History of Maruti Suzuki

It is now a familiar story which hits the headlines with amazing regularity-labour unrest at Maruti Suzuki manesar plant, plant forced to shut down and thus incurring massive production loss with each passing day. But what is the root cause of this reoccurring trouble? What started as a minor scuffle over a suspension of a technician, took a political and an ugly turn claiming a life of an HR executive and burning down of an office at the plant.

Was this a case of politicized union, mismanagement of the company and its contract labours or is it linked to something deeper as in our archaic labour laws? History is testimony to the fact that the relation between the management and the employee was not always this sour, the opposite infact but somehow has deteriorated over the years. Maruti Udyog Ltd. (MUL) is one of India’s leading automobile manufacture,a market leader in the car segment, both in terms of vehical sold and also revenue earned.

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It was established inFebruary 1981, by Sanjay Ghandhi, younger son of then Prime Minister. It was then taken over by the Government Of India in Feb’1982 In October of the year 1983,Maruti entered into the collaboration with Suzuki Motors,by which Suzuki acquired 26% of the equity and agreed to provide the latest technology as well as Japanese management practices. The commercial production and sales began by the end of 1983. The introduction of automobile 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 arbitration and finally withdraws the case after an amicable settlement was India. Employee Relation For most of its history, Maruti Udyog had relatively few problems with its labour force . The company trusts its employees to a greater extent and the employees in turn respond by being totally devoted to the company. Both the managers and workers of Maruti wore the same uniform and ate at the same canteen even during the period of agitation. After recovering from the strike Maruti had a perceptible change in culture.

A VRS scheme introduced soon afterwards increased the sense of insecurity amongst employees, but it was all for a good cause. Wage Structure During the 1980s and early 90s the level of employee satisfaction at Maruti was comparatively higher than most manufacturing companies in the country as they received significantly higher salaries as compared to employees of other companies. Generally the Wage rates and earnings of workers at Maruti were result of a series of revisions based on bilateral negotiations. The pre-revised (before 2001 strike) labour cost per vehicle in Maruti at Rs. ,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 the incentive earnings were around Rs 6,500. With incentives accounting for a more than as usual and sizable proportion of the pay packet, workers badly needed the incentive scheme. Maruti’s worked formed part 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 the workers 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 hiring contractual labour. This made it difficult for workers to sustain the strike. They had to call off the strike and were in fact forced them to agree to some changes laid down by the management. The power of Japanese has always been there in an implicit manner. Always present as a the conflict resolver.

Labour Unrest in 2000 The car market in India become highly competitive in late 1990s with almost all major players entering the Indian market with manufacturing of various models. So company suffered a decline of market share. As Maruti’s salary structurecomparatively higher than most manufacturing companies, due to this competition and decline in profit, the company could not live up to the expectations of the employees. As a result worker unrest started to grow in the company. In September 2000 the Maruti Udyog Employees Union went on an ndefinite strike if 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 these demands. Production fell by around 40 % for a period of 3 months. During this period the engineers at the managerial positions manned the assembly lines to ensure that production does not stop completely. The top management of Maruti were under some 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 code of 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 Maruti changed significantly after this.

Change in the work culture 1. The sense of job security that the workers enjoyed at Maruti diminished. In subsequent years a number of nonperformers were asked to opt for a voluntary Retirement (VRS) and by introducing VRS, 1251 jobs were reduced. 2. Derecognized 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 decrease its costs. 4. The proportion of variable performance based pay out of the total increasedsignificantly. The major reasons behind labour unrest(Year 2000) 1. In the late 90s, Maruti had begun to feel the effects of competition in automobile industry and this can be attributed as one of the reason for attack on the workers. 2. With the change in management in mid- 1990s, when it becamepredominantly government controlled for a while, and the conflict between the Government and Suzuki ay have been the cause of unrest among employees. 3. When Management-Union talks broke down in September 2000, the workers’ start agitation: black badges to start with, and later, hunger strikes, tool down strikes etc. 4. The management introduced a scheme, where incentives paid would be dependent upon the sales of the company both of cars and spare parts, which are not accepted by the union because productivity incentive ecould not be connected with car sales since that were not something the workers could determine. 5. Introduction of SCANLONtype incentive scheme.

The union demanded reinstatement 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 an incentive bonus. 6. Mandatory requirement of signing a ‘good conduct undertaking’. Built up Manesar unrest There was a very clear lack of bargaining and a convincing response from the management which only worsened with the passing years. But the final nail on the coffin came with the economic recession.

In early-2010, coming out of the slowdown in car sales in 2008 and 2009, Maruti experienced a spurt in demand. While the company expected demand to rise, it was not prepared for the sudden jump — a 30% rise year-on-year — in bookings. What made the situation worse was that the company had not invested in manufacturing capacity during the slowdown. The longer wait period for Maruti’s models meant rivals started cannibalising market share. Its Manesar plant, with an installed capacity of 250,000 cars a year then, started making 350,000 cars.

To ensure worker buy-in, their incentives were aligned to production. In essence, Maruti stepped on the gas hard, responding to market realities. But life on the shop floor took a turn for the worse. While production at its Gurgaon facility rose by 17%, Manesar was pushed harder, with a 40% jump. With production touching new milestones,so did the unrest among the workers grew which resulted in 3 strikes in 5 months in 2011 which still didn’t give the employee the respite or the answer to their demand thus ultimately perpetuated the violent act of 18 july 2012.