Case Study Solution

Marutis Manesar plant unrest: Possible impact on

rivals, contract labour, Gujarat & industrial relations.

Group Members: Mehul Brahmane Deepika Sharma Anupam Arya Divya Gupta Ashwin Abhilash Ashutosh Dolly Gagan Pal Singh Deepa Pathak Deepali Singh

SUMMARY
Background: On 18th July, 2012, auto factory workers in Marutis Manesar plant attacked supervisors and set ablaze fire in the building that killed company official and injured 100 managers, including 2 Japanese expatriates. The attack was allegedly influenced by two acts. A caste slur (later discredited) by the supervisor against a worker. The demand for the hike in the salary of workers which was flatly rejected by the management.

This unrest has led to different ramifications which will have an impact on the company in certain areas:1.) Small gains to the rivals: Due to such a furious violence act, the Manesar plant was shut down. As it was one of the main production plants of Maruti Suzuki, they faced huge loss situation. There was a backlog of 55000 units of swift and 65000 units of Dzire model. The competitors tried to tap into this opportunity. The gainers were Hyundai, Ford and Toyota which were the close competitors of Maruti. They pushed their sales by offering higher incentives to agents, giving cash discount, offering free accessories, etc. But though competitors had very small gains. Nobody was able to compete on Marutis cost, out of all the competitors companies only Hyundai had challenged Maruti in that segment.

2.) Contract labour losses some shine: More than 50% workers in the shop floors were on contractual basis. It began with Indias shifting labour laws which let the labour law reforms to be elusive and opted for temping and contract labour. In the automobile industry nearly 50% workers are on contractual basis. In Maruti there are 50-55% workers on contractual basis. After the unrest it was decided to overhaul its recruitment policy and all the future employments will be done through HR department to remove distortions. 3.) Big lure to Gujarat auto hub: Due to such an act now the companies are looking forward for a more stable political climate, pro business government and good infrastructure which is why now these companies are attracted to Gujarat and the NCR auto hub is losing out. There were 2 reasons why NCR got some investment. Companies like Maruti, which already had a big presence and built their vendor eco-system there. Many MNCs especially the Japanese with large expat population have traditionally preferred to locate in the friendlier and more hospitable NCR. But over past decade things have changed. Almost all new investments from Nissan to Renault to Ford have totally ignored NCR while choosing their plant location. Gujarat will be

the biggest gainer. With the access to good ports, stable political climate and efficient business climate makes Gujarat most preferred place. By 2015-16, it is estimated that nearly one of every three cars that roll out in the country would be from Gujarat.

4.) Soul Searching on IR: The Maruti unrest has made a call that the Industrial Relations (IR) matters a lot and is extremely critical area for the company. This important aspect was missing from the company and it was unable to manage its industrial relations. IR has to be made relevant not just to the floor level but also in the service sector. Top engineers & MBAs prefer to work for service sector companies rather than a manufacturing firm. Such an incident held due to lack of communication to the works and improper handling of the workers. The major reason for the plant unrest was the inability of Maruti to manage its IR. The next 3-5 years will be a period where companies and HR professionals will need to relearn the people management game. 5.) A small push for local voice: A question has arised in the recent past, that whether the MNCS in India understands its employees or not. It has been asked because most of the companies are sending expats to head India operations. These expats dominate the crucial decisions in the company; they are constrained in understanding the Indian workers. So, this has to be taken into consideration that they have to be sensitive towards the shop floor employees also rather just limiting them to top management.

CONCLUSION
No firm wants dis-gruntled workers. This has a snow balling effect which hampers the growth and brings bad repute to the organization. What Maruti needs to do here is employ someone form the locale to represent and hear the grievances of the labors to avoid such conflict. And as aptly thought by the company, it should also revise its employment policy. Even if the company employs contract labor, proper terms and conditions need to be laid down to govern their working culture and understanding their needs also. Further Industrial Relations should also be given importance. It covers issues of concerns to managers and employees at workplace, including workplace bargaining, management strategy, employee representation and participation, union management cooperation, workplace reform, job design and new skill development. An IR expert will more usually work for a trade union in order to represent employees interests. However he may also work for an employer in an HRM department serving the employers interest.

SUGGESTIONS
The last two decades of India growth story has focussed on the development of only the services sector and the manufacturing sector has been ignored. It is a crucial time that IR should be given equal importance as the other domains in the HR industry. In a company employees and workers satisfaction should be given utmost importance as they are the main asset of every company. Employees should be properly compensated according to the work done, also other incentives should be provided like benefits for their spouse and children. A proper check should be maintained over employees and their demands should be taken for the consideration and accordingly negotiations should be made. 4 to 5 supervisors should be placed amongst the workers who will give all the information of the bottom level employees and keep an eye on them. Certainly it is a real concern for all aspiring HR professionals. Professional bodies at the National Level should take this up seriously with the labour ministry. While taking up the issues with labour ministry, we should suggest ways, means, remedies, controls and punishment also by way of suggestion, letter, appeal etc. We should always memorize that nobody wants to loose control over the relations as it takes enormous, energy, time, and will to rebuild relations. Here the role of government is equally important, however if the Government does not amend the Contract Labour Act, the organisations should proactively define policies for engagement of contract labour in the organisations.