Contract Workers' Strike

Case Details: Price:

Case Code : HROB104 For delivery in electronic format: Rs. 300;
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Case Length : 15 Pages 25 for Shipping & Handling Charges

Period : 2004-2005
Themes
Pub Date : 2008
Human Resources & Industrial Relations/ Labor Unrest/
Teaching Note : Available Collective Bargaining

Organization : Honda Motorcycle & Scooter India

(Private) Ltd.

Industry : Automobile

Countries : India

Abstract:

The case study focuses on the HR problems faced by

Honda Motor Cycle & Scooters India (HMSI). The
case discusses the various reasons which led to the
dispute between the management and employees of
HMSI. It elaborates the incidents, which led to the
strike at the company that resulted in HMSI workers
being severely beaten up by the police. Labor strife
and the management's inability to deal with it
effectively had resulted in huge losses for the
company due to the fall in the production level at the
plant. In addition to this, the company also received
a lot of negative publicity as newspapers and TV
channels gave wide coverage to the violence of the
action.

The case highlights the growing number of instances of clashes between the employees and the management of
companies in India, which is often guided by external parties such as trade unions and political parties.

Issues:

» 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 working environment.

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

Introduction

On July 25, 2005, the management of the Honda Motorcycle & Scooter India (Private) Limited, (HMSI), a wholly-
owned subsidiary of Honda Motor Company Limited6 (HMCL), encountered violent protests from workers that
disrupted production at their plant in Gurgaon7.

HMSI workers were severely beaten up by the police, and newspapers and TV channels gave wide coverage to the
violence of the action. The protest followed six months of simmering labor unrest at the HMSI factory in which the
workers also resorted to job slowdown8(since December 2004 when the workers' demand for an increase in wages
was rejected by the HMSI management).

Introduction Contd...

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'9tactics 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'10to 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.

Background Note

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...
Labor Unrest at HMSI

The 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 Blame Game

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...

Violation of Laws?

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 laws relating to the welfare of workers (Refer to Exhibit
III for laws related to welfare of workers in India).

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...

The Aftermath

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...

Could this Ugly Situation have been Averted?

Several factors can lead to a conflict between the workers and the management of any company, and as such,
companies should be prepared to trace the root cause of the problem and solve it. Industry experts opined that with
proper understanding of the industrial laws and causes of disputes, the management and the workers of any
company could avoid incidents such as the one at HMSI (Refer to Exhibit IV for the Root Cause Analysis for Labor
Unrest)...