Labor Dispute Ends at India's Maruti

Oct. 2, 2011
Cost company $150 million in lost output

India's leading carmaker Maruti Suzuki ended a bitter month-long labor dispute with workers on Oct. 1 that cost the company nearly $150 million in lost output. The Japanese-controlled company and the workers at a Maruti plant in northern India had been at loggerheads since late August when the company locked out employees, accusing them of sabotaging cars on the production line.

"We are happy, everyone is happy that the strike is now over," said Maruti chairman R.C. Bhargava. "We have reached a settlement and (full) production will resume on Monday," Bhargava said after the two sides clinched an agreement following several hours of grueling negotiations.

The end to the dispute came after all the employees agreed to sign a "good conduct" bond, promising they would not sabotage production, before going back to work. "Everybody will sign the good conduct undertaking and 18 apprentices who were dismissed will be taken back," the company chairman said.

Maruti sells nearly half of all new cars in India.

A company spokesman said the standoff had led to a production loss of 22,000 cars worth $147 million. This came after nearly two weeks' worth of production was lost in a labor row in June, costing Maruti close to $93 million.

The South Asian nation is critical to Suzuki's fortunes as it is the Japanese company's biggest overseas market.

Maruti reported on Oct. 1 a 20.8% drop in monthly sales in September to 85,565, blaming the fall on the labor dispute.

"The disruption in production owing to the labor issue at the companys Manesar plant during September adversely impacted the sales numbers," the company said.

The labor dispute erupted as Maruti has been battling to boost its market share, which has shrunk to 45% from 55% in the past four years with global auto giants aggressively seeking to penetrate India's fast-growing vehicle market.

The company produces the Swift and A-Star hatchbacks, and the SX4 sedan at the Manesar factory, which employs 2,000 workers. The company continued to make some cars at the Manesar plant in Haryana state with the help of a few employees who had returned to work, supervisors, engineers and other trained people brought in by the company.

The company had alleged that problems were discovered during quality-control checks and included doors falling off and dents in car bodies but the workers had denied the accusations.

The Maruti Suzuki Employees Union (MSEU), which the company has refused to recognize in place of the existing house union, said it accepted Maruti's conditions for a return to work. "We are satisfied with all aspects of the settlement and we will sign the good conduct bond," said MSEU organizing secretary Arvind.

He said the dismissal of 44 permanent company staff has been converted into suspensions. However, company chairman Bhargava said that the 44 workers had been suspended pending the outcome of "legal proceedings."

Copyright Agence France-Presse, 2011

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!