India's Top Automaker Demands Employees Sign 'Good Conduct' Pledge

Aug. 29, 2011
Production halted following alleged sabotage as labor problems persist at company that sells nearly half of all new cars in India.

Production at a Maruti Suzuki plant halted on Aug. 29 as India's top carmaker locked out its workers, demanding they sign a "good conduct" pledge following alleged sabotage, the company said.

The Japanese-controlled company said it asked all workers to sign what it called a "good conduct" bond, promising they would not sabotage production, resort to go-slow tactics or otherwise hamper output at its Manesar plant.

"Production is right now at a stop," said a company spokesman, who declined to be named, citing company policy.

It was the third dispute to affect production at Maruti in three months.

The 2,000 workers were not being allowed back into the factory, one of two operated by Maruti in the northern Indian state of Haryana, until they signed the pledge, the company said.

Workers denied the allegations of sabotaging production at the automaker, which sells nearly half of all new cars in India.

The company spokesman said 10 workers had been suspended and five fired last week for "sabotaging production and deliberately causing quality problems" at the Manesar plant, which rolls out 1,200 vehicles every day in two shifts.

The production problems were discovered during quality-control checks and included doors falling off and dents in car bodies, according to the firm.

"We have done no such thing. It is completely baseless," said Arvind Kumar, who is part of the unrecognized Maruti Suzuki Employees Union (MSEU).

In the three days to Aug. 25, the company produced only 1,570 cars, less than half of the planned 3,700, said a company executive who spoke on condition of anonymity. Of these, only 969 cars were cleared after quality checks.

Maruti produces the Swift and A-Star hatchbacks, and the SX4 sedan at the Manesar plant.

"The situation had reached a stage where it was directly harming customers interest and trust," the spokesman said. "Talks are on but it is a very serious matter if buyers' lives are at risk."

In June, 11 days' worth of production was lost, costing the company nearly $93 million, after workers downed tools demanding recognition of a new union and the reinstatement of dismissed workers.

In July, production was again halted for a day due to a labor dispute at the plant. But it reported earlier this month that sales had fallen by 25.3 % in July -- its sharpest ever monthly fall -- from a year earlier, hit by high interest rates which pushed up the cost of consumer car loans.

Fresh unrest "is a matter of concern", said Jagannadham Thunuguntla, head of research at New Delhi-based SMC Global Securities.

"Low-cost, skilled labor has been key to the success of India's growth story. If labor problems persist or spread across industries, it is not good."

Automakers like Honda Motorcycle and Scooter India, Hyundai Motor India and General Motors India have also been hit by bouts of labor unrest, with workers mostly demanding higher wages and better working conditions.

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!