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Corporate Aug 28, 2012

After Manesar, Maruti shareholders urge better labour relations

Maruti Suzuki shareholders on Tuesday urged India's biggest carmaker to be more sensitive to labour disputes in the wake of a deadly riot at its Manesar factory as the company promised a swift return to normalcy at the plant.

One shareholder at the annual general meeting sung an ancient Hindu chant to ward away evil spirits from the carmaker as executives spoke to generally supportive applause just six weeks after violent clashes forced the company to shut down one of its factories for a month.

Marutisuffered about $250 million in lost output during the shutdown.AP

Maruti, controlled by Japan's Suzuki Motor Corp, suffered about $250 million in lost output during the shutdown, a year after a summer of labour strikes at the same factory cost the company more than $500 million.

Maruti, which contributed 28 percent of Suzuki's net profit in the last fiscal year, can ill-afford the mounting losses as high interest rates and cooling GDP growth drive down car demand. Shares in Maruti are down 4.6 percent since the riot.

"This AGM is not being held in the happiest of circumstances because of what happened on July 18, unprecedented not only in the history of Maruti, but industrial India," Maruti's chairman, RC Bhargava, said on Tuesday. "Only one died, but many more could have because of the way the attacks were carried out."

Workers armed with steel rods and car parts rampaged through the factory in Manesar in Haryana on July 18, assaulting supervisors and setting fire to parts of the plant, reigniting fears over the company's management of labour relations at a factory with a history of unrest.

Bhargava stressed that the riot was "premeditated" and that security guards would remain at the factory until all employees were confident of their safety.

The factory will be back at full capacity "in a reasonably short time" Bhargava told the meeting in New Delhi on Tuesday, without providing details.

"The management should think of bolstering industrial intelligence," DD Sadhana, a shareholder, told the company's board of directors on Tuesday. "Had it been active, we would have known what is happening."

Another shareholder who only gave his name as Chopra said, "We need to have a good industrial relations department, which should not let these evils crop up."

Unions and workers' groups say months of discontent over stalled pay negotiations had festered prior to the riot, while Maruti management has said that it is still unaware of what incited the violence. A police investigation is ongoing.

"We have to find out the cause of the incident and take preventative measures so that this kind of incident doesn't happen again," Suzuki's chairman, Osamu Suzuki, said on Sunday. "We are trying to find out if there was any dissatisfaction among the workers and if we find anything we will address it."

The 550,000 vehicles per year factory, which reopened with a skeleton staff last week, is currently producing fewer than 100 cars per day. Bhargava added that a planned factory in Gujurat may start production in 2015-2016, but said it would depend on market demand.

Maruti said this month that it would fire 500 workers following the riot and begin a process of converting the bulk of its contract workers to permanent positions. The use of contract workers was said by union officials to be one of the root causes of the riot.

Converting contract workers to permanent staff will not significantly affect Maruti's costs, Bhargava told reporters on Sunday, as the starting salary of a permanent worker is only about 10 percent more than a contractor's pay.

Reuters


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