Maruti chief to improve communication, end contract labour

After labour unrest forced Maruti Suzuki to shut down its Manesar plant, the company has decided to lift the lock out almost after a month and resume operations at the factory from today. In an interview with CNBC-TV18, the chairman of Maruti Suzuki, RC Bhargava said the suspended workers may try and jeopardise operations once again. Moreover, it would not be surprising to see the unions taking the matter to court, he added.

Further, Bhargava emphasised on the fact that Maruti has a zero-tolerance policy towards violence. Hence, the company is trying to do away with issues that led to the violent clashes. The contract worker system was allegedly one of the main reasons for the trouble and Bhargava acknowledges the fact that the system was not ideal. Moreover, the company is now trying to do away with the contract system completely. Here is the edited transcript of the interview on CNBC-TV18. Q: It would be naive to imagine that the troubles for Maruti Suzuki are over now that the operations have partially restarted at the Manesar facility because we are seeing protests by the workers who are being sacked and that's a large number, 500 of them. The entire belt is now coming out in support of the sacked workers. So, it would be too simplistic to assume that things will get back to normalcy starting today. Bhargava: I agree with you. I don’t think we ever imagined that merely lifting the lockout and starting partial production would mean that everything is normalised. We did expect and we do expect workers who have been discharged from the company to carry out protests.
We do expect that these people will try and influence the other workers either not to work or to support them. We have to deal with that. I think the local administration is also aware of what's going on and we have to together work to see that over time we normalize. Q: But there has been no indication of a strike given to you by the Gurgaon union because they have come out in support of the discharged workers. But has there been any indication that they would actually want a tool down or a strike, anything of this sort? Bhargava: No, we have no indication of any kind of production disruption or disruption of industrial action at the Gurgoan factory.
_PAGEBREAK_ Q: Are you anticipating any legal trouble because I know that you are using the Supreme Court order, past order as a precedence for discharging these 500 workers, discharged simplicator is what it’s known because the management feels that it has lost faith and confidence in these workers but, do you anticipate legal trouble on account of this? Bhargava: I wouldn't be surprised if they go to court because there are lots of trade unions, at least some trade unions who have obviously been backing these workers right from the beginning. For example, the first demand which was made when the strike took place last year was that they should form an independent union. It had nohing to do with Gurgaon and the application which was originally made by the workers did provide for affiliation.
So, clearly at that time there were some trade union which were motivating the workers at Manesar. Basically, Situ, All India Trade Union Congress (AITUC)I don't know which of these were involved and to what extent. The history of course is that these people have been trying to get into the Gurgaon union since the mid 90s. Q: But 500 workers being discharged are you certain that all 500 of them were involved in some fashion when the violence actually broke out on the 19th of July? Bhargava: The selection of these workers has been made on the basis of statements and evidence given by our own people who were in the factory at that time, about a 100 of whom got beaten up. The others who didn't get beaten up were also there because we have some 400-500 people. Q: So then the workers' claim that this is a one-sided approach does hold some water? Bhargava: We are not in a judicial proceeding. We are trying to determine to our satisfaction those who are responsible and we cannot take any risk. Our mangers and supervisors will not really feel comfortable and may not even go to work if a whole lot of these people were back in the factory.
Q: So it is a cleansing exercise, isn't it? Bhargava: It's more to get rid of these people who indulged in violence because the principle in Maruti right from the beginning has been that we can put up with all kinds of industrial actions and things but, violence is something which we will never tolerate.
It has happened in the past, we have got rid of people from Gurgaon also, who at one stage indulged in violence, beat up some of the other workers and we got rid of them. We will not at any stage compromise with violence. We do not think that we can run a factory with people who are believers in violence. Q: You talked about how Maruti will not compromise on the principle of safety and security of its employees and there will be no negotiation on that but, what about what is being seen as the capitulation of the management as far one of the key demands of the workers is concerned, that is regularising the contract work force. Maruti was planning to do that come March 2013, you have advanced that. So in a sense, the management has acknowledged that you were being unfair to the contract workers, were you not? Bhargava: We had acknowledged the fact that the contract system was not a good system going forward when we decided to change the policy and get everybody regularised by March 2013. It was before this trouble started. All that has happened because of this trouble.
It becomes natural to advance this because before taking back the contract workers it would make sense now to screen them and to do away with the contractors completely. Q: But you had to do this after your back was pushed against a wall? Bhargava: It is not that. This particular trouble had nothing to do with the contract system. Q: You acknowledged after the last strike that the contract-worker system was not working. But hasn't the system been in place at Maruti for close to more than a decade now? Bhargava: That's true. We realised that the system needed to change because we have witnessed that it has been one of the biggest causes of spoiling relations between management and workers. Q: But don't you follow the principle of same pay for the same work on the same production line? Bhargava: I agree. Normally, we collect as much information as we can about all our workers, but this is not done for contract workers as they are provided by the labour contractor. We have no say in selecting the workers and to my mind, this is the bigger problem. Q: India's largest car-maker is now going to regularise all contract workers. You are not going to have any contract workers on the production line. Will the principle of same work and same pay apply whether a worker is on contract or not? Bhargava: The principle of 'same-work, same-pay' applies to the extent of the tenure of service. The pay will be the same for the same work for workers with the same tenure of service. The common mistake is comparing a worker who has been working for 12 years with a worker who has just joined on contract. Q: This is going to have ramifications across the board for industry in the entire Manesar belt. The percentage of contract workers as compared to the regular workforce in most industrial organisations is more than 50% and in some cases, it is as high as 70%. How do auto companies get by with quoting seasonality as a factor for employing 70% of their workforce on contract? Bhargava: I really don't know how it is done. Right from the start, for about twenty years, there were no contract workers on the production lines. This contract-worker system became popular during the last ten years across industry and we wanted to try it out at our organisation to see how it worked.
_PAGEBREAK_ Q: Are you worried that this demand for regularisation will become the norm across the Manesar belt? Bhargava: It is very likely that this will happen. I think managements have to respond because this existing system of using contract workers has many flaws. I think the manner in which the whole industrial belt has been behaving towards workers' demands was not sustainable. Q: Is it not hypocritical for industry to talk about labour reforms when there is no initiative to remove the deficiencies in the current system? Bhargava: I have never argued that managements are not at fault. In fact, I have always said that labour trouble is never one-sided. Managements as well as the unions have deficiencies of some sort. It is not one-sided. Q: What held the management back all these years? For a decade, you worked with a deficient system, what were the restraints? Was is it the pressure of margins or was it the cost arbitrage that you continued to enjoy? Bhargava: We were acting in conformity with the system that was introduced a decade ago in Manesar, Gurgaon and other areas. We were amongst the exceptions that differed and about three years ago, we started looking at options to end the contract-worker system. Q: So what impact will the employment of a regular workforce have on the margins? Bhargava: The impact will be very marginal because the difference in salary is too small. I think probably the it will result  in better productivity. Q: How confident do you feel of being able to ramp up production quickly? Bhargava: Ramping up production will depend on attitude of the workers as they return to work. We are just starting today. However, this is not the best of times to start because of the heavy rains. Q: What about the local community? The khap panchayat has come out in favor of Maruti Suzuki. Do you believe that that the support of the local community is more important than that of administration? Bhargava: I think the support of the local community is the most important factor an industrial unit can possibly have. Sure, the local administration is required to maintain law and order in the broader sense. But the pressure of the village-elders is very difficult for workers to resist. Q: What kind of security system have you set up to ensure the 300 workers will return to their homes at the end of the day? Bhargava: That's where the local community will come into play. Leaders of the local community have assured us that that nothing untoward will happen. Q: What about the vendors? The vendor-ecosystem that revolves around Maruti is very strong. A lot of these vendors are listed companies and employ contract workers. Will they be forced to regularise their workforce? Bhargava: In due course of time, I think all of them will have to follow this system and this has been discussed with the vendors. Q: So what was the feedback of the vendors? Bhargava: I explained to them that it was important to should know their workers. Regularising the workforce will create pressure on the balance sheet for the moment, but it  will result in higher productivity and better commitment to the work. Q: While it maybe easier for Maruti to absorb the hit, how have the vendors absorbed the impact of the lock-out? Bhargava: Let us see. I think the vendors will find some way of doing it. They have to look for ways of reducing cost of their total operations.
_PAGEBREAK_ Q: When do you start recruiting afresh for the Manesar facility? Do you do have an available talent pool? Bhargava: We will select employees for the regular workforce from around 1,900 contract workers. After that we will select fresh workers needed to return to full capacity. Q: By when do you anticipate the regularisation process will be complete? Bhargava: The process will start on September 2. I am not sure of the schedule, but it will probably take three-to-four weeks to complete the process. Q: What is the view of the Japanese management regarding the transforming of the workforce from contract to regular? Bhargava: In Japan, they don't have the systemof contract workers. It is not knowm to them at all. They had agreed because everybody else was doing it and assumed that it was the Indian way of working. They are now supportive of what we are doing. Q: Have they expressed disappointment with the way in which the situation is being handled? Bhargava: No, the Japanese were as much a part of the introduction of the contract worker system as anybody else was. They have now seen what it leads to. The Japanese are quite willing to admit if something goes wrong and take initiatives to correct it. Q: Did you have this list of tainted workers even before the violence took place?
 
Bhargava: No. This list has been prepared on the basis of the actual evidence of people who were in the factory on that evening. Q: Has this list been submitted to the police as well? Bhargava: No. Q: Is the police conducting its own investigation? Bhargava: There is a separate list of people who we thought were involved in the violence which we gave to the police. That is different. This list of 500 workers is a new list prepared on the basis of those participated in the violence. Q: What are the other things that you would like to change in Maruti Suzuki? Bhargava:  Besides doing away with the system of contract labour, I would like to implement continuous and effective communication with all workers. Q: Do you believe that suffered? Bhargava: That's what Gurgaon was built on. I think to some extent there was a lack of effective communication at Manesar. Q: Why? Was it because of a sense of complacency? Bhargava: I think the management at Manesar just believed that because Gurgaon was being run so nicely and the same would happen automatically in Manesar. I think that was the mistake. We changed after the strikes last year and improved the communication system via monthly meetings organised by Siddiqui and MM Singh with the union and the workers. Q: But was it enough? Bhargava: It was not adequate. What bothers me is that all the grievances of the workers after the last strike were settled. To my knowledge, there were no new grievances. Q: Do you believe that to reduce the risk you would look at the possibility of the expanding operations in Gujarat? Bhargava: We are expanding operations in Gujarat. We have bought land there. Q: But there was a lot of talk that you would perhaps be looking at more land to ramp up your initial production… Bhargava: No, we have enough land in Gujarat for the next 10 years. Gujarat is very much part of our plan. All this talk about shifting is rubbish and has no grounds at all. We will go to Gujarat because as a pan-India car-manufacturer we have to increase our geographical reach. Q: When will you start operations in Gujarat? Bhargava: By 2015, I think. Q: You are committed to staying in Manesar unless another untoward incident takes place? Bhargava: Yes, but then that would mean that Manesar would have to be shut down. It will not be shifted, it will be shut down. Q: Is that decision final?  Bhargava: No, there is no such decision. It is just my personal view. But it's clear that if there is another repetition of this incident then something is very wrong in this place. How do you work in a place like this? Which manager would be willing to go back to that factory? I think that's going to be the more important issue if violence breaks out again in Manesar.