Riots at Maruti Suzuki halts production

August 17, 2012

Industrialisation has a bloody history of battles between workers and owners. Are the riots in an India car plant a re-run of industrial history?

At least 90 people have been arrested after violent clashes between workers and managers at a Maruti Suzuki factory near the Indian capital, Delhi. A senior factory official died and more than 85 were injured, including two Japanese nationals in the riot. Maruti, India’s biggest car maker, has halted production at the factory.

The blame game

Managers and workers blame each other for starting the clashes, which follow months of troubled labour relations. The violence at the vast factory in Haryana state is believed to have erupted after an altercation between a factory worker and a supervisor.

Workers reportedly ransacked offices and set fires at the height of the violence. It escalated when they tried to take disciplinary action against the employee as other workers protested and blocked all exit gates, preventing senior executives and managers from leaving the factory. The union denied responsibility for the violence and told local media that it was triggered by “objectionable remarks” made by the supervisor.

Leniency a reason for the riots?

The Times of india suggested leniency towards Union bosses was ‘reason for rift among staff’

it appears now that the management of the auto giant may have made a major miscalculation in handling a labour incident only weeks before violence broke out in the factory. [Union leaders were treated in a more lenient way than workers after aggression towards a supervisor].

Meanwhile, the plant remains closed. The company maintains that it is giving high priority to employee safety and is considering several initiatives to scale up safety in the Manesar plant. “In this direction, the company is exploring the best safety measures in terms of equipment, personnel and on ground training for the employees,” the company said in a statement.

The act of unprovoked violence [on July 18th 2012, but July 21st according to some news reports] started without any specific industrial relations issue.

A backdrop of financial losses

The story occurred against a backdrop of losses attributed to increased royalties to Suzuki.

The main reason for the fall was a rise in royalty payments to Japan’s Suzuki, which holds a large stake in Maruti. Analysts said the increase would also affect the carmaker’s future earnings.one observing: “Raw material costs have been easing but the effect of higher royalty payments will be there in the next few quarters”.

Outside of the increased payments to Suzuki, Maruti performed well during the quarter, “The sudden change in royalty charge overshadows an otherwise strong operating performance,” said Chirag Shah at Emkay Global Financial Services.

A similar pattern of violence

Reuters reported [6th August 2012] that other foreign owned car makers such as Hyundai, and Honda have also experienced troubles at their plants in recent years.

“This is definitely sending a wrong message. Investors will be reluctant,” P. Balendran, vice-president at General Motors’ Indian unit, said of the Manesar violence. “The need of the hour is flexible labour reforms. In 2012 you cannot afford to have a rule which is applicable … from 1956.”

A bone of contention

India’s labour laws, some dating to the 1920s, make it difficult for large companies to fire permanent workers, forcing companies to hire large numbers of contractors – a bone of contention with many unions.

“We knew that something of this sort might happen sooner or later,” said Balendran. “It happened to Suzuki today, tomorrow it could happen to us.”

Latest news

Regardless of the reported stringency of India’s labour laws, the company plans to make 500 employees redundant and will re-open the plant shortly [August 21st 2012]. The challenges to leadership are likely to continue.


Volkswagen News: Is it Jetta Launch or Jettison Plans?

June 22, 2010

Volkswagen parties in Times Square for the launch of the 2011 Jetta. But is this the biggest story around for the German giant?

Volkswagen went in for a sexy launch of the new Jetta in Times Square this week [June 2010]. The Square was turned into a beer garden for the event, with grass and sand shipped in. I’ve never seen sand as a big feature in beer gardens in Germany, and the music did not quite capture the Oompa Oompa Gemutlichgeit spirit either.

VW chose to launch the car using pop diva Katy Perry. Dressed in a skin-tight, low-cut dress and high heels that kept the cameras clicking, Perry took the stage while three new Jettas — one behind a makeshift moat — remained off on the margins. Perry’s presence might leave some to think the target market for the new Jetta is 14-year-old screaming girls. They certainly packed the square along with twenty- and thirtysomethings who danced and sang along. But Perry was there to generate the party vibe New Yorkers expected and to cast this new Jetta in an urbane, fun and distinctly American light.

American or what?

The attack on the American auto market by incomers has intensified with the shift in public interest away from the older and larger models which once dominated the sector. Toyota, Holda, and Volkswagen are serious players. VW seems inclined to differentiate itself from the Toyota strategy of appearing to make all-American cars for the US market. The brand image on offer in Times Square may be sending mixed messages. In any event, in light of Toyota’s recent problems they may also be signalling ‘we aren’t like those other foreign auto-companies like Toyota’.


Another VW story

But is there another VW story bubbling along? Maybe there is. Far from the glitz of Times Square, rumors are growing that Volkswagen is up to something big with Suzuki. Bikers have been blogging the possibility of something very new on two not four wheels. http://www.automotorblog.com/rumors-from-volkswagen/ . For this community, the story is as sexy as Katy Perry.

According to Dr Thomas Kirchmaier, a distinguished media commentator with long experience of the automotive industry, and Lecturer in Strategy at Manchester Business School “The VW Group is going partiularly strongly in China’

Rumors involves plans for the company to set up a new manufacturing plant in Asia http://www.businessweek.com/news/2010-06-16/volkswagen-plans-significantly-higher-operating-profit-sales.html, and that it its interest in electric cars may be an ‘e-lusion’ and that commitment to all-electric vehicles may be jettisoned.

Or there may be further developments in the dynastic struggle involving the inter-related Porsch and Volkswagen famiies. Leaders we deserve had been noting the possibility of a merger since 2007. The ‘reverse takeover’ occured shortly after State Law was revised, arguably to permit it.

Dr Ferdinand Porsche designed the original Beetle in 1936, and his grandson, Ferdinand Piech, is chairman of VW and the controlling shareholder in Porsche. Wendelin Wiedeking, chief executive of Porsche, is a member of the supervisory board of Volkswagen …In November 2007, rumours suggested that Porsche intended to acquire VW, and incorporate the models under the Porsche brand through a holding company. The powerful unions at Volkswagen sent a signal of discontent, with work stoppages, including 40,000 workers at the main Wolfsburg plant [Wednesday Oct 30th. 2007]

Business Lessons

There are plenty of business lessons here worth reflcting on. They will appeal to corporate strategists, environmentalists, business leaders, marketing executives, petrol heads, and (I almost forgot), teenage fans of Katy Perry.

Acknowledgements

Image of Katy Perry via starpulse


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