August 2012

Corporate quagmire

By Pradyut Hande

The country's largest automobile manufacturer, Maruti Suzuki India Limited (MSIL) finds itself firmly entrenched in a major "corporate quagmire". In an unfortunate turn of events, July 18 turned out to be a dark day in the company's history, when disgruntled workers at its Manesar facility resorted to violence and went on a gruesome rampage; damaging property and assaulting hapless management executives. Apart from the monetary loss, the sordid episode led to the death of a senior management executive; while over a 100 others were severely injured.

With tempers frayed and matters perched precariously on a razor's edge, the MSIL has now declared a lockout at its Manesar plant. Mr. R.C. Bhargava, Chairman, MSIL firmly stated that the need for a lockout has been necessitated as a fallout of the widespread worker unrest, fuelling a wave of unprecedented violence that threatens the safety of the management. The top brass' decision to enforce a lockout is a forced albeit inevitable move that has far reaching consequences. Despite the ongoing problems faced by the auto maker at Manesar, the MSIL has dismissed rumours of shifting base to an alternative location. Let me now delve deeper into the entire crisis at large that would help elucidate the chain of events leading upto the fateful Wednesday of July 18.

The Causative Agents:

The Manesar facility of the MSIL employs about 1,500 odd permanent workers and approximately the same number of workers employed on a contractual basis. Labour unrest has been bristling under the surface for a long time now, what with the management and workers adopting a definitively polar opposite stance on various issues of veritable import. In fact, there were three instances of sporadic unrest at the same plant between June and October, 2011. The workers' demands for recognition of an independent trade union, re-induction of suspended fellow workers and the provision of permanent employment to the contract workers amongst others were not met by the company management. This further stoked the ire of the already disgruntled workers. Nevertheless, both the management and the workers came to an agreement to put an end to the forced strikes as cumulative losses had already reached a whopping Rs. 2,200 crores.

On July 18, the tenuous employer-employee relationships endured a major blow when an altercation between a permanent worker and his supervisor resulted in his immediate suspension. The workers' demand to revoke this suspension did not find favour with the management; which further exacerbated the situation. As negotiations collapsed, a mob of about 2,500 workers turned to belligerence to force their hand. What followed was sheer carnage. Thus, numerous factors were collectively responsible for the eventual "snowball effect"; resulting in the rage fuelled violence and consequent lockout.

The Implications:

MSIL's Manesar facility is responsible for 45 percent of its overall production in the country, manufacturing 1,600 cars per day. The unrest thus, has majorly hit production operations causing losses of up to Rs. 70 crores a day. For a company, that is already grappling with the threats posed by increasing fuel prices, rapidly changing consumer sensibilities and dynamic competitors in a fluctuating marketplace; MSIL can ill afford to compromise on its production if it is to hold on to its dwindling market share. Add to that the losses incurred due to vandalism and arson, and the picture gets that much bleaker. Thus, its production capacity has been hugely dented as a result.

Furthermore, the violence caused grievous harm to human life, killing one and injuring over a 100 executive managers. The company would find it difficult to rally its troops after an incident of this nature. Mounting losses, damaged management- worker relationships and a band of various external and internal pressures have left MSIL vulnerable in an unforgiving market.

The Road Ahead:

Granted the fact that there existed major flashpoints of segregation when it came to key issues between the management and workers' perspectives, but violence of this nature cannot be condoned under any circumstance. There is absolutely no excuse for such acts that disrupt the industrial sanctity of a region in such a brutal manner.

The Haryana Government has already instituted an inquiry into the incident, while the company has set up an internal committee of its own to investigate the deplorable chain of events. For starters, the perpetrators ought to be dealt with suitably. Furthermore, negotiations are in order to resolve the ongoing conflict between the management and the worker's union. Despite the severity of the situation, MSIL can salvage something out of this scenario, provided its corporate honchos act with calibrated alacrity and pragmatism.

Only time will determine the fate of those workers involved in the fracas and whether MSIL can institute a framework to deal with incidents of this nature in the future.

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