Labor Unrest at Toyota India

On January 08, 2006, Toyota Kirloskar Motor Private Limited (TKM) announced an indefinitelockout of its vehicle manufacturing plant at Bidadi located near Bangalore, Karnataka. Thedecision was taken following a strike, which had entered its third day, by the ToyotaKirloskar Motor Employees Union (Employee Union), the only company recognized union.

The lockout notice stated that the strike was illegal as the Employee Union did not give themandatory 14 day notice period as per Industrial Disputes Act, 1947.It also stated that the workers were indulging in violence and destruction. TKM was a jointventure, established in 1997, between Toyota Motor Corporation (Toyota), Japan's largestcar company and the second-largest car manufacturer in the world, and the Kirloskar Groupof India.Toyota holds an 89% equity stake and while the Kirloskar Group holds the remaining 11%.

Toyota has invested nearly US$ 336 million (INR 15 billion) in the plant with capacity of producing 60,000 units per year. Toyota manufactures its world famous cars like Corolla,Camry and Innova at the plant.The plant had a total workforce of 2,378 out of which around 1,550 employees belonged tothe Employee Union. On January 06, 2006, the Employee Union went on strike with thedemand to reinstate three dismissed employees, ten suspended employees, and improvethe work conditions at the plant.

These employees had been dismissed and suspended by the company, on disciplinaryrounds, for attacking a supervisor and misconduct. TKM declared that it would not rehire norreinstate those employees culminating in the strike and lockout. TKM made several seriousallegations against the Employee Union.

The company said that the striking workers were threatening to blowup LPG gas cylinders inthe company premises, obstructing the outward movement of manufactured vehicles,illegally stopping production, and manhandling other workers, who were not part of theEmployee Union, to strike.In response, the Employee Union said that three employees were dismissed because theywere actively participating in trade union activities and the company wanted to suppress thetrade union. They further said that working conditions at the plant were inhuman and 'slavelike'.

They were often made to stretch their working hours without sufficient relaxation andcompensation.The issue took a new turn when representatives from the management at TKM refused toattend a meeting before the Labor Commissioner on January 09, 2006 for resolving thedispute with the union.

The company said that the atmosphere was not conductive for talksas the Employee Union was in a violent and agitated mood. Though, the company appealedfor two weeks time to appear before the Labor Commissioner so that situation could becomestable, they were given time only till January 12, 2006. The Employee Union got supportfrom various trade unions and demanded the intervention of the state government to helpresolve the dispute in their favor.

TKM continued with partial production of vehicles with the help of non-unionized workersand the management staff, who were specially trained for these kinds of emergencies.However, the company's output had fallen from 92 vehicles per day to 30 vehicles with anestimated production loss of around INR 700 million. The Company lifted the lockout onJanuary 21, 2006 stating that it was responding to the request from workers who eager toreturn to work.

The workers were required to sign a good conduct undertaking to maintaindiscipline and ensure full production.The Employee Union relented and withdrew their strike following a Government Order onJanuary 21, 2006, which was against the strike and referred the issue to the third AdditionalLabor Court. However, the union said that they would not sign the good conduct declarationspecified by TKM.The unrest had other ramifications as the Toyota spokesperson said that the company wouldrethink its recent decision to build a second car manufacturing plant in the state.It was also felt that this incident would seriously affect the Karnataka Government's effortsin trying to attract Volkswagen to establish a vehicle manufacturing plant in the state.

Thiswas the second dispute involving a Japanese vehicle manufacturer and trade unions inIndia. Earlier in July 2005, workers of Honda Motor & Scooters India Limited had a violentclash with the police at Gurgaon, near New Delhi, resulting in a revenue loss of around INR1.25 billion for the company. This recent rise in trade union activism resulting in violenceand business loss has attracted the attention of the national and international media. Witharound US$ 2 billion equity investment since 1991, Japan was the fourth largest investor inIndia.

During the Honda incident, the Japanese ambassador in India had stated that thesekinds of incidents would show India in poor light. ISSUES:1) Understand the factors that lead to strikes and lockouts at a factory and theimpact of such happenings on the employees and the company2) Study HR policies adopted by organizations to prevent labor unrest at theworkplace3) Examine the role played by the top management in ensuring peacefulworking environment4) Analyze the role of external parties such as trade unions; political partiesetc in disturbing the working environment in a company