06 February 2020 13:34:15 IST

Honda needs to end imbroglio and get production back on track

Tell us how you would sort out the industrial relations issues with contract workers at the HMSI plant

November 5, 2019 started like any other day for the workers of HMSI (Honda Motorcycle and Scooter India) plant in Manesar, Gurugram district, Haryana. But as the workers headed towards the plant to report for duty, some of them were stopped at the gates. The management prevented 200 contract workers from entering the plant, and asked them to go on leave for three months. The workers started protesting and, soon, others joined them. A total of 2,000 contract workers went on a tools-down strike.

The Indian automobile market had been facing tough times and both the car and two-wheeler markets were adversely impacted by sluggish growth in the economy. The two-wheeler market had witnessed a decline for seven continuous months and, in the first nine months, it fell by 10 per cent. HMSI, the second largest player in the market, saw sales of its scooters fall by 21 per cent and that of motorcycles by 13 per cent. In October 2019, HMSI’s sales dropped to 517,808 units from 521,170 units in October 2018.

The slowdown prompted the company to cut down production at the Manesar plant, which produced 3,000 vehicles a day. The management announced that: “Based on demand fluctuations and production adjustment, 200 contractual members whose term had been completed are relieved from their work. Necessary recruitment will be considered on the basis of future market requirements.”

By November 7, the permanent workers also joined the demonstration against the management, and 1,800 workers remained inside the plant, holding demonstrations.

Honda workers protesting against the lay-offs


The workers’ grievances

According to the workers union, HMSI Manesar plant had 1,900 permanent workers and 2,500 contract workers. The workers union president said that many of the workers who were asked to leave were with the company for several years. The workers said that in August the company had removed 700 contract workers, and promised to reinstate them in November. But it failed to keep the promise, and only retrenched more workers. The members of the union reported that some of the retrenched staff had their contracts running till March 2020.

HMSI said that due to the economic slowdown and demand fluctuations, production had to be cut down, prompting it to reduce manpower. The head of the workers union argued that production at the Manesar plant fell by half, while the company’s other plants were functioning normally. (The other three plants were located at Tapukara in Rajasthan, Narsapura, Kolar in Karnataka and Vithalpur, in Gujarat).

The workers continued their protests and demanded that the retrenched workers be reinstated, failing which they wanted a compensation of ₹1 lakh for each year of service rendered by the retrenched workers. The workers demanded regularisation of all the workers who were employed for more than ten years.

Closure of assembly lines

Meanwhile, the workers who occupied the plant refused to vacate it. Negotiations between the union leaders and the management failed to make any headway and, on November 11, the company closed down the plant, including two assembly lines for scooters and one assembly line for motorcycles, indefinitely. It issued a notice saying, “Due to the prevailing IR (industrial relations) situation, plant operations have been suspended and the plant will remain closed till further intimation.”

The company said that with contractual workers sitting in the premises, normal operations had to be stopped. The company claimed that the shutdown would not have any impact on the production as the other HMSI plants would make up for the lost production.

Saibal Maitra, Head of the Manesar plant, said that the union was urging the contract workers to continue the strike and sit inside the premises, whereas the union had no role to play between contract employees and the contractor who employed them. HMSI employed contract employees from three contractors. Some workers reported that the private contractors were forcing them to rejoin work. The contractors asked the workers to get a clearance certificate and sign a new contract to rejoin work. This was the system prevalent among contractors, due to which the workers were not regularised and remained on contract even after working for several years.

Stay order sought

The management moved the court asking for a stay order on the strike and seeking police protection. The Gurugram-Manesar belt had been a hotbed of labour unrest for many years, and there had been instances of things getting out of hand in the past. Widely publicised instances of earlier violence include the labour unrest at HMSI in July 2005 that resulted in workers being severely beaten up by the police, attracting a lot of criticism for HMSI. Another escalation of violence at the Manesar plant of Maruti Suzuki India Ltd in July 2012 led to a rampage by workers, resulting in the brutal murder of a General Manager (HR), and left more than 100 injured.

The workers of HMSI vacated the premises of the plant on November 19, after they were given certain assurances from the leaders of the central trade unions. On the same day, the company suspended the HMSI employees’ union chief along with five others for allegedly instigating the contract workers.

With the suspension of employees and with no signs of settlement emerging even after ten days, on November 20, 2019, workers from other automobile units in Gurugram joined the workers from HMSI to protest at the office of the Deputy Commissioner. They alleged that HMSI and other companies were using the pretext of economic slowdown and slump in demand as an excuse to fire the workers. They also contended that the government was not paying heed to the plight of contract workers.

Future of contract staff

On November 22, Saibal Maitra served a notice to all the permanent employees asking them to join back their duties between November 25 and 28, after signing a good work/ good conduct undertaking. The workers joined duty, but lodged a complaint to the labour department about being forced to sign such an undertaking. The notice from the company did not mention anything about the contract staff. Many workers opined that the contract staff should not have been evicted from the plant, as it had helped the company resume production without resolving the issue.

On November 26, HMSI restarted operations, with the permanent employees rejoining work. Union members, however, claimed that it was not possible to resume production only with the permanent staff. While the future of the contract staff remained in a flux as they continued their protest at the gates of the plant, Saibal Maitra needed strategies to put the plant back on track.

What you need to do

You are entrusted with the responsibility of assisting Saibal Maitra in the smooth running of the Manesar plant.

1. Could the labour unrest and subsequent stalemate at HMSI have been prevented? How?

2. What would you suggest to Saibal Maitra to ensure smooth production? Should he reinstate some of the contract workers? Should he reinstate the union leaders whom HMSI had suspended? Or should he stick to the original decision?

3. If you were asked to reinstate only those contract workers who are necessary to resume production, how would you go about the job? How would you attend to the challenging task of convincing the irate contract workers who are protesting at the gates? How would you persuade the union members? What would you do to improve the morale of workers at the plant?

Send in your answers to the above questions to blcasestudies@thehindu.co.in not later than midnight of March 2 . You can work in teams of maximum two students, though solo entries are accepted too. Entries should be a maximum of 800-850 words long. Read the detailed contest rules on the Case Studies page.

Indu Perepu


Debapratim Purkayastha

(Indu Perepu is a Research Faculty and Dr Debapratim Purkayastha is Dean, IBS Case Research Centre, Hyderabad. This case was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.)