Four reasons behind Maruti Suzuki's Manesar problems: ET

The bad old days of militant trade unionism are back. The violence at Maruti Suzuki's Manesar factory, which killed one senior employee and injured close to 100 others, bodes ill for the future of not just Maruti but also the industrial hub of NCR. This is not the first time that Maruti is fighting trouble in Manesar. 

Last year, labour unrest resulted in a loss of over Rs 2,500 crore for the company. So, what's causing Maruti such big problems at Manesar? ET Magazine looks at four reasons that could have resulted in the simmering tension between the management and workers at Maruti Suzuki. 

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The Missing India connect

Since 2007, two important changes have happened at Maruti. One, Shinzo Nakanishi, the current MD of Maruti Suzuki, took over the reins from Jagdish Khattar. RC Bhargava, who was a director, was made chairman. Two, Maruti and the India market are also becoming increasingly important for Suzuki Motors. Till recently, Maruti contributed more than half of the parent's profits.

As Maruti's contribution to Suzuki has increased, the latter's tendency to control India operations has increased. Agreed, it has an Indian chairman but Bhargava is 78 years old. It does have many senior Indian executives who have been 'lifers' at Maruti. But insiders who will speak on the condition of anonymity say the Japanese voice counts and often tends to dominate crucial decisions. Culturally, Indians and Japanese are far apart. Their sense of discipline, punctuality, employee connect too are very different. Some loss of connect with Indians is expected.

Leaner, Meaner Pressures

The challenges of running manufacturing outfits have surged. Costs and wages have increased and sales are poor & volatile. Doing business is difficult. Doing profitable business is even more difficult. Every company is figuring out ways to bring down costs and improve productivity. Most have contract labour to bring in flexibility and reduce costs. At Maruti's Manesar factory, 40% workers are on contract and their salary could be half of the regular workers. Maruti is among the better pay masters.

Amid all this, competitive intensity in the marketplace for Maruti has never been as severe. Being a volume player, the only way for it to survive and flourish is to churn out more and more cars. All this has translated into relentless pressure to improve productivity and margins at all levels. For Maruti, this pressure is particularly high. Not surprisingly, the Manesar plant, that churns out two top-selling models in the Maruti stable — Swift and Dzire — is at the heart of all the strife.

Young & Restless Workers

In Haryana, young blue-collar workers have seen dramatic changes around them. Land prices have surged as Gurgaon has become a commercial hub. Overnight, people have become rich and their lives have transformed simply because they made a killing selling their land. Such changes have re-calibrated worker expectation who have seen their sleepy little hamlet transform into a city of high rises and malls in a decade.

They are less tolerant and fairly aggressive in their expectations and how they want to achieve it. Poor wage hikes and raging inflation have queered the pitch further, resulting in an impatient, militant workforce, which believes in aggressive posturing. Sonu Gujjar, the leader of the labour unrest at Maruti plant last year, represents that generation. In his 20s, Gujjar organised a concall with analysts to put forth the workers' point of view and made headlines.

Return of the Red Flag

From its peak in the 1980s, trade unions have been on a decline in India. Trade union bodies across the board — from Citu to AITUC — have been seeing a steady decline over the years. It does not help that a large percentage of workers in Indian factories are foot-loose contract workers. Over 90% of the Indians are employed in the unorganised sector where the trade unions have been finding it difficult to make inroads. They have made many efforts to spread their network among white collar workers like BPO employees, but with little success. Expectedly, they are tapping into every possible opportunity they can get to grow their base. Their involvement in Maruti's labour unrest signals that.