July 06, 2020
Home  »  Magazine  »  Business  » Maruti Udyog »  The Mutiny Drive

The Mutiny Drive

At a time when marketspace is cramped, a fight for incentives at MUL turns ugly

Google + Linkedin Whatsapp
Follow Outlook India On News
The Mutiny Drive

Both sides had dug themselves in for a long haul. Each willing to play the waiting game to see who blinks first. For nearly a week, the strike at Maruti Udyog Ltd's plant at Gurgaon, Haryana, was turning out be one of those classic management vs union confrontations, which haven't been seen in a long while. But no one was prepared for the events of October 18. That afternoon, 56-year-old Chander Bhan, a water pump operator in the factory, was rushed to a nearby hospital, where he was declared dead on arrival. Later that evening, the body of Rajesh Kumar, a 20-year-old Maruti apprentice, was discovered nearly 10 km away from the factory. The next morning, Anand Singh Bohra, a 39-year-old draftsman at Maruti, was hospitalised.

As she fights back the tears, Anand's wife Shashi Bohra recounts the night of October 18, when her husband came back from the factory, "He was agitated and tense and kept mumbling to himself about his job and colleagues. At 11:30, he ran out of the house talking incoherently." Bohra finally calmed down, but worse was in store. "He woke up at five in the morning, crying, saying my children will die if I don't go back to work," she recounts. He was rushed to the nearby Sumangala Hospital. Says Dr K.K. Sharma, who initially treated Bohra, "He was suffering from a psychotic disorder, apparently induced by stress." Bohra has now been referred to a mental health hospital.

By the 19th, as the news spread among the 4,500-odd unionised Maruti workers, the air was thick with tension. Nearly a thousand of them gathered at a nearby mortuary where the post-mortems of the two bodies were to be performed. The question they wanted answered was: how did this happen? Till Outlook went to press a day later, there were still no answers. The Maruti Udyog Employees Union (mueu) said that they had been denied a copy of the two post-mortem reports. They also demanded a judicial inquiry into the two deaths.

The striking workers believe Chander Bhan, an asthmatic and a heart patient, died because the management was forcing him to stay in the factory and work by threatening him with suspension. Rajesh Kumar's death is a mystery. According to Maruti, his body was discovered 10 km away from the factory, in civilian clothes and not in the Maruti uniform, which he'd have been wearing if he had died inside the factory. As such, the company says his death is unrelated to the agitation, more so as apprentices are not a part of the union. Maruti also says that Chander Bhan's death was due to natural causes. He'd a history of heart problems, for which he had been hospitalised four times this year. The company condemned the "union's attempts to exploit his death to fuel the sentiments of the workers with a view to sustain their campaign which was losing steam. He'd not participated in the tool-down strike and, in fact, defied the call of the union for not joining duty. Therefore, he and his colleagues were the targets of verbal abuse and persistent threats from the union. That is why Bhan was staying within the factory."

But aren't the deaths too much of a coincidence? Did these happen because (if, at all) the Maruti management is cracking the whip, or because of the union threatening workers who haven't joined the strike? The union claims not more than 80-90 unionised employees are inside the factory and that too under threat of suspension or dismissal. Apart from that, they claim that around 100 apprentices are being forced to live inside and work round the clock and many other casual workers are being used by Maruti to keep production going. But managing director Jagdish Khattar says there are over 3,000 workers in the factory, of which 400 are apprentices-who were in Japan undergoing training and have been rushed back. The rest include a fair number of unionised staff who don't support the strike, casual workers and former Maruti employees. "We have managed to consistently increase staff and production. On October 12, there were 2,344 workers inside the factory and by October 18 it went up to 3,007," says Khattar, "Consequently, production has also increased from 299 units at the beginning of the strike to 834 on October 19." Khattar believes that in a few days, Maruti will be back to producing between 1,200-1,400 units a day, which is its usual quota. The union disputes Khattar's claim and says production isn't even half of what he claims.

But just why is it so difficult for the union and the management to reach an agreement? In fact, their opinions are so divergent that the two sides haven't had negotiations since the first week of October. The crux of the issue is an incentive-based wage scheme that was to come into effect on April 1, '99. Says M.S. Taragi, vice-president, mueu, "At that point Maruti was struggling to deal with the Supreme Court ruling on Euro II norms, so we agreed to defer negotiations." And when they did begin a few months ago, the two sides could not find a common meeting ground. "The average Maruti shopfloor employee operates on a cost to company of Rs 22,000 a month. If we accede to the union's demands, we'll end up paying around Rs 41,000 per month," says Khattar. Instead, Maruti has notified a new incentive-based wage scheme of Rs 33,000 a month. "Under the scheme, our wage bill will go up by about Rs 50 crore, but if we accede to the union's demands, it'll cost us another Rs 50 crore," says Khattar. That's something Maruti can ill afford, especially since in '99-2000, its net profit margin dipped to 3.4 per cent from 6.3 per cent the previous year.

Khattar points out that Maruti already has a higher labour cost per vehicle than competitors like Hyundai. Hyundai's labour cost per vehicle is Rs 1,617 including foundry operations-and this when they produce higher value cars than Maruti. In contrast, Maruti spends Rs 2,696, despite 50 per cent of the company's production being low-value cars. Contests Taragi, "Hyundai imports more components and thus books most of its labour cost abroad." But the other factor is that Maruti is an 18-year-old firm, and workers have seen reasonable annual increments. In contrast, a three-year-old company like Hyundai has younger workers working at lower base salaries. Already, the average salary in Maruti is twice that of most competitors.

Both sides also contest the increase in productivity that's possible. The union says productivity cannot increase beyond 2 per cent a year, especially when productivity per employee has already risen from 41.5 cars to 81.5 cars now. This means the actual incentive they eventually get will be lower. But the management says that productivity increase between '95 and '99 was 4 per cent and with the new plant that's just come up, it is bound to increase. Also, according to the union, productivity incentive should be paid when more than 41.5 cars per employee are produced. This was the base in '88-'89, when the incentive scheme was first introduced. Today, with productivity per employee doubled, workers get roughly half their salary as incentive. But Khattar says that the incentive should now be applicable only on productivity increases over 81.5 cars. And if you add a higher base salary-which is proposed-to incentives being paid beyond 41.5 cars per employee, the total cost to company reaches the numbers that Khattar is dead set against: Rs 41,000 per month cost to company per employee. In fact, thanks to annual increments, while productivity has increased by 17 per cent between '95-96 and '99-2000, the cost to company per worker has increased by a whopping 85 per cent!

A senior executive at a rival car company agrees with Khattar, "What the Maruti workers are asking for is impossible to give. Maruti will surely lose its competitive edge if Khattar gives in." Another executive is even more scathing: "Maruti will be finished if the workers' demands are met." So, what's Khattar's strategy? "Once production at our plant is back to the usual levels, the strike will become redundant and workers will come back on their own," he says, "If I agree to their demands now, the company will suffer for years."

Labour troubles are something every management has to deal with. Maruti itself has always had to deal with a restive union. But the situation has never been this grave. And this is an issue far larger than just Maruti. If it accepts the workers' salary demands, wouldn't unions in other auto majors, from Telco to Hero Honda, also demand the same sort of pay package? That would open a Pandora's box that Indian vehicle manufacturers can ill-afford to handle right now. As the two sides in Maruti blame each other for the two deaths, there're still no sign of talks. How long will this standoff continue? The question is all the more important as Maruti has launched five new models in the last 10 months, and most recently, the Alto, which Khattar described as "the future of Maruti". As of now, while they are hoping that the management will not give in, Maruti's competitors just can't help smiling.

Company Wages Maruti 22,000 Telco 12,000 Ford 11,000 Hyundai 10,000 Average cost to company per shopfloor employee per month. (source: Maruti Udyog)

Next Story >>
Google + Linkedin Whatsapp

The Latest Issue

Outlook Videos