Unions need to think jobs, not just wages
Toyota Kirloskar Motor Ltd may or may not be running its plant with contract workers and apprentices, the way the unions are alleging, but it may want to look at what fellow Japanese firm Suzuki did when faced with a similar labour unrest in 2000. Maruti Suzuki simply asked its vendors to lend it their workers—along with these workers, its own engineers and contract workers, Maruti managed to produce the same number of cars and even got the JD Power customer satisfaction award for that year, demonstrating that the full-time workers could, if need be, replaced without too much a problem.
Another Maruti lesson for Toyota’s management is that good conduct agreements of the sort it wants workers to sign tend to get abused—union leaders convince workers this is a ploy to take away their rights. In any case, since the good conduct agreement is just reiterating that workers will follow standing orders—everyday do’s and don’ts that are agreed upon by the management, the unions and the labour commissioner—why not just get it from the unions instead? In the case of Maruti, when the 2000 strike went on for too long, Prime Minister Atal Bihari Vajpayee suggested to Maruti—informally—that it would be tactical to get the undertaking from the unions instead of individual workers. Maruti did just that, and while other demands were negotiated, this is what really cooled things down.
That said, unions need to keep in mind today’s different reality. Given the current slump—passenger car sales grew 1.7% in FY12, contracted 7% in FY13 and another 4.6% in April-February FY14—managements are not in a position to give generous pay hikes. PAT margins for Hero MotoCorp fell from 9.46% in March 2013 to 7.66% in December 2013, and from 9.49% to 6.41% for Suzuki—they rose from 16.46% to 18% for Bajaj Auto. Also, managements are simply not adding workers at the pace at which production is growing. In the case of Maruti, while production has risen 3.4 times over the last decade, the number of workers has risen just 2.5 times; for Bajaj Auto, production rose 76% between FY08 and FY12, while the number of employees fell a tenth. While Tamil Nadu has announced a policy of declaring automobiles as a public utility to prevent flash strikes—how the Ford agitation pans out will tell us whether the solution is working—the problem is across industry. As a result, Crisil points out that while 12 workers were hired for every million rupee of manufacturing GDP in FY05, this is down to around 7 today. A recent McKinsey study points out that states with industry-friendly labour laws had 35.3% of their non-farm employment in 2010 housed in the organised sector versus 23.2% for states which had less labour-friendly policies. And a recent Oxford study, on the cover of The Economist, points out that humans can be replaced by machines in about 47% of occupation categories, with telemarketers and accountants most at risk. That’s a sobering reality.