s affairs—unlike in the past. Says Ravi Wig, chairman, Council of Indian Employers, “There are reports that several political appointees are working in Maruti. Such workers have their own vested interests. They may have been throwing their weight around, banking on their political patronage.” Interestingly, even though the Bhupinder Singh Hooda-led Haryana government was involved in last October’s settlement, it has not been able to play any role in resolving this matter.


Caravan stops rolling Trailer trucks outside Manesar plant. (Photograph by Tribhuvan Tiwari)

Of course, it has now stepped in to calm the waters, given the sudden appearance of Gujarat CM Narendra Modi on the scene. While there’s no way Maruti Suzuki can shift out of Haryana, the nervousness is understandable after the experience of Tata’s Nano plant. The local villages have also jumped into the act in order to protect their local economies that are so dependent on Maruti’s massive 600-acre plant. It is also not surprising that the trade unions—carefully weeded out by the Maruti Suzuki management from influencing its workers—are using this occasion to now make inroads into the company.

Says Manish Sabharwal, CEO, Teamlease, “There is large-scale politicisation of unions and criminalisation of politics which is a combustible cocktail and is trickling down to unions in companies.” In their defence, union leaders say that the workers could not have resorted to violence if they were not provoked or even manhandled by guards, police or the company-hired bouncers. “It is strange that for over two months there was not a single incidence of violence. How can it happen that without provocation the same set of workers resort to such mindless violence?” asks Tapan K. Sen, general secretary, CITU.

Maruti Suzuki officials say they won’t resume operations in the Manesar plant till the security and safety of the workers and managers is ensured. That, given the current situation, could take a long time, seriously affecting the company’s balance-sheet. About 35 per cent of the company’s production comes from Manesar, which accounts for revenues of around $220 million a month. The plant also produces Swift, D’zire and A-Star, Maruti’s new money-spinners that are much in demand and also have a waiting list.

The company has indicated that it will reduce its exposure to contract labour, and employ more permanent staff through fresh recruitment as well as by absorbing the contract labour. This could further vex its balance-sheet, as the wage bill will go up substantially. According to analysts, if the lockout lasts for two or more months, the company stands to lose the production of 75,000-1 lakh vehicles, a significant dent in revenues. The prognosis is grim. Says Mitul Shah, automobile analyst, Karvy Stock Broking, “The lockout may go on for longer. This may affect its sales as the inventory too is exhausted.” Also taking a hit will be Maruti’s robust vendor ecosystem, spreading the pain for a company and brand close to the heart of a large number of Indians. For that, it has only itself to blame.


Suzuki’s 5-S formula

What employees should do to improve shopfloor efficiency

  • Seiri (proper selection)
  • Seiton (arrangement)
  • Seiso (cleaning)
  • Seiketsu (cleanliness)
  • Shitsuke (discipline)

Suzuki’s 3-G Sutra

What employees must consider for problem-solving

  • Genchi (actual place)
  • Genbutsu (actual thing)
  • Genjitsu (actually)

Suzuki’s 3-M Recipe

What employees should eliminate on the shopfloor

  • Muri (inconvenient)
  • Muda (uselessness)
  • Mura (unevenness)

Suzuki’s 3-k Mantra

How employees must interpret shopfloor orders

  • Kimeraareta Koto Ga (what has been decided)
  • Kihon Dori (exactly as per standard)
  • Kichin to Mamoru (must be followed)

***

Catching All The Wrong Signals

Industrial relations at Maruti’s Manesar plant were a disaster in the making

  • The Workers
    A young and edgy workforce turned against the management with horror stories of low wages, bad working conditions and verbal abuse on the shopfloor. Only about a third of its 3,000-strong staff were permanent employees. An inexperienced union negotiating for higher wages for poorly paid contract labour complicated matters further. It was a communication meltdown, fuelled by stark disparities in the matter of wages.
  • The Management
    Failed to read the simmering discontent amongst workers, could not ease ‘unbearable tension’ on the Manesar shopfloor. Cultural issues at play as Suzuki played hardball during wage revision negotiations after two previous agitations last year. Company also appointed bouncers who were present in the factory premises and misbehaved with workers.
  • The Haryana Government
    Many observers say “political forces” had a role to play in fomenting trouble at the Manesar plant. Bhupinder Singh Hooda’s government was part of the tripartite agreement with workers and management last October, but has done precious little to ensure smooth running at Maruti. Now says probe will be intensified to ensure company stays in Haryana.
  • The Haryana Police
    Beyond the initial arrests, they have not been able to make much headway in the case. It is difficult to prove who started the violence. For now, there’s a cat-and-mouse game going on between the Haryana police and Maruti workers in the Manesar-Gurgaon industrial belt. It now faces pressure from both the government and the company to complete the probe fast.

By Arindam Mukherjee with Lola Nayar

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