A Live Project Report on Labour Unrest in HondaSubmitted in partial fulfillment of the requirements for the award of

the degree of

MASTER OF BUSINESS ADMINISTRATIONSession- 2011-13

MAHARAJA AGRESEN INSTITUTE OF TECHNOLOGY

(ISO 9001:2008 Certified and AICTE NBA Accredited)

PSP Area, Plot No. 1, Sector-22, Rohini,Delhi-10086Ph.: 011- 27582283

Website: http://www.mait.ac.in

Submitted To- Submitted By-

Dr. Sangeeta Malik Rahul Singh Koshiha Lal Aakash Saxena

Ankit Kumar

CERTIFICATE

This is to certify that the live project report titled “Labour Unrest in Honda” is an academic work done by “Rahul Singh, Koshiha Lal, Aakash Saxena, Ankit Kumar” submitted in the partial fulfillment of the requirement for the award of the degree of Master Of Business Administration from Maharaja Agrasen Institute of Technology, Delhi, under my guidance & direction. To the best of my knowledge and belief the data & information presented by him/her in the project has not been submitted earlier.

Dr. Sangeeta Malik

Project Guide

ACKNOWLEDGMENT

Research is a venture that requires cooperation of many people we feel pleasure in taking this opportunity to express our sincere regards to our mentor, Dr. Sangeeta Malik,without her guidance, valuable suggestions, constructive criticisms and encouragement throughout the course of the project the present shape of the work would not have been possible.

We wish to place on record our gratitude to Dr. N.K. Kakkar, Director Maharaja Agrasen Institute of Management, New Delhi for his continuous encouragement and advice which were of immense help. We are also thankful to all teachers and non-teaching staff of the institute for their kind help.

Rahul Singh

Koshiha Lal

Aakash Saxena

Ankit Kumar

CASE SUMMARYThe Gurgaon plant of HMSI had peaceful labor relations for the first few years after it was set up in October 1999. The management entered into labor contracts with individual laborers, which covered the basic wage structure and detailed parameters specifying the work conditions for workers. In December 2004, the workers at HMSI's Gurgaon plant started demanding that the management increase their wages commensurate with the company's growth in the market.

The management and the workers traded allegations and counter allegations on what the root cause of the dispute was. They blamed each other for the situation that ultimately took an ugly turn on July 25, 2005. The management held the workers responsible for indiscipline and for slowing down production, while the workers insisted that there had been no indiscipline on their part and that the management was bringing up this issue only to prevent the formation of a trade union at HMSI.

With their demands being rejected by the management, the workers tried to form a trade union and this resulted in a confrontation with the management. Fifty workers of the production team were suspended and four others dismissed in May 2005. Apparently there was a show of strength between the management and the workers.While the management alleged that the workers were resorting to 'go-slow' tactics and were threatening not to return to work until their colleagues had been reinstated, the workers alleged that the management was using pressure tactics such as victimization of active union members and a 'lock-out' to break the back of the union.

On July 25, 2005, the workers of the plant were demanding reinstatement of the suspended employees when some workers allegedly attacked policemen on the plant premises.This led to police intervention and a violent tussle ensued between the police and the workers in which workers protesting peacefully were also beaten up.

The police were reported to have overreacted and it was alleged that they had been overzealous in protecting the interests of the HMSI management, even without any direct request from the company's management (Refer to Exhibit I for some images of violence during the HMSI protest).

For companies, the incident brought to the fore the need to maintain sound industrial relations to ensure productive and profitable operations.

TABLE OF CONTENTS

Company Profile.

. CHAPTER 1.o Case Introduction.o What is the case about?o What has been discussed in this case?

CHAPTER 2.

o Case Objectives. o Company’s Strategy.

CHAPTER 3.

o Case Analysis.o Limitations.

CHAPTER 4.

o Conclusion.o Bibliography.

COMPANY PROFILEHonda Motorcycle and Scooter India, Private Limited (HMSI) is the wholly owned Indian subsidiary of Honda Motor Company, Limited, Japan. Founded in 1999, it was the fourth Honda automotive venture in India, after Hero Honda, Kinetic Honda Motor Ltd and Honda Siel Cars India.

The entry of Honda into the Indian market as HMSI began with the launch of the Honda Activa, a 100 cc scooter. A slightly modified trendier version of the Activa was soon launched, as the Honda Dio. Honda Eterno was launched thereafter to add to the portfolio of HMSI's scooters.

The Honda Unicorn was the first motorcycle released by HMSI. The Honda Shine has since been released.

Honda was the largest manufacturer of two-wheelers at the global level. HMSI was a wholly-owned subsidiary of Honda Motor Company Limited (HMCL), Japan. The Tokyo-headquartered HMCL was one of the leading manufacturers of automobiles and power products and the largest manufacturer of two-wheelers in the world, with more than 120 manufacturing facilities in 30 countries worldwide. HMCL was known to have excelled in the adoption of the post-Fordist production system (also called Toyota Production System). HMSI was established on 20th

October 1999. Its aim was to achieve this dream through production of world-class scooters and motorcycles manufactured at its state-of-the-art plant. The HMSI factory was spread over 52 acres. The initial installed capacity was 100,000 scooters per year, which was scheduled to reach 6,00,000 scooters by the end of 2005.

HMSI operated on principles, which were followed worldwide by all Honda companies. Maintaining a global viewpoint, HMSI was dedicated to supplying products of the highest quality, yet at a reasonable price for complete customer satisfaction. It aimed to produce technologically superior, efficient and reasonably priced two-wheelers, with Honda-tested technology, backed up with after-sales service of Honda’s global standard. Instead of being just vehicles of transportation, its products were intended to become vehicles of change: change in the way you work, the way you travel, and change in the way you live.

The company had about 3000 employees in all; of these 2000 were in the worker category––1300 were confirmed workers, and 700 were contract workers. About 1000 employees belonged to the supervisory and managerial staff. Besides, 700 persons were working as trainees and 300 were apprentices under the Apprentices Act, 1960. Almost every worker or

trainee held a certificate from some or the other ITI (industrial training institute) in India. All trainees normally got absorbed in the regular workforce after the training; whereas only about 15 per cent of the apprentices were able to get a job with the company after the apprenticeship was over.

Going by the region-cum-industry considerations, HMSI had the reputation of being a comparatively good paymaster. During the time when workers waged recent agitation, the company had increased the wages of each worker by Rs. 3000 per month. Thus, in October 2005, salaries for workers ranged from Rs. 8,150 for its unskilled worker to Rs. 11,200 for skilled worker, which included Rs. 2,000 towards house rent allowance.

EMPLOYEE WELFARE

HMSI had taken several initiatives in the area of employee welfare, which ranged from subsidized canteen facilities to attractive hospitalization reimbursement for all employees. Some of the key initiatives in this regard were as follows: Besides canteen, transport facilities to and from workers’ residences were provided at subsidized rates. The company had a sports club for employees’ use at Sukhrali village in Gurgaon, which had facilities for indoor games. Workers had been organizing matches with employees of other companies in different games including football, volleyball, table tennis, chess, carom board, badminton, tug of war and high/long jump. Two sets of uniforms, one company cap and one pair of shoes were provided to each employee every year; all employees including the managers wore similar uniforms.

HUMAN RESOURCE POLICIES

The Human resource policies of HMSI were in alignment with the philosophy of its parent company, HMCL. The latter considered itself as a unique organization as it claimed to have adopted some distinctive employment and production practices. Respect for the individual stemmed from initiative, equality, and trust. The company believed that it was the contribution from each individual in the company that was responsible for company’s success, and which would take the company into the future.

HMSI had a performance appraisal (PA) system for all its employees including those in the worker category. It involved interviewing of the person concerned by the section head and the shift incharge, on the basis of which PA was done on a rating scale. For the purpose of increment, workers were divided into five categories; increments ranged from Rs. 400 to 1400 per month depending upon the PA grade of an employee. The company announced all PA results and salary-hikes immediately on the end of the financial year.

Things were going smooth for nearly two years after production started, but for a series of unpleasant events.

CHAPTER 1

Case Introduction: The case study focuses on the Human Resource problems faced byHonda Motor Cycle & Scooters India (HMSI). The case discusses thevarious reasons which led to the dispute between the management andemployees of HMSI. It elaborates the incidents that led to the strike at thecompany that in turn resulted in HMSI workers being severely beaten upby the police. Labor strife and the management's inability to deal with iteffectively had resulted in huge losses for the company due to the fall inthe production level at the plant. In addition to this, the company also received a lot of negative publicity as newspapers and TV channels gavewide coverage to the violence of the action.

The case highlights the growing number of instances of clashesbetween the employees and the management of companies in India,which are often guided by external parties such as trade unions andpolitical parties.

What is the case about?

Labour Unrest:

A labour unrest is a social phenomenon of enormous complexity and it is very difficult to give any complete explanation of this phenomenon. It is a matter of controversy whether the predominant factors underlying labour unrest are economic or non-economic. It has been concluded that so long as income remained the all important means for satisfying human wants and needs, wage would continue to be major consideration in labour unrest.

Considering the nearing period of labour unrest with the recent cases of Honda and Maruti, it is the time to do root cause analysis and find out what are the possible reasons which lead to labour unrest so as to address these issues and untide the tide of labour unrest.

HMCL:

Soichiro Honda, a mechanical engineer, established the 'Honda Technical Research Institute' in Hamamatsu, Japan, in 1946. His idea was to develop and later produce small two-cycle motorbike engines.

Honda's first product, an A-type 50cc bicycle engine, was produced in 1947. In 1948, HMCL was incorporated with a capital of ¥ 1 million. Thereafter, the company started to design and produce lightweight motorcycles. Honda's first motorcycle, the D-type two-stroke 98cc, was produced in 1949...HMSI

HMSI was established on August 20, 1999, and a plant was set up at Manesar to manufacture two-wheelers for the Indian market. HMCL made an initial investment of Rs. 3 billion to establish the plant which had an annual production capacity of 200,000.

Labour Unrest at HMSI:

The Gurgaon plant of Honda Motorcycle & Scooter India (Private)Limited (HMSI) had peaceful labour relations for the first few years afterit was set up in October 1999. The management entered into labour contracts with individual labourers, which covered the basic wage structure and detailed parameters specifying the work conditions for workers. In December2004, the workers at HMSI's Gurgaon plant started demanding that themanagement increase their wages commensurate with the company'sgrowth in the market.

The conflict began in December 2004 after a manager allegedly hit a worker, who was said to be engaged in organising a union within the plant. Another four workers were sacked after they expressed their solidarity with their workmate. The official justification for the dismissals was "undisciplined behaviour in the factory”. The whole situation came to boiling point when the management sacked another 57 workers and nearly all the workers in the factory reacted by going on strike in June 2005. At the end of June 2005 the management replied by officially sacking 1,000 workers and locking out the strikers.

The management and the workers traded allegations and counterallegations on what the root cause of the dispute was. They blamed eachother for the situation that ultimately took an ugly turn on July 25, 2005.

The management held the workers responsible for indiscipline andfor slowing down production, while the workers insisted that there hadbeen no indiscipline on their part and that the management was bringingup this issue only to prevent the formation of a trade union at HMSI. Some analysts charged that the incident was fallout of the long term oppression and malpractices at the Gurgaon factory by the HMSI management. They alleged that HMSI's management had violated certain lawsrelating to the welfare of workers.

What has been discussed in this case?

The major issues that we have chosen for careful consideration and analysis are to:

Understand the factors that lead to labor unrest at a factory and the impact of such incidents on the employees and the company.

Study HR policies adopted by organizations to prevent labor unrest at the workplace.

Examine top management's role in maintaining a peaceful workingenvironment.

Analyze the role of external parties such as trade unions; politicalparties etc., in disturbing the working environment in a company.

CHAPTER 2

Case Objectives: To find out the causes of labor unrest in Honda manesar plant. Company had been suffering

a production decline resulting in a monetary loss of 1300 million. During the months of May and June, 2005.

To study the human resource policies and employee welfare in Honda. The company followed post-Fordist production system; which created stress for the workers.

Company’s Strategy:

WHAT WAS THE ACTION TAKEN BY HONDA:

According to an agreement brokered by Haryana chief minister Bhupinder Singh Hooda, on the day the strike ended:-

HMSI agreed to take in 4 dismissed and 50 suspended workers while workers agreed to resume duty from Monday and promised not to make any fresh demand for a one-year period.

The company also agreed to allow workers to retain the Labour Union, formation of which was the bone of contention and a major issue which led to the confrontation with the management. The workers will, however, not get salary for the period they were on strike.

The dismissed employees will also be giving a ‘separate assurance letter’ to the management, apart from the undertaking that all the agitators would sign before joining duty. In the undertaking, they would promise not to engage in any kind of indiscipline and also give an assurance that they would ensure normal production.

The workers also claimed that the company has promised to employ a family member of one of the apprentices who was killed during the agitation early in July.

In a statement issued that day, the company said the management has in consideration of the state’s industry in general and the welfare of the HMSI workmen agreed to resolve the current situation with certain one-time measures that would help in normalising overall situation and promote goodwill and harmony not just at HMSI but at the entire region as well.

CHAPTER 3

CASE ANALYSIS

WHAT COULD HAVE POSSIBLY GONE WRONG?

The management of HMSI had long denied the workers the right to form trade unions which is against the law.

Trade unions form an integralpart of industrial relations and aid in peaceful settlements between workers and the management. The management had obviously wanted tostay bureaucratic, denies the workers their rights and wanted to employ them as cheap labor. There have been charges that the workers were not given proper wages as per the prescribed norms and their welfare was not taken care of.

The trade union was formed only after the workers were pushed off the edge and very grave grievances were done to them.

The workers should have formed a proper workers’ trade union well before the unrest began to fight for their wages and welfare issues. The trade unions were apparently not united and unified in their ideologies and policies as they were influenced by different political parties.

Trade Unions were not following the proper policies.

Some of the workers had indulged in violence against the police and the management which should have been avoided as trade unions are meant for peaceful settlements.

The matter of the Japanese who kicked a worker was neverinquired and the four employees who came to his rescue were alsoterminated without any reasons. These issued were never dealt with.

WHAT THE COMPANY DID?

The management never once tried to find the root cause of the unrest .

The root cause analysis for the protests or the uprising was never done properly. They were only concerned about laying off the employees, getting them arrested and saving their faces from the media and the public.

The company staged a “lock-out” when it was pressurized instead of dealing with the issue.

And it obviously had the police in its pockets asthe police were overzealous, were completely in the interests of saving the management and involved in unnecessary violence against the employees.

WHAT COULD HAVE BEEN DONE TO AVOID?

HR policies say:-

1. The management should always look for the interestand welfare of the employees.

So, the management should have fixed proper wages, welfare benefits and other allowances to the employees in the first place. And if this had been done, all this uprising would have been avoided.

2. The management should have taken care of proper formation of trade unions.

When the workers felt aggrieved with their wages and benefits,they should have formed trade unions and taken the matter to the proper authority and should not have waited for the problem to grow and explode.But we should also notice that the HMSI management had denied the workers’ their rights to form unions.

3. Management is the soul responsible for the mis-management of their employees.

The management had apparently been involved in many malpractices related to the worker benefits. The management should have known that the word would eventually get out and create a huge hue and cry someday. They could have easily avoided this.The

alleged attack of the worker by the Japanese manager is agrave and sensitive issue of human rights violation. No manager can physically assault a worker at any point of time. And moreover a foreign national attacking an Indian could have become a global human rights issue. The management had been extremely negligent about this issue. Also, four other workers who had come to the assaulted workers rescuehad been terminated without any reason or notice.This is a highly sensitive issue and vehemently condemnable one that if taken to a court of justice could result in the complete closure of the company. But since the workers did not have a proper union, they did not know what to do and had staged protests.The management should have allowed the workers to form unions which would have resulted in peaceful talks and settlements and avoided all the dirty lock outs, layoffs and unrest.The workers should have taken the assault of the employee to a court of justice. They should not have involved in violence against the police even if they had been victimized.

SUGGESTIONS TO HMSI TO PREVENT SUCH INCIDENTS IN FUTURE:

Ensure that the workers are satisfied with their wages, benefits and welfare provided to them.

Encourage the workers to form trade unions for peaceful talks and settlements of disputes.

Respect all the workers equally and treat them as human beings. Avoid violence and abuse against the workers. Take stringent action against worker abuse. Avoid involving the police into the industrial disputes unless and until absolutely

essential. Try to have settlements with the workers rather than indulging in layoffs and lock outs. Prevent malpractices in worker benefits and worker welfare. Punish employees who defame the management with their unethical behavior.

HOW THE INDUSTRIAL RELATIONS WILL IMPROVE IN THE FUTURE IN HMSI:

IF, HMSI follows the suggestion that we have given above, then theindustrial relations in HMSI may improve gradually over the years in the following ways:

The workers may work in the interest of the management.

The workers would not involve in violent protests, uprising or strikes.

The workers would have a peaceful and likeable work environment.

The workers loyally may improve.

Attrition and turnover may reduce a great deal.

Productivity would improve which in turn would improve the profitability of the company.

The trade unions would help in peaceful resolution of grievances and disputes.

The company would feature in the good books of the public and the media.

The company would be considered a great place to work and would be considered as one of the best employers in the country.

A lot of recognition and award would pour in for efficient andeffective labour relations and employee management.

Certifications, rewards, titles and awards would galore.

TIME LINE OF EVENTS:

January 17, 2005 - A Honda official kicks a worker.

May 26, 2005 - AITUC leader gurdas dasgupta complains to Haryana chief Minister. May 30, 2005 - workers get unions registered, company dismisses four unions Office June, 27, 2005 - Dass gupta meets the prime minister of India after writing to him, July, 6, 2005- unofficial lockout, company willing to allow workers in if they want. July 21, 2005 unions asked why workers not allowed in despite giving Undertaking.

July 25, 2005 - 11.00 AM- about 3000 marching workers clash with people, Deputy superintend of police were beaten-up

1.30 P.M - workers told by police to go to mini- secretariat at gurgaon to submit memorandum

2.30 P.M –workers assemble there, over 500 policemen surround them and Beat up them

Understand the factors that lead to labor unrest at a factory and the impact of such incidents on the employees and the company.

Study HR policies adopted by organizations to prevent labor unrest at the workplace. Examine top management’s role in maintaining peaceful working environment.

ROOT CAUSE ANALYSISFrom the study of some of the strikes and lockouts over last 10 years, it is concluded that all the possible reasons can be classified into Five major heads. The potential problems can then be researched to find the root cause and correct it. The five heads are as follows: Monetary Political Legal Job Specific Others

The Blame GameThe management and the workers traded allegations and counter allegations on what the root cause of the dispute was. They blamed each other for the situation that ultimately took an ugly turn on July 25, 2005. The management held the workers responsible for indiscipline and for slowing down production, while the workers insisted that there had been no indiscipline on their part and that the management was bringing up this issue only to prevent the formation of a trade union at HMSI...

Violation of LawsSome analysts charged that the incident was fallout of the long-term oppression and malpractices at the Gurgaon factory by the HMSI management. They alleged that HMSI’s management had violated certain laws relating to the welfare of workers. It was reported that a worker had allegedly been kicked by a Japanese manager on the shop floor in December 2004. The services of four other workers who had come to his rescue were allegedly terminated.

Limitations

Money Constraint:

HMSI was established on August 20, 1999, and a plant was set up at Manesar to manufacture two-wheelers for the Indian market. Since it is located in gurgaon, visiting it required ample of time and money so this prevented the in-depth study of the case.

Time Constraint:

HMSI’s location is the prime factor as far as the completion time of the project is considered. Also, the in-depth study of Honda and the labor unrest required wide area coverage, the causes, management’s perspective, labor’s viewpoint etc. Since the project had to be completed in 1 month, which is very short span of time for all this, time factor also acted as a major limitation.

Limited information:

This project is based upon the secondary data. The information available over the internet may not be correct or may be only of a particular perspective. There are no proper articles available, that discuss the top level management’s, middle level management’s and the labor’s viewpoints, that can be used to get a 3D view of the unrest. Limited availability of the information required proved to be an effective constraint for the project.

CHAPTER 4

CONCLUSION

The Labour unrest in HMSI is a typical example how a small issuein the factory can turn out to be the reason a huge industrial dispute thatcould result in defaming the management in the worst possible way. Thecase also illustrates the importance of trade unions and how mandatoryThey are in the industries.

Also, human rights violation is a serious issue which needs awareness and proper grievance handling machinery to deal with. The workers should never indulge in violent practices. Lock outs and layoffsare never the best options to deal with industrial relations issues or Resolution of industrial disputes.

A foreign national assaulting an Indian could have easily become aglobal issue which luckily did not become grave. The media and thepublic would always be watching. The companies should always take a holistic approach when dealing with sensitive issues that involve Humanitarian and human rights issues and issues related to wages andwelfare of the employees that are under the purview of labour legislations in the Indian constitution.

The HMSI incident is a good lesson that needs to be learnt by all organizations on how to deal with industrial disputes, sensitive worker issues and labour legislation related matters.

BIBLIOGRAPHY

Books

Dessler et al (2008). Human Resource Management, Pearson Education

Snell et al (2010). Human Resource Management, Cengage Learning

Lepak, D.& Gowan M. (2009). Human Resource Management, Pearson Education.

Links

http://www.honda2wheelersindia.com/

http://en.wikipedia.org/wiki/Honda

http://www.economist.com/node/18621140