Gujarat holds key to Maruti Suzuki’s labour crisis
Maruti Suzuki, Suzuki's Indian flagship, is beset by labour unrest. Problems at its Manesar plant also echo squabbles at Tata Motors in West Bengal.
But an enterprising Gujarat may come to Suzuki's rescue as it did for Tata.
Suzuki's Indian venture should be a source of pride. The Japanese automaker was the first foreign player to make an impact through it's 1981 joint venture with government-owned Maruti.
Suzuki now owns over 50 per cent of the equity, with the government having sold its entire stake in 2007.
And the company is the nation's market leader with its India-listed business valued at close to $6 billion. But it has been dogged by labour disputes.
This week a riot at its Manesar factory saw an personnel manager die and around 100 employees, including two Japanese nationals, injured.
And the horrific episode is not a one-off. Labour unrest cost the company more than $500 million in lost production in 2011.
India can ill afford its automotive sector to slump. It's one of the few success stories in Indian manufacturing. With no caps on foreign direct investment, new entrants have spurred competition and exports already make up 15 percent of output.
The problems for Suzuki have some parallels with a Tata Motors saga of 2008. Two years of agitation by farmers over land compensation halted production at the original plant in West Bengal, and was only resolved when Gujarat's Chief Minister Narendra Modi famously convinced Ratan Tata to shift the factory to his state.
Modi is now on a similar mission with Suzuki. He flies to Tokyo this weekend in an effort to get them to shift production to Gujarat.
Such competition between states is useful. It can help to keep in check the political forces which tend to make some sectors uncompetitive.
And it may be just the fix Suzuki needs. But there is risk that it will further fuel inequality between India's industrial hubs and its under-developed hinterlands.
CONTEXT NEWS
- A riot at the Manesar factory of Maruti Suzuki, which is majority owned by Tokyo listed Suzuki Motor Corp, shut the plant on July 19 and inflicted the biggest loss on its share price in almost two years.
- Labour unrest at the factory, where the trade union has accused India's biggest car manufacturer of anti-worker and anti-union activities, cost the company more than $500 million in lost production in 2011. Wednesday's trouble flared after a disciplinary incident against one employee.
Company officials say workers began to attack senior management during discussions, while the union said its representatives were attacked first.
Human resources manager Awanish Kumar Dev was burned to death during the riot, and the Japanese manager of the factory was also attacked, the company said.
- Shares in Maruti Suzuki, whose sales fell 11 percent in the fiscal year to March partly as a result of the protracted strikes, fell 8.9 per cent on July 19, their biggest daily percentage drop since July 26, 2010.
Suzuki shares closed down 3.8 per cent in Tokyo, at their lowest level since February 2009.
- The Chief Minister of Gujarat, Narendra Modi is leaving for Japan on Sunday with the aim of convincing Suzuki leadership to substantially scale production at its Gujarat plant from the existing 250,000 cars every year, the Business Standard newspaper reported on July 20.
Comments
See the history of Haryana,
S.S.Inamdar
21 Jul 2012 - 10:43
See the history of Haryana, UP, Bihar, they are all states which run on poor & uneducated people, see what is there mind set, Governements of this states are not even matured enough , why industrial despute in Maruti's Manesar Plant is altogather related with workers mentality, we cannot support this kind of violance movement of any worker unions in India, in fact we condemn this kind of bloody movement, but if see the history of above states they are use to it, they can terminate preganancy of women child very cold bloodedly, its normal there, if Japanees are running Maruti's Plant in Manesar, they will find very difficult to impose there rules in Manesar plant, they have already experienced it in this week itself, now they have to dicide very quickly to shift there plant in eighther Maharashtra or Gujarat, in Maharashtra they will get everything they want in the evening as they were getting in Haryana & Delhi, I suspect they will not get it in Gujarat......let them decide, but when Gujarat CM Narendra Modiji is quick enough to catch the opportunity in comming days he will do whatever possible to grab it, however no one can expect same from Maharastra CM & Dy.CM, they are as lethalgic as there public in genaral. we can only wish Maruti's best fortune & wishes, & most importantly Maruti Management also needs to improve on the issues of labor handling. if they wish they can take examples from Bajaj auto, Telco who are in the similar kind of business, & well experiences handling all kinds of labor issues delicately, sensitively & sucessfully.
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