Maruti has suspended production at its Manesar plant, near Gurgaon in the Indian state of Haryana, following violent clashes between workers and company management.
IHS Global Insight Perspective | |
Significance | Maruti Suzuki has suspended production at its Manesar plant, near Gurgaon in the Indian state of Haryana, following violent clashes between workers and company management yesterday evening (18 July) that resulted in the death of one person and injuries to at least 90 executives. |
Implications | Local police have lodged a first information report (FIR) against more than 80 workers, including union leaders, who have been charged with murder, attempted murder, causing grievous injury, and rioting. More arrests are likely in the next 48 hours. |
Outlook | No damage was caused to the plant's production line or facilities. The factory will remain closed today (19 July) and the company is unsure when it will be able to resume operations there. |
Maruti Suzuki has suspended production at its Manesar plant, near Gurgaon in the Indian state of Haryana, following violent clashes between workers and company management yesterday evening (18 July) that resulted in the death of one person, reports the Hindu Business Line. At least 90 officials have been sent to hospital with injuries, including a few from Japan. "The police have taken charge of the premises…One body was recovered from the premises, it is charred beyond recognition," said Puneet Dhawan, spokesperson for Maruti. The company management and workers have blamed each other for the violence. There is currently heavy security at the plant.
According to Maruti, the clashes started after the company decided to take disciplinary action against a shopfloor worker who allegedly slapped his supervisor. However, the workers' union has accused the supervisor of making objectionable remarks to the shopfloor worker. Workers at the plant then allegedly turned violent, stormed a conference room, and beat up senior officials from the company. The workers then apparently prevented management from taking disciplinary action against the shopfloor worker and stopped executives and managers from leaving the plant. The workers allegedly attacked executives and managers after talks with management failed. Five sections of the Manesar plant, including a control room, were set ablaze during the violence. When the fire was doused, the charred remains of a body were found.
Local police have lodged a first information report (FIR) against more than 80 workers, including union leaders, who have been charged with murder, attempted murder, causing grievous injury, and rioting. Haryana public works minister Randeep Singh Surjewala said that a "political conspiracy" cannot be ruled out. More arrests are likely in the next 48 hours, he added.
Outlook and Implications
Maruti has said that no damage was caused to the plant's production line or facilities. Suzuki, the parent company of Maruti Suzuki, said in Japan that the Manesar plant will remain closed today (19 July) and the company is unsure when it will be able to resume operations there.
Labour unrest is nothing new at the Manesar plant. Last year, the facility witnessed three strikes, which affected operations at the plant for a total of 60 days and caused the company a cumulative production loss of 83,000 units. In June 2011, the Manesar plant was shut down for 13 days, followed by another 33 days in August and September and a further 14 days in October (see India: 24 October 2011: Maruti to Tackle Backlog, Resumes Normal Production at Manesar Plant). Labour unrest cost the company more than USDD500 million in lost production last year. However, the latest incident appears more serious as last year's strike action was related to workers' rights to form a union and never turned violent. The workers' union, the Maruti Suzuki Workers Union (MSWU), has accused the company management of taking coercive measures against the workers and has demanded intervention from the government. The union is threatening to stop production until an amicable solution is reached.
The Manesar plant, which became operational in 2007, has an annual production capacity of 550,000 units and accounts for nearly 40% of the total production capacity of Maruti Suzuki, India's leading carmaker. The plant, which operates two units, makes top-selling models such as the Swift, Ritz, SX4, and the recently introduced Ertiga. The company is setting up a third unit at the plant, which will increase annual capacity by another 250,000 units. The Manesar plant is becoming more and more important for Maruti as the company is gradually shifting vehicle production from its old facility in Gurgaon. However, the frequent strikes at the plant are threatening to put Maruti's plans in jeopardy.
Meanwhile, in other developments, Maruti, along with its parent company Suzuki, is reportedly working on a small two-cylinder 800cc diesel engine that could be equipped in the next-generation A-Star (known globally as the Alto), which has so far been unable to make any major inroads in the country. The engine, codenamed the E2, is expected to offer 40 horsepower and deliver fuel efficiency of 25–30 km/l. The diesel engine project is currently undergoing testing and validation in Japan and may come to India for indigenisation in 6–12 months' time. The engine is expected to be ready to be rolled out by 2015 in India. If Maruti manages to launch the new diesel 800cc option with the desired requirements at a competitive cost, it could prove to be a great success in the market (see India: 3 July 2012: Maruti Suzuki Working on 800CC Diesel Engine with Parent—Report). Meanwhile, Maruti is working to introduce a new 800cc car in India, for which it reportedly plans to start commercial production in July or August at its Gurgaon facility. The model is scheduled to hit the market in the key Diwali holiday season, around October (see India: 27 June 2012: Maruti Suzuki to Launch New 800CC Car in Holiday Season, Commercial Production to Start Soon—Report).