Toyota Unrest

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Abstract:

The case examines the industrial relations problems at Toyota Kirloskar Motor Private Limited (TKM), an Indian joint venture between Japan based Toyota Motor Corporation and Kirloskar Motors. The case discusses the various reasons, which led to the dispute between the management and the employees of TKM. It elaborates the incidents, which led to the strike and lockout at the company.

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 strikes and lockouts at a factory and the impact of such happenings on the employees and the company

» Study HR policies adopted by organizations to prevent labor unrest at the workplace

» Examine the role played by the top management in ensuring 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 January 08, 2006, Toyota Motor Corporation's (Toyota)4 Indian joint venture company, Toyota Kirloskar Motor Private Limited (TKM) declared a lockout5 at its plant in Bidadi, Karnataka. The lockout came after two days of agitation by the plant's employees against the dismissal of three workers by the management. The strike was the outcome of an incident that occurred in February 2004 when the management suspended 15 employees on the grounds of disrupting work and for unruly behavior. In 2006, TKM dismissed three of these fifteen employees after a year-long investigation and appraisal of their performance. The management stated that the three employees had been dismissed due to their indiscipline and poor performance.

In response to the company's decision, the employees belonging to the TKM Employees' Union (TKMEU) decided to go on strike.

They alleged that the three employees had been dismissed because they had been actively participating in the functioning of the TKMEU and demanded that they be reinstated. As of January 2006, TKM had 2,358 employees on its rolls at Bidadi. Of these, 1,550 workers were members of the TKMEU.

Rejecting their demands, TKM's management stated that workers once dismissed would not be taken back. The workers immediately went on strike. The management then declared a lockout stating concern for the safety of the plant and the workers as the reason. It also added that the lockout would continue for an indefinite period until the work atmosphere became peaceful.

Industry analysts opined that the strike at TKM raised doubts about the success of the Japanese style of management in the Indian context. They also recalled the July 25, 2005 incident at the Gurgaon6 plant of Honda Motorcycle & Scooter India Private Limited (HMSI), a wholly-owned subsidiary of Honda Motor Company Limited (HMCL)7, when there were violent protests from workers, disrupting production at the plant (Refer to Exhibit I for the labor unrest at HMSI). These incidents served to underline the fact that it was essential to ensure sound industrial relations for the smooth continuation of operations and the safety of management, workers, and the plant of companies (Refer to Exhibit IIA and IIB on statistics regarding the number of strikes during 2002-2006and lockouts and a list of industrial disputes in 2005 in India).

Commenting on the growing incidents of discord between management and workers, Surinder Kapur, Chairman of the Sona Group, an automotive component manufacturer, said, "This incident has brought to light the need to look at labor laws afresh. We cannot have archaic labor laws in a liberalized economy. Compare China and India not just on infrastructure but also on labor laws. It is much more liberal there (despite the Communist regime).8 Liberal labor laws are not about hire-and-fire at will but about more room for...
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