Chennai/New Delhi: India’s biggest car maker Maruti Suzuki India Ltd set a precedent last month when it raised wages by 75% and approved a housing plan for workers, seeking to improve relations with its workforce after labour unrest led to a burst of violence in July that left one executive dead and led to a month-long lockout of its Manesar factory.
Now, employees of other auto makers are seeking comparable benefits, putting pressure on their managers at a time when they are struggling with slowing sales.
India’s No. 2 car maker Hyundai Motor India Ltd, biggest two-wheeler company Hero MotoCorp Ltd and Honda Motorcycle and Scooter India (Pvt.) Ltd are already in talks over wages with their workers’ unions.
United Union of Hyundai Employees (UUHE) is seeking a 45% increase in the salaries of permanent workers spread over the next three years.
“We are negotiating for a 15% hike every year for the next three years, and asking for a package including various allowances worth over Rs.1.5 lakh a month,” said G. Vinayagan, president of UUHE. This, he said, will add Rs.15,000-20,000 to a worker’s monthly gross salary over three years.
Workers at several auto makers have walked off the job in recent years to press demands for higher wages, improved working conditions and pay parity, among other things.
At Maruti’s Manesar plant in Haryana, where workers have gone on strike several times in the past couple of years, a senior official was killed and at least 100 were injured in a riot by workers on 18 July. The plant reopened operations in August and announced the wage hike in September.
A spokesperson for Hyundai Motor India, a unit of South Korea’s Hyundai Motor Co., said the Maruti Suzuki wage settlement would have no impact on the negotiations under way with its own union.
“We are in the process of finalizing our wage settlement and it will be competitive and one of the best in the industry once concluded,” said the spokesperson.
Wage discussions at Hyundai began in April 2012.
Slowing economic growth, high borrowing costs and fuel prices have taken a toll on auto sales, which have been sluggish this year.
Still, an auto industry analyst at a leading brokerage said he doesn’t expect wage hikes to make a big dent on the margins of auto makers.
“Maruti’s salary increase so far is limited to 2,000 employees, which will have an impact of around 25 bps (basis points),” said the analyst, who requested anonymity because his company policy bars him from speaking to reporters. “As and when they revise salaries of the entire 8,000 workforce, the impact will be 80-100 bps. Even that is not significant as that could be mitigated by increasing prices of the cars by 1%.”
He said other companies such as Hero MotoCorp. would be in a similar situation.
“What it will add on is that it will bring stability to production with good labour relations,” he said.
Another sector analyst, also on condition of anonymity, said it was in the interest of the auto companies to heed the demands of workers.
“Even during last year’s unrest at the Manesar plant, we were telling the company to increase the wages to solve the problem as the impact of such an increase was nominal on margins,” the analyst said. “But look what has happened. The company suffered a revenue loss of Rs.4,000 crore while increasing wages would have increased the wage bill by only Rs.150 crore in three years time.” For most car companies, the wage bill is in the range of 2-3% of their sales. Following Maruti’s move, auto industry workers are optimistic of a bigger raise than they would have otherwise expected.
“We are all eagerly waiting for the wage hike. We hope we get a good hike of Rs.24,000,” says Guru Ragavendran, a line relief worker at Hyundai who takes home a salary of Rs.33,500 a month. He has been with the company for 11 years.
Workers at India’s top two-wheeler companies Hero MotoCorp. and Honda Motorcycle and Scooters India have submitted demand notices to their management teams for increased salaries and a housing scheme, among other benefits.
“Our settlement has been pending for some time now,” said Harjeet Grover, general secretary of the Honda Motorcycles and Scooter India Employee Union. “This includes a raise in basic pay, dearness allowance, a housing society, schooling facilities and other allowances to take care of daily needs.”
Grover did not disclose more details because the matter is under discussion with the company management.
A spokesperson for Honda Motorcycles and Scooters said, “There is a mutual understanding between the Management and HMSI (Honda Motorcycle and Scooter India) Employees Union. At this point, we cannot share the ongoing proceedings of wage negotiation till we arrive at the conclusion.”
A Hero MotoCorp union member, speaking on condition of anonymity, said his union had demanded a settlement on the lines that Maruti workers had won. “If Maruti, being the No.1 car maker, can offer such good wage settlement, why can’t Hero (India’s largest selling motorcycle company) do the same?” said this person
Wage discussions at Hero MotoCorp. and Honda Motorcycle and Scooter started in 2011.
“For several years now, our salaries have been far in excess of minimum wages as prescribed by the government,” said a spokesperson for Hero. “We will continue with this practice in future as well.”
Workers at Ford India’s Chennai plant are demanding both higher wages and recognition for their union. K.Selvaraj, treasurer of the Ford India Employee Union, said a wage settlement has been done in April 2012. The next round is due in January 2013. The company does not pay a dearness allowance or provide medical insurance for workers’ parents, he said. “We asked the management for these benefits and asked for a 40% hike totally. But all they gave us was a 15% rise,” Selvaraj said.
Ford has 1,500 permanent workers in India and 3,200 trainees who will be confirmed in their jobs after three years depending on their performance. Permanent employees received a hike of 15% in April, adding Rs.3,700 to an average monthly salary of Rs.33,000 for permanent workers, according to Selvaraj.
The company did not respond to a questionnaire sent by Mint on Friday. But in an interview in September, Ford India’s president Michael Boneham said the company was looking at a variety of elements in terms of job satisfaction at its plant.
At Hyundai, a section of the workers has aligned itself with a union that the company does not recognise.
The unrecognised Hyundai Motor India Employees Union has its own set of demands and threatens to go on strike if these are not met. “If a final settlement is reached with UUHE, we will have to go for a strike,” says R. Sridhar, general secretary of HMIEU.
The company declined to comment on the threat by HMIEU saying it is a “minority unrecognized union”. The group is politically affiliated, according to the company management.
Hyundai has seen three strikes between 2009 and 2010 called by HMIEU, resulting in about Rs.140 crore production loss.
Pravat Chaturvedi, a former labour secretary in the Union government, said the “only way to ensure a peaceful work environment is to hear out all unions, be it minority or majority.”
“You may not agree to their views or demands, but it is necessary to have a dialogue.”