Is Maruti right, or its workers

Written by Ronojoy Banerjee | Ronojoy Banerjee | Updated: Sep 6 2011, 08:41am hrs
As the countrys largest carmaker Maruti Suzuki battles to find a resolution with its workers at its newest manufacturing facility at Manesar, FE explains the critical issues that need immediate attention. Although the plant accounts for only 25% of the company total production, it is still an integral unit for the company since marquee brands such as SX4, Swift and DZire are being manufactured here.

What is the current labour stir at Maruti Suzuki all about

The recent labour stir is quite unique. While the workers are keen to restart production at the earliest, Maruti management has set a precondition, according to which 2,500-odd workers have to sign a good conduct bond. The backdrop to this new pre-condition was set because the company alleged that a certain section of the workforce was purposely sabotaging the finished cars so that they fail the quality test of the company. Apart from that, while the production target for each day is around 1,200 units, workers were producing only half of these cars with only a third of these meeting the quality standards. According to a company statement issued last week, A series of serious quality problems have been observed in the vehicles produced, for example, vehicle door not properly clamped leading to doors falling during production, cutting wiring harnesses in the produced vehicle, dents on the body and critical components not fitted on the vehicles. Such deliberate acts, if not detected during quality checks, would have led to serious implications and directly harmed customers.

Is Maruti Suzuki right in enforcing such a bond

According to the Industrial Employment (Standing Orders) Act, 1946, that pertains to Haryana, any company employing over 50 workers has to formulate a charter codifying management-labour relationships. These are referred to as the standing orders which work like a constitution governing the relations between the company and its workers. Once it is drawn up, it needs the approval of not just the management but also the workers and the state government. In fact, Maruti feels that under such standing orders, the company can issue such a bond if it is convinced that its workers are purposely jeopardising finished cars and going slow on production. Maruti had asked its workers to sign a similar bond in 2001 after a long labour strike that had crippled the companys total production for weeks.

Is this different from the 13-day labour strike in June

The current impasse is significantly different from the strike witnessed two-and-a-half months ago. In June, Maruti workers suspended work when their demand for a new trade union for the Manesar facilityMaruti Suzuki Employees Unionwas rejected by the management. The company had said that since the Gurgaon facility already has its own representative body in the form of Maruti Udyog Kamgar Union (MUKU), there was no need to have a separate union for Manesar workers. However, the striking workers argued that MUKU was directly controlled by the company, hence it had little or no power to interfere in matters that directly impact the workers. But, in the current case, workers refuse to call it a strike since they argue that they want to re-start their work as soon as possible.

Didnt the workers-management reach a resolution in June

According to a hurriedly reached resolution last time, workers were to resume production while the company would deduct double the salary of the workers since the strike was declared illegal by the Haryana government. However, the core issue of a new union was left unaddressed and one felt that it would only be a matter of time before the two sides once again entered into a fresh confrontation.

Is there a resolution or a compromise in sight

A resolution or a breakthrough looks bleak. Maruti Suzuki has flatly said that they would not be compromising on the principles of what is right and what is wrong. In this case, the company says that since the workers were purposely sabotaging cars, it had reached a limit since basic customer safety norms were being disregarded. Maruti chairman RC Bhargava told this newspaper that the company is willing to wait and watch rather than compromise its position. He said that the companys parent body Suzuki was also clear on the stand.

What is the quantum of losses Maruti has had to face so far

Although the production target per day is 1,200 units, Maruti is only managing to produce a little over 100 units per day. The first two days of the labour stir totally crippled production, but soon Maruti was able to hire 120 trained

workers from ITI centres to restart production on a limited scale. So far, the production loss for Maruti has been around R180 crore, although there is still no official word on the same from the company, which has decided to bring forward the date of its second assembly line at Manesar by a month to free up capacity.

How is the strike impacting Marutis sales in a market that is showing signs of a slowdown

The recent stir could not have come at a worst time for Maruti. The company is set to report a single digit growth rate in 2011-12, owing to an overall slowdown in car sales and continuing labour troubles. The company reported a 17% fall in domestic sales for August to 77,086 units compared to 92,674 units in the corresponding month last year. This was the second straight drop in sales for the company on a sequential basis. In July, the companys sales had fallen 26.2% to 66,504 units. What has further complicated the problem is that Maruti was banking on its newly refurbished Swift to drive sales in the second and third quarter of the fiscal. In fact, the company was in the midst of increasing Swift capacity from 12,000 units to 17,000 units.

Does this strike threaten to attract workers of other auto factories in the Gurgaon-Manesar belt

The labour stir has already fuelled passions amongst workers of other auto companies and their component units. On Friday, over 5,000 workers from other manufacturing units congregated outside Marutis Manesar facility in solidarity with Maruti workers. The workers who joined the protests included those from Honda Motorcycle & Scooter India, Hero MotoCorp, Sona Steering and Rico Auto. Marutis workers from Gurgaon are also showing support. What could delay a resolution is the active political backing for the Manesar workers. CPI-affiliated All India Trade Union Congress is openly backing the Manesar workers rights. According to its national secretary DL Sachdev, This is not a strike. Workers have been stopped from going to work because they do not want to sign a bond. This is unacceptable.