India's top carmaker Maruti said Wednesday it has given workers at a plant where employees went on a deadly rampage a 75% pay hike as it seeks to mend labor relations.
Workers at the Manesar plant will see their monthly pay and allowances climb by about 18,000 rupees ($336) over three years, making them among the top-earning factory workers in the country.
The wage increase along with rises in transport and other allowances makes the deal work out to "an increase of 75%", said a spokesman for Maruti Suzuki, majority-owned by Japan's Suzuki Motor Corp. IW 1000/133)
A permanent worker's monthly pay packet now averages about 25,000 rupees, said the spokesman for Maruti, which is key to the fortunes of its Japanese parent, contributing close to a third of Suzuki's profit.
While wages had been increased, "labor costs will continue to make up 2.4% to 2.5% of total sales … it is in our business plan," said the spokesman, who spoke on condition of anonymity in line with company policy.
Wage Hike Follows Violence
The wage hike comes after workers in July chased supervisors at the plant with iron rods, killing a personnel manager and injuring close to 100 other managers.
The riot, unprecedented in the company's three-decade history, saw India's leading carmaker by sales lock out workers for a month at the plant and cost Maruti some $250 million in lost production.
Workers' representatives had said unhappiness over wages and working conditions led to the riot, along with use of lower-paid contract workers. Maruti has already said it is shifting to use of permanent workers.
The employees will also get other benefits such as interest-free loans and better health benefits, the Maruti spokesman told AFP.
"This seems to be a good settlement -- allowing Maruti to move forward and focus on production," Deepesh Rathore, IHS Automotive's India-based auto analyst, told AFP. Maruti's shares closed broadly unchanged at 1,314.25 rupees.
"This is not going to make much difference as a percentage of sales as the wage rise can easily be recovered by sales and/or price increases," he added.
The deal came after shareholders last month urged Maruti to improve labor relations at the plant, which has been beset by strife for several years, hitting profits.
Labor Tensions Hurt Sales
Sales slumped 41% in August from a year earlier due to reduced car output while profit plunged 23% in the last financial quarter.
The salary offer was being extended to workers at Maruti's other plant in northern Haryana state, Maruti added.
"We think the agreement is satisfactory," Maruti Udyog Kamgar Union General Secretary Kuldeep Janghu told AFP.
Seventy-five percent of the pay hike will come in the first year with 12.5 percent being awarded in each of the two succeeding years. The rise is far bigger than the 2009 settlement's six-percent increase.
Maruti fired some 500 workers it alleged were involved in the riot and has been slowly rehiring and building up output at the plant, which was responsible for 40 percent of the firm's output.
The spokesman said conditions were "getting back towards normality" and the factory was making 800-900 cars daily out of a 1,700 capacity.
"We're progressively making more cars and recruiting more people," he said.
Copyright Agence France-Presse, 2012