Maruti grapples with labour strife

The company, which has declared a lockout at its Manesar plant, has very little stock of its popular Swift and Dzire models. Can it sort out the labour issue once and for all?

Two weeks ago, the demon of labour strife raised its ugly head at Maruti’s Manesar plant, the scene of last year’s long-drawn labour protests that saw output in the crucial month of October 2011 halve. What caused the fracas on July 18 was reportedly an inappropriate comment made by a supervisor to a worker. What followed was mayhem and destruction of property which led to the death of one senior company official and close to 100 injured.

The company has since declared a lockout. The plant, a relatively new unit, rolls out the Swift, Swift Dzire, A-star and Ritz. Maruti has said its stocks of Swift and Dzire are drying up and only 10,000 currently in transit will likely be available to buyers. However, counting on strong customer loyalty, it will continue to take bookings.

In the short term, Maruti is clearly ready to absorb the hit. It does not have a model that it can suggest that buyers opt for. The Swift is an iconic car and it is not likely that the potential buyer would choose another car. He may opt for another brand though. The Dzire, now with an under-four-metre variant, has boosted sales from an average of about 8,000 a month to nearly 14,000 (see sales table).

Labour-ing issue

The main issue at the Manesar plant is contract labour. Reportedly, the numbers of such workers is higher at Manesar than at Gurgaon and their demand is apparently for better or equal wages. Moreover, the age profile at Manesar is reportedly in the 20s, a more aggressive and aspirational group. This is the group that is at the vortex of the labour imbroglio.

How Maruti handles this group of contract workers perhaps will determine what happens at the plant. Companies hire contract labour to keep wages in check. In the face of inflexible labour laws, companies cannot lay-off workers in a lean phase or if a unit makes losses.

The first casualty in such cases are contract workers who can be asked to go with immediate effect. So while they are actually employed, should they be given the same wages as their permanent staff for similar jobs? That is the question as hiring at the same wage will not help the company concerned save wage-related costs.



Vendors to Maruti, some of whom met with the Gurgaon Chamber of Commerce, say that it is time to take on staff on a company’s roll and that the dependence on contract staff should be kept preferably to a minimum. That will necessarily mean a higher wage bill for companies which, in turn, means the focus will have to be on more productivity.

All companies want a disciplined and committed workforce but clearly getting that isn’t going to be easy. While rigid labour laws give companies little space for manoeuvering, cost-push inflation means that real wages are not actually rising. Companies can opt for greater automation as well but given the focus on job creation, this is not a clear-cut solution.

On its part, the Haryana government has promised all help to Maruti Suzuki as it seeks to handle the labour issue as amicably as possible. For now though, manufacturing output will take a hit and Maruti will have to go all out to ensure that its workers’ problems are solved and things are back on track.

BRIAN DE SOUZA