The cost of converting 5,000 contract workers to permanent positions is expected to hike Maruti Suzuki’s annual wage bill by just Rs 80-100 crore.

If you compare that to a production loss of at least Rs 1,400 crore at the Manesar plant in July-August, was the trouble really worth it?

Could the issue not have been resolved without the loss of a life and injuries to many, ask analysts and industry experts. If indeed under-paid and dissatisfied contract labour was the core issue, as claimed by various quarters.

Put this in context, this year’s closure of the Manesar facility for 27 days cost Maruti at least Rs 1,400 crore, though analysts put the figure closer to Rs 2,000 crore.

Last year, it had lost Rs 2,500 crore on a strike over the demand for recognition to a union.

Deepesh Rathore, MD at IHS Automotive India, says that considering Maruti has already lost a lot of revenue, changing contract workers to permanent may prove an added, but necessary expense.

“If the impact is only about Rs 1,000 per car price increase, then the whole dispute was surely not worth the headache. They should have got rid of it earlier. For a company that sells a million cars a year, a Rs 100-crore increase in the wage bill can be absorbed easily,” he says.

Maruti has about 6,000 workers at the Gurgaon plant, half of whom are on contract. In Manesar, there are 1,028 workers now permanent (500 were recently dismissed) and 1,869 are on contract.

M. M. Singh, Maruti’s COO for Production, says that the move to convert contract workers to permanent was planned as the “mix was getting disturbed”. Between September and March next year, the carmaker plans to make about 80 per cent of the 5,000 contract workers permanent. The rest will have temporary positions for six-nine months, though with equal pay as the permanent workers.

“Earlier, we used to have only permanent workers, but this trend of contract labour came in the 1990s. We’re not happy with the situation and are looking at a mix where at least 75 per cent will be permanent and rest can be moved as per market demand,” he said.

Other reasons?

Top Maruti officials have suggested that the real reason for the workers’ discontent may be something else, but over a month after the violence, answers are yet to be found as to what that could be.

Says M. M. Singh, “We’re still finding out the real reason, let the SIT report come in and then we will know the answer. I don’t think the issue was only about contract labour.”

Without a true picture, various possibilities have been doing the rounds, such as the lack of proper housing, to the extent of blaming competition and ultra-Left elements for planning the July attack.

Some have also pointed to the lower average age of the Manesar workers than the Gurgaon counterparts making them more susceptible to the sway of outside elements working against Maruti.

Suzuki Motor Chairman Osamu Suzuki indicated that the true picture could take six more months to emerge as the special investigation team (SIT) of the Haryana police finishes its work.

Whether Maruti can afford the wait is another issue.

roudra.b@thehindu.co.in

(This article was published in the Business Line print edition dated August 28, 2012)
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