Maruti Udyog Limited:Industrial Unrest of 2000-01 (A)

Group E-9

A BACKGROUNDJoint Venture between Suzuki Motor Corporation and Government of India (50:50)Market share fell from 82.8% in 1996-97 to 61% 2000

5500 employees in 2000Productivity: 25 cars per employee per year in 1998-99 to 70 cars per employee per year in 1988Current MD Mr. Jagdish Khattar in 1999

MUEU: All employee representation

Small car

segment

Price sensitive

Over capacity

1981MUL established

as JV between GoI & SMC

1983Maruti 800 launched

1985-93Gypsy, Alto, Baleno,

WagonR, 1000 ,Omni & Zen launched

1986Exports begin

1988Productivity at 25

cars per person per year

SMC equity – 40%

1987SMC equity – 26%

1992SMC equity – 50%

1999Bhaskaradu retires

Khattar becomes MD

Market share – 61%PBDIT – 7.6%

Productivity at 70 cars per person per

year

1997Market share – 61%

PBDIT – 13.6%

2000-2001

TIMELINE (1981-2001)

PRE-AGITATION SCENARIO

• Strategy of “value-for-money” and lowest price to customers• Excellent relations between previous director and MUEU• Original incentive scheme

➢ linked to production ➢ Relative to productivity level of year 1988-89

• Incentive scheme was to be changed in March 1999, and the negotiation for new one started only in September 2000 (It was proposed to change the base year to 1998-99)

• Reasons:➢ Loss in Monopoly power➢ New entrants➢ Market share/PBDIT(as % of sales) went down

-Co-operation of MUEU in restoring normalcy in production-Incentive scheme as proposed on October 17-All MUEU members sign code of conduct undertaking-Legal action against 92 workers that were suspended/dismissed

-92 employees should be reinstated-Withdraw Code of conduct undertaking-Better incentive scheme (Based on Production, and not on revenue)-Better pension scheme

Man

agem

ent’s

4 p

oint

pac

kage U

nion’s Dem

and

MUEU initially rejected the offer

THE CONFLICT

MUEU couldn’t support the agitation due to • Its financial constraints• Lack of support from the

state• Rejection of petition by legal

entities among othersHence, an agreement was reached on January 2001

ManagementMUEU

Accepted the new proposed

incentive scheme

Signed agreement to

follow orders of company

Took back 46 of terminated employees

THE AGREEMENT

Oct 17, ‘00Mgmt. announces

new incentive scheme – monthly

salary increased from 22000 to 33800 Rs

Oct 13, ‘00MUEU demands Rs

1219 increase in monthly salary

Dec 26, ‘00Govt.

intervention

Dec 14, ‘004-point mgmt

proposal rejected by MUEU

Jan 9, ‘01Employees returned

to work

Oct 9, ’00Other trade unions

extend support

Oct 12, ‘00Employees boycott

production

May-Sep ‘00MUL employees interrupt work intermittently

TIMELINE (2000-2001)

• Stick to the planned timeline of incentive revision & keep MUEU informed in case of lapse

• Involve MUEU in next incentive revision decision making• Tune MUEU officials into the financial and strategic

ongoings in MUL’s business• Take assistance from impartial third-party mediators to

resolve exceedingly contentious points/issues

‘PREVENTIVE’ MEASURES

• MUL suffers from poor trust and an image of high-handedness• Incidents where employees were forced to work• ‘Good conduct undertaking’ broadly usurps employees’ right

to protest – forced obedience• Higher management’s political affiliations may be a factor

reinforcing this• MUEU may join other trade unions to boost its political power –

third party influences will complicate matters• Incentive issue only temporarily quenched, not extinguished –

may erupt at a more unfortunate juncture for MUL

‘CURATIVE’ MEASURES