IR Problems at Toyota Kirloskar

Motor Private Limited

Case study
Reference no 406-082-1

This case was written by Pushpanjali Mikkilineni, under the direction of

Vivek Gupta, ICFAI Center for Management Research. It is intended to be used as
the basis for class discussion rather than to illustrate either effective or ineffective
handling of a management situation. The case was compiled from published
sources.

© 2006, ICFAI Center for Management Research (ICMR).

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 406-082-1

IR PROBLEMS AT TOYOTA KIRLOSKAR MOTOR PRIVATE

LIMITED
“We have requested the government to intervene in the matter immediately and prohibit the
lockout declared by the management which is illegal. The government should prosecute the
management for violating labour laws and issue immediate relief to the dismissed employees
such as reinstatement and payment of wages during the dismissed period.”1

- Meenakshi Sundaram, General Secretary, Centre of Indian Trade Union, Bangalore,

in 2006.

“How long can we put up with unruly behaviour? We would like to restore normalcy as soon as
possible, but at the same time, we would not like to compromise on discipline.”2

- A R Shankar, General Manager, Corporate Planning Division, Toyota Kirloskar

Motor Private Limited, in 2006.

“There are another 11 people suspended by the management and we fear they may also be
dismissed. We are officially supposed to work for eight hours but we are overworked sometimes.
And we are treated in such a way, that we can’t even take a bathroom break when we want.”3

- R. Ravi, Union Joint Secretary, Toyota Kirloskar Motor Employees Unions, in 2006.

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

1
Bureau, “Union Urges Action against Toyota,” www.business-standard.com, January 12, 2006.
2
Reuters, “Toyota Shuts India Plant,” www.financialexpress.com, January 09, 2006.
3
Corporate Bureau, “Toyota Kirloskar Patch-Up Meet Fails,” www.financialexpress.com, January 09,
2006.
4
Established in 1937, Toyota is a Japanese automaker. The company is the world’s second largest
automobile manufacturer with sales of ¥ 21,036.9 billion and a net income of ¥ 1,372.1 billion in 2005-06.
5
The withholding of work from employees and closing down of a workplace by an employer during a
labor dispute.

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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 contract labor with a tenure of, say, three
years or so, and more temporary workers. If there is a feeling that minimum wages are low, the
government must work toward increasing them.”9

BACKGROUND NOTE

TKM, a joint venture between Toyota and the Kirloskar Group10, established its plant at Bidadi
on October 06, 1997, with an initial investment of Rs. 7 billion. Toyota held a 74 percent stake in
the joint venture while the remaining 26 percent stake was held by the Kirloskar Group. In 1999,
Toyota increased its stake to 89 percent.

The Bidadi plant began production in December 1999. In the first year of operation, the
manufacturing capacity of the plant was 20,000 units. This was increased to 35,000 units in the
second year to 50,000 units by 2004. TKM decided to introduce Kijang, a Multi Utility Vehicle
(MUV) into the Indian market, branding it as Qualis.11 TKM launched Qualis on January 11,
2000. The company stated that its decision to launch an MUV was to understand the Indian
market before introducing passenger vehicles. Contrary to the expectations of analysts, Qualis
was successful in the Indian market and gained acceptance from government departments,
corporates, tourist car operators, and individuals. In the first year, TKM sold 21,785 units of
Qualis against the target of 20,000 units. With this, TKM grabbed a market share of 35.1 percent
in the MUV segment.

6
Gurgaon is a satellite town near New Delhi, India.
7
HMCL has its headquarters in Tokyo. As of 2005, it is the largest manufacturer of two-wheelers in the
world and has more than 120 manufacturing facilities in 30 countries worldwide.
8
China had less rigid labor laws when compared to India according to the ‘Doing Business’ study
conducted by the World Bank in 2005. India was rated among the countries with most rigid employment
regulations (difficulty in hiring & firing workers and rigidity in hours) with an overall score of 62 whereas
China scored 30 and Singapore scored zero. (Source: Ranjit Devraj, “Japanese Investors Learn Indian
Labour Laws the Hard Way,” www.oneworld.net, August 04, 2005).
9
S Kalyana Ramanathan, “India: Is Labour Trouble Resurfacing?” http://in.rediff.com, August 06, 2005.
10
The Kirloskar Group was founded by the Kirloskars in 1910. The group began by manufacturing fodder
cutters and iron plows and played a major role in various sectors of manufacturing, oil and gas, power,
construction and mining, agriculture, industry, and transport. The group was made up of eight major group
companies including the joint ventures.
11
Kijang (‘kijang’ means ‘deer’ in Indonesian) was first introduced in 1977 in Indonesia. It became the
most popular and the best selling car in the country.

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Having achieved success through Qualis, TKM decided to introduce Camry and Corolla. On
April 10, 2002, Toyota Industries Corporation (TICO) and Kirloskar Systems Limited (KSL)
established a plant to build manual transmissions. The plant was located at the premises of KSL
at Bidadi. In this joint venture, 64 percent of the stake was held by Toyota, 26 percent by TICO,
and the remaining 10 percent by KSL. The plant began production in June 2004 and had the
capacity to manufacture 160,000 units per year. About 400 employees were employed at the plant
out of which 220 were newly recruited and the remaining 180 were employees who had been
working at KSL.

In February 2005, TKM phased Qualis out from the Indian market, stating that it would introduce
Innova in its place. TKM said that the reason for phasing out Qualis was the changing
preferences of Indian customers. Innova, a car launched in the premium segment, offered the
benefits of both an MUV as well as a passenger vehicle. In February 2005, TKM launched
Innova in the market. By October 2005, the company had sold about 26,800 units of the vehicle.

As of December 2005, Toyota’s investment in its Indian joint venture was Rs. 16 billion. The
plant operated at a capacity of 60,000 vehicles per year. On an average, it manufactured 92
vehicles per day, which included 70 Innovas and 22 Corollas. The company’s estimated turnover
was more than Rs. 30 billion in 2005. In 2005, TKM cornered a market share of 5 percent in the
Indian automobile market. The company was eyeing a 15 percent share by the year 2015.

LABOR RELATIONS AT TKM

From the time it started production operations in 2000, TKM had had a history of disturbed
relations between the management and the workers. Prior to the strike and lockout in January
2006, the plant had experienced three other strikes: two in 2001, and a strike and a lockout in
2002 that lasted for almost two months. The first strike at TKM began in April 2001, and it went
on for about two days. The second one was in June the same year.

In 2002, the company decided to call the workers in two shifts to meet the increased demand for
the company’s cars. The first shift at TKM started at 8 AM and ended at 4 PM. The workers in
this shift were asked to work overtime for four hours between 4 PM and 8 PM. The second shift
started at 8 PM and ended at 4 AM. Again, in the second shift, workers were asked to work
overtime between 4 AM and 8 AM.

TKM wanted its workers to conform to the Toyota Production System (TPS). The TPS
propounded effective manufacturing techniques, which involved significant restructuring of
production processes in order to reduce inventory holding and increase the production efficiency
of the employees. It also required the workers to do overtime whenever needed. In TPS, the Just-
in-Time (JIT) technique enabled Toyota to respond quickly to the changing demands in the
market. Based on Toyota’s standard, TKM’s plant was supposed to produce one vehicle every
4.5 minutes.

To help them get accustomed to TPS, TKM sent its employees to Toyota plants located in Japan,
Indonesia, and Thailand to attend training programs. More than 425 TKM employees were sent
to Toyota’s plants located worldwide to receive training. Toyota also assigned master trainers
from these plants to the Indian plant to ensure 100 percent implementation of TPS. The workers
at TKM, 75 percent of them aged between 20 to 25 years, refused to work overtime for four
hours despite it being made mandatory by the management.

During this time, the workers of TKM also demanded that they be allowed to form a trade union,
but this was vehemently opposed by the company’s management (Refer to Exhibit III on trade
unions in India). The workers, however, decided to go ahead with forming the union and the
TKMEU was born. The workers also demanded that TKMEU’s office be located within the

4
 406-082-1

premises of TKM, as it would make it easier for them to conduct the activities of the union. The
management, however, turned down this demand.

During this time, the management of TKM also dismissed two office bearers of the TKMEU on
grounds of bad performance. TKM’s management said there were differences of opinion between
these workers and the management regarding the appraisal systems in the company. The
management stated that it was just adhering to Toyota’s global human resource policy, which
included performance appraisals every month. It said that prior to their dismissal, the two
workers had been warned twice about their poor performance but they had failed to show any
improvement.

Protesting against the shift system and the dismissal of the workers, the employees went on strike
and TKM had to declare a lockout in January 2002. Both the strike and lockout went on for 53
days. Subsequently, the company had to change the shift system and hike salaries. The matter of
dismissal of the workers was still pending before the Industrial Tribunal as of January 2006.

In February 2004, the TKM management suspended 15 workers. The management stated that the
workers had been suspended for misconduct, as they had abused a supervisor and disrupted work.
The rest of the workers did not protest too much over this issue as the management stated that it
would keep the dismissal order pending until further investigation into the matter.

The rift between TKM’s management and workers intensified further in 2005 when TKMEU was
affiliated to the CITU12. Commenting on the affiliation of TKMEU with CITU, A R Shankar
(Shankar), General Manager of the Corporate Planning Division of TKM said that the company
did not like third parties to interfere in TKM’s internal matters. He charged that some of the
union members were indulging in unproductive activities and leading other workers down the
wrong path at CITU’s instigation. TKM also firmly declared that it had recognized only TKMEU
but had not accepted its affiliation with the CITU.

During April-May 2005, TKM’s management avoided another row with the workers after
agreeing to their demands for a hike in salaries. The workers demanded a 15 to 18 percent hike in
their salaries. The management agreed to a 15 percent increase.

THE DISPUTE

On January 05, 2006, TKM’s management dismissed three workers out of the fifteen that had
been suspended in February 2004. According to the management, the three workers, Prasanna,
Sridhar Dhote, and Satish, had been dismissed as the year-long investigations carried out by
TKM had proved that they were guilty of misconduct which included violent behavior, disruption
of work, and assault on a supervisor. According to the company’s spokesperson, “We have
reinstated one employee as the misconduct proved against him did not warrant dismissal from the
service... In the case of the other ten suspended employees,13 action will depend upon the
outcome of the pending enquiry. We always have been fair and firm in all our actions.”14

The TKMEU stated that of the 15 workers who had been suspended, two were office bearers,
four were executive committee members, and the remaining nine were active members of the

12
CITU is a national level trade union in India founded in 1970. It is the trade union wing of the
Communist Party of India (Marxist) (CPI-M), a political party. In 2006, the union had above 2.8 million
members. (Source: www.answers.com).
13
Out of the fifteen employees that were suspended, one of them resigned while another one was
reinstated.
14
“Toyota Employees Go on Flash Strike,” www.sify.com, January 08, 2006.

5
 406-082-1

union. The union alleged that the workers were suspended for minor reasons such as not
participating in the five-minute warm-up exercises before commencing their work. They were
also suspended and their wages were cut if they talked with their co-workers or wore black
badges during their protest against the TKM management.

The TKMEU also complained about the heavy workload and unfavorable working conditions at
the plant. The workers said that the workload was very high as they were asked to produce one
vehicle every three minutes. Even workers who were ill were forced to work to meet the
production targets, the union alleged. TKMEU also complained that due to the heavy workload
and no time being given for rest, many workers suffered from spinal cord problems and some of
them had had to undergo surgery. It also complained that many workers suffered from respiratory
problems as the management had failed to provide them with any safety equipment to protect
them from paint and dust. It said that some of the equipment in the factory were unsafe to work
with. The workers alleged that they had to obtain permission from their superiors even to visit the
toilet.

The TKMEU also alleged that the management had not conducted a proper and fair investigation
before announcing the dismissal of the three workers. It complained that they had been dismissed
even as the case was being heard in the labor court. According to Vasudev, Vice-president of the
TKMEU, “The issue is not of wages, but job security. The inquiry had to be completed in three
months according to the Industrial Disputes Act but it has dragged on for two years.”15 The
workers also expressed fear that the management would dismiss the remaining ten who were still
under suspension. Retaliating to the decision to dismiss the three workers, the workers began
their strike on January 06, 2006.

TKM’s management described TKMEU’s allegations as ‘baseless’. It said that there was
complete job security for those who complied with the rules and regulations of the company but
that it would not spare those who did not follow discipline. Commenting on the safety issues,
TKM stated that it had well-established safety and health guidelines. It said that the jobs at the
plant had all been well analyzed, including the aspect of ergonomics at work. TKM claimed that
it had an integrated safety committee, led by the Deputy Managing Director. It said that the
committee met once a month to review and take corrective measures in case there were any
accidents or injuries.

TKM added that it dealt fairly with all the workers and considered them as the company’s
stakeholders. The company said that it acted firmly on issues of indiscipline. It stated that the
workers whose services had been terminated had failed to abide by the law (Refer to Exhibit IV
for employment laws in India). It stated that it expected timely response, cooperation, and
support from the union. TKM also stated that the three workers had been dismissed because they
had indulged in misconduct, and that this was not related to the issues to be referred to the
Additional Labor Tribunal.

As the workers began their strike, the TKM management declared a lockout at the plant on
January 08, 2005. Commenting on this decision, Shankar said, “We are forced to declare an
indefinite lockout under Sections 22, 23, and 24 of the Industrial Disputes Act of 1947 to ensure
the safety of the plant as well as the employees.”16 He also stated that the unionized workers had
turned violent and were misbehaving with those employees who had not joined the strike. He
alleged that these workers had threatened to blow up the LPG (Liquefied Petroleum Gas) tanks at

15
“Toyota Declares Indefinite Lockout,” www.newindpress.com, January 09, 2006.
16
“Toyota Kirloskar Declares Lockout to Evict Striking Staff,” http://news.webindia123.com, January 09,
2006.

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the plant. The management sought police help when some workers refused to leave the plant
premises.

Protesting against the management’s decision, TKM’s workers stated that the lockout declared by
the management was illegal as it had been announced without any notice being given. The
workers requested the state government of Karnataka to intervene in the matter and to declare
that the lockout was illegal.

TKM, in turn, alleged that the strike instigated by the workers was ‘illegal’ and ‘destructive’. The
company said, “Since the company has been notified as a public utility service by the Karnataka
government, the flash strike instigated by the employees is illegal in the absence of a 14-day
notice from the union under the Industrial Disputes Act, 1947. A section of the union members
also stopped production, obstructed movement of vehicles from the factory, manhandled and
assaulted other employees, and damaged property.”17 Justifying TKM’s decision, Shankar said
that the workers had protested strongly against the dismissal of the three workers. They had
called for a strike without giving prior notice to TKM’s management, which had resulted in a loss
of production at TKM. The management stated that the lockout had been declared for an
indefinite period and would end only when the situation returns to normalcy.

TKMEU also alleged that earlier the management had not attended the meetings called by the
union, despite notification. S R Deepak (Deepak), General Secretary of the TKMEU, said,
“Earlier on two occasions, when we served notice and called for meetings, the company
terminated (the services of) office-bearers and created an insecure atmosphere.”18 The workers
stated that the company had always acted illegally and that they had therefore decided to go on
strike without notice. They said that if the management was talking about legalities then it should
not have terminated the services of the three employees without prior notice.

THE NEGOTIATIONS

TKM’s management presented the labor issue before V N Hittanagi (Hittanagi), the Deputy
Labor Commissioner (DLC) of Karnataka (Region II). The management, however, maintained
that it would not go back on its decision on not reinstating the dismissed workers. On January 09,
2006, the representatives of TKM, TKMEU, and the CITU were asked to present their case
before the office of the DLC at a conciliatory meeting. However, this meeting was called off, as
the TKM representatives were not present.

TKM said that members of the management were afraid to enter the office as the workers were
protesting and raising slogans against the management in front of the DLC office. The TKMEU
had staged a day and night ‘sit-in’19 in front of the DLC office. According to a TKM
spokesperson, there were about 400 workers protesting and raising slogans against the company.
Hence, TKM had requested the DLC to postpone the meeting for about two weeks until a
peaceful atmosphere prevailed. According to a statement issued by the company, “We are keen
for the talks in a peaceful environment and will request our striking union members to approach
the issues in a manner that is productive and aimed at building a healthy work environment at the
factory.”20

17
“Toyota Kirloskar Declares Lockout to Evict Striking Staff,” www.newkerala.com, January 08, 2006.
18
“Toyota Takes Tough Stand,” www.deccanherald.com, January 10, 2006.
19
Sit-in, popularly referred to as ‘Dharna’ in India is an organized way of protesting in which the
participants occupy an area and decline to move until their demands are met.
20
“Toyota Workers’ Agitation Enters Sixth Day,” www.newindpress.com, January 12, 2006.

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The DLC, however, decided to call for a meeting on January 12, 2006. Hittanagi said, “We are
here to create a clean platform for both the company and its union workers. TKM feels a meeting
at this juncture will not serve the purpose and have asked for two weeks’ time but we weren’t in a
position to give that much of time and hence we decided to re-schedule it to January 12.”21 In
response to this directive, TKM’s management informed the DLC that it would attend the
meeting only if the atmosphere was peaceful.

Reacting to the management’s statement, the TKMEU said it would shift its sit-in to Bannappa
Park as DLC had advised. It said that the meeting would be attended by elected office-bearers of
the union, the authorized representatives of TKMEU, and the CITU leaders.

On January 12, 2006, the conciliatory talks began at the office of the DLC. At the meeting,
TKM’s representatives including the General Manager (Legal) were present. The TKMEU
representatives were supported by representatives of the CITU State Committee. The TKMEU
put forward its list of demands to the state government (Refer to Table I for TKMEU’s demands
to the state government).

After the meeting concluded, the DLC gave the following suggestions – the dismissal order of the
three employees should be kept in abeyance until the Industrial Tribunal gave its judgment; the
lockout should be lifted; no disciplinary action should be taken against the protesting workers;
and the workers should withdraw the strike in order to maintain a peaceful work atmosphere.
TKMEU accepted the suggestions made by the DLC. However, the management stated that it
would decide on the matter and convey its decision during the next meeting, scheduled for
January 16, 2006.

TABLE I
TKMEU’S DEMANDS
• To order the management to keep the dismissal order in abeyance. The government can do this
under Section 10B (Karnataka Amendment) of the Industrial Disputes Act, 1947.
• To order, under Section 10B, that production be restarted at the unit employing all the
workmen who were on the rolls as on January 6, 2006.
• To refer for adjudication, the justifiability of the strike/lockout.
• To prohibit the lockout.
• To prosecute the management for violating Section 3322 of the Industrial Disputes Act, 1947
and
• To sanction all applications for prosecution for violating certified standing orders, Contract
Labor Act, and Unfair Labor Practices.
Source: Balakrishna Shetty “India: Toyota Motor Workers Resist Attack On Union Rights,”
www.politicalaffairs.net, January 24, 2006.

On January 16, 2006, TKM’s management declared that it would not accept the demands of the
union. It rejected DLC’s suggestion to keep in abeyance the dismissal of the three workers. The
company stated, “The atmosphere is still grave, tense, and there is no safety for non-striking team
members and company’s property. The company requested the Labor Commissioner’s office to
advise the Union to stop violence, threats, etc. and restore normalcy and discipline without any
preconditions.”23 TKM’s management also said that the lockout would not be lifted. Responding
to TKM’s decision, the labor commissioner decided to refer the matter to the Government.

21
“Toyota Takes Tough Stand,” www.deccanherald.com, January 10, 2006.
22
According to Section 33 of the Industrial Disputes Act, 1947, the conditions of the service should remain
unchanged when proceedings in a particular case is pending. (Source: http://www.vakilno1.com).
23
“Toyota Refuses to Lift Lockout,” www.sify.com, January 17, 2006.

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THE DISPUTE CONTINUES

On January 20, 2006, in a sudden turnaround, TKM’s management announced in the local
newspapers that it would lift the lockout. In an advertisement, it said that it was happy to
announce that the lockout would be lifted from January 21, 2006 onward. However, the workers
reporting for duty were asked to sign an undertaking to maintain good conduct. Commenting on
the decision, Shankar said, “The management has decided to lift the lockout in response to the
request of several employees who have expressed willingness to resume work. Even parents of
many workers have been calling us to lift the lockout on behalf of their wards.”24 The
management also added that police arrangements had been made to ensure the safety of the
workers and the plant.

TKMEU, however, expressed doubts about the management’s sudden decision to lift the lockout.
The union also pointed out that the advertisement did not contain any statement about whether
the management had accepted their demand for keeping the dismissal of the three employees in
abeyance.

On January 21, 2006, the Government of Karnataka banned the strike by TKM workers and
referred the matter to the third additional labor court. Commenting on the order, R. Ravi, the
Joint Secretary of TKMEU said, “The order prohibiting the strike was issued by the Principal
Secretary (Labor) on Saturday. The order asked the additional labor court to decide whether the
dismissal of workers, the strike and lockout were justified or not and what were the relief for
persons involved in this.”25

On January 22, 2006, local newspapers reported that about 60 workers resumed work on the first
day of the lockout being lifted. However, TKM’s management claimed that about 600 workers
had reported for work at the plant. The newspapers also reported that the management had
suspended another 27 workers on January 20, 2006, for their violent behavior during the strike
and lockout. TKM’s management stated that these 27 workers and the remaining 10 workers who
were under suspension prior to the strike would not be reinstated until the labor court had decided
on their cases.

On January 23, 2006, after a union meeting, organized after the government prohibited the strike,
the TKMEU announced that it was withdrawing its strike. TKMEU, however, stated that it would
not sign any ‘good conduct undertaking’ as required by the management. Commenting on this,
Ravi stated, “We have decided to go to work in keeping with the government’s order. However,
we will not tender any good conduct undertaking as insisted upon by the management. The
workers would travel to work in a company vehicle and turn up at the gate. If we are not
permitted inside sans the undertaking, we will stage a sit-in at the gate.”26

The management said that it wanted the workers to give the undertaking to ensure that they did
not indulge in destructive activities. Shankar said, “The only reason for seeking such a
declaration was because of the large-scale violence during the strike and the threat of the
workmen to blow up LPG tanks in the company premises. Hence we want to underline the basic
fundamentals of employment through this simple document.”27 The management charged the
TKMEU with going back on its word as the undertaking was simpler than what it had agreed to
during the conciliation talks with the labor commissioner. The management also stated that the
workers were acting irresponsibly by refusing to sign the undertaking.

24
“Toyota Lifts Lockout to Resume Production,” http://news.webindia123.com, January 20, 2006.
25
“Toyota Kirloskar Staff Banned from Going on Strike,” www.hindu.com, January 24, 2006.
26
“Toyota Motors Employees Agree to Resume Work Tomorrow,” http://news.indiainfo.com, January 23,
2006.
27
“Toyota Employees Relent, Withdraw Strike,” http://inhome.rediff.com, January 23, 2006.

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On January 24, 2006, TKM’s workers and the management entered into talks. The union sought
removal of the lockout clause from the undertaking, which stated that the strike was illegal and
that the management would take disciplinary action in case of the occurrence of such incidents in
future. A union representative said, “The union had objected to references in the undertaking
terming the strike illegal and of taking punitive actions in case of any incident. We spoke to the
management and suggested a change in the format of the undertaking, to which they agreed,
following which the workers today resumed duty.”28 The management accepted the proposal
made by the union and decided to remove the clause. However, the conditions in the undertaking
regarding accepting standing orders, maintaining discipline, following instructions, and
complying with the safety rules remained unchanged.

With this, the tussle between TKM’s management and the workers came to an end. CITU stated
that it would continue its support to TKM workers and would fight against the management
regarding the order suspending the workers during the strike. On February 03, 2006, TKMEU
announced that from February 05, 2006, three persons would sit on a hunger strike for 24 hours;
another three would sit for the next 48 hours, followed by another three members for 72 hours.29
The union also added that this strike would continue and would become an indefinite hunger
strike, without affecting the production. The union also stated that the hunger strike would go on
with the support of the CITU. The CITU also called a meeting of all the trade unions in the city
on February 11, 2006.

On February 05, 2006, the union workers began the hunger strike. This hunger strike did not
continue as the management said that it did not affect the production operations at the plant and
that it would not respond to the demands of the workers. The workers of the union issued a strike
notice to the government stating that they would go on strike from March 23, 2006. However,
this strike was deferred as the labor commissioner initiated conciliatory talks between the
management and the workers. Later, the state government banned the strike stating that Toyota
was a public utility service company.

THE RESULT

TKM did not face any major problems due to the strike of the workers and the lockout at its
plant, having ensured that the market supply was not affected by either. TKM had made
appropriate arrangements to meet the market demand for its cars in the event of the talks failing
between the management and the union. The company had asked its managerial staff to maintain
production in one shift. It had trained about 700 people to work on the shop floor in case of
emergencies.

Due to proper planning and execution, the plant continued to operate with the remaining
employees. The company produced about 30 vehicles per day. The production was carried out by
the managers, supervisors, and those who were not part of the union. This was made possible
because of the production training that the management had provided to all employees during the
induction program itself. Moreover, TKM had finished stock that could last for a month.

While TKM did not face any problems on the supply side, analysts expressed doubts about
Toyota’s willingness for further investments in Karnataka in the near future. Toyota had earlier
planned to set up another plant in Karnataka near the existing plant to manufacture compact cars
and the Karnataka government had accepted this proposal. Toyota planned to enter the small car

28
“Toyota Workers Sign Modified Undertaking,” www.sify.com, January 24, 2006.
29
Mahesh Kulkarni, “Toyota Staff to Launch Hunger Strike from Feb 5,” www.business-standard.com,
February 03, 2006.

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market in India through its subsidiary Daihatsu30 by setting up a new plant at Bidadi, which
would roll out 150,000 small cars.

However, with the continued labor unrest in the present facility, TKM’s management preferred to
keep its options open. The management stated that the workers were being misled by ‘external
forces’ and urged the state government to take action against such forces. It added that the
government should take strong action against those who were trying to disturb the industrial
atmosphere in the state.

Analysts felt that the growing political disturbances in the state were affecting industry and
society, and would result in Toyota declining against setting up a plant in the state in future.
According to an article published in The Economic Times on February 02, 2006, the company
sources were reported to have said that they had given up their plans to start up a second plant.
One of the major reasons stated was the industrial discord between TKM and its employees.
Other reasons cited for the withdrawal were doubts regarding the feasibility of the return on the
investments made, the fewer tax incentives offered by the Government of Karnataka, and the
difficulty in pricing of small cars. Analysts opined that this would lead to a loss of employment
opportunities, which would have been otherwise created in the state.

30
Daihatsu Motor Co., Ltd., set up in 1907, is a Japanese car manufacturer specialized in making small
cars. It became a subsidiary of Toyota in 1999.

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 406-082-1

EXHIBIT I
LABOR UNREST AT HMSI
On July 25, 2005, the management of the Gurgaon plant of HMSI encountered violent protests
from workers, disrupting production in the plant. The protest came after a job slowdown31 and
labor unrest at the Honda factory over the previous six months (since December 2004 when the
workers’ demand for increase in wages was rejected by the management). The workers had 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 were dismissed in December 2004. Other
workers threatened not to return to work until their colleagues had been reinstated.

The management did not want to reinstate the dismissed workers. It asked the workers to return
to work after signing an agreement that they would maintain discipline in the organization and
ensure normal production at all times. The workers of the plant were demanding reinstatement of
the suspended employees when some workers attacked policemen posted within the premises of
the plant. This led to police intervention and a violent tussle between the police and the workers
ensued in which workers protesting peacefully were also beaten up. The police were reported to
have overreacted and to have been overzealous in protecting the interests of the Honda
management, even without any direct request from the company’s management.

After the protests on July 25, 2005, HMSI’s management said that it would wait for the third
party inquiry into the dispute to be completed, before taking any decision on reinstating the
suspended employees. However, the workers who had gone on strike on July 25, 2005, were
reinstated after they signed an undertaking that they would not go on strike in the future.

On July 30, 2005, the management of HMSI said that it had taken “one-time measures” to
normalize the overall situation and in the interest of the entire industrial region, the company
would ensure betterment of working conditions. It also acknowledged that HMSI has been
successful because of the hard work and efforts of its workers on the job. Production levels at the
factory normalized after the company hiked the salaries of the line associates by 30 percent.
HMSI incurred a loss of over Rs. 1 billion due to the labor unrest. Its production in June 2005
was 4,500 units in comparison to the normal monthly production of 10,000 units. This had an
impact on the company’s sales for the month with its market share dropping to 39 percent for the
month.
Adapted from various sources.

31
Job slowdown refers to slowing down of operations by employees.

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 406-082-1

EXHIBIT IIA
NUMBER OF STRIKES AND LOCKOUTS IN INDIA DURING 2002-2006
ITEM 2002 2003 2004 2005 (P) 2006 (P)
(Jan to Dec) (Jan to May)
A. No. of Strikes 295 255 236 243 76
No. of Workers Involved 900,386 1,010,976 1,903,054 2,111,433 150,655
No. of Man-days lost 9,664,537 3,205,950 4,828,737 7,286,667 1,771,341
B. No. of Lockouts 284 297 241 215 21
No. of Workers Involved 179,048 804,969 169,167 183,750 15,818
No. of Man-days lost 16,921,382 2,70,49,961 19,037,630 15,979,034 709,891
(P) = Provisional.
Source: http://labourbureau.nic.in/idtab.htm.

EXHIBIT IIB
INDUSTRIAL DISPUTES IN 2005 IN INDIA
Company Place Dispute Resulted In Month
KSRTC Bangalore, Karnataka Pay Hike Strike November
Transfer Dismissal Demonstration July
HMSI Gurgaon, Haryana Pay Hike Strike July
Tata Motors Jamshedpur, Jharkhand - Flash Strike June
Apollo Tyres Limbda, Gujarat - Strike June
S Kumars Thandavpura, Karnataka - Strike June
Mico Bangalore, Karnataka Pay Hike Strike June
Hitachi Gurgaon, Haryana - Strike May
Electric
Speedomax Dharuhera, Haryana Pay hike Strike May
Autofit Dharuhera, Haryana Pay hike Strike May
TKM Bidadi, Karnataka Wage Settlement & Agitation May
Disciplinary Action
Remsons Gurgaon, Haryana Pay Hike Strike May
Cables
Compiled from various sources.

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EXHIBIT III
TRADE UNIONS IN INDIA
The role of trade unions in an economy and society has been interpreted and understood in
different ways by different interest groups of society. Traditionally, the role of the trade unions
has been to enable job security and real earnings, secure better conditions of work and life, and
fight against exploitation and arbitrariness to ensure fairness and equity for employees. Trade
unions have a long history internationally and in India. The role of the trade union has also
undergone a lot of change over time. The trade union retains the protective role in form, but it
varies in substance. The debate on the purpose and role of trade unions and its relevance in the
present socio-economic-political scenario continues.

Trade unions have been classified into five categories:

• Business or “Bread and Butter” Unionism: They are usually trade conscious and not class
conscious. They go in for collective bargaining on wages, hours, working conditions, etc.
Strike is their main weapon of protest.
• Friendly/Uplifting Trade Unionism: They usually seek to elevate the moral, intellectual,
and social life of workers. The weapons are political action, profit sharing, etc.
• Revolutionary Unionism: They are class conscious rather than trade conscious. The
weapons are direct action and political action.
• Predatory Unionism: They are dominated by gangsters. They do not have any ideology, or a
legal or ethical code.
• Dependent Unionism: They are parasitic on the company or the labor group.

As of 2006, the trade unions in India, in general, face the following problems:
• They have not been able to achieve growth in terms of either area or industry across India.
• The average number of members in trade unions is declining.
• The financial conditions of trade unions are not strong as they are not able to collect
membership fees.
• As a result of a multi-union fabric, intra-union rivalry and inter-union rivalry and also dispute
with central unions are quite common.
• Leaders of trade unions being from other professions are not aware of the actual problems of
the workmen.
• They face the problem of gaining recognition from the management.
• The trade union laws are outdated and are not responsive to the changing employment
scenario and working conditions.
• There is lack of education among the workers.
• There are unfair practices by the union leadership and management.
Compiled from various sources.

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EXHIBIT IV
EMPLOYMENT LAWS IN INDIA
ACT DESCRIPTION
Worker’s Compensation Act, Compensation is provided by the Board from the accident
1923 fund to the workers in case of personal injury or death arising
out of and in the course of the employment.
Trade Unions Act, 1926 The Trade Unions Act, 1926, provides for registration of
trade unions with a view to rendering lawful organization of
labor to enable collective bargaining.
Industrial Employment The Act requires employers to define and standardize
(Standing Orders) Act, 1946 conditions of employment and make it known to workmen.
The Industrial Disputes Act, The Industrial Disputes Act, 1947, was enacted to secure
1947 industrial peace and harmony by providing machinery and
procedure for the investigation and settlement of industrial
disputes by negotiations instead of by trial and strength to
both employers and employees and thereby promote
industrial progress.
The Minimum Wages Act, 1948 The Act fixes the minimum wages for certain occupations. It
requires that the workers should be paid for overtime beyond
a normal working day.
The Factories Act, 1948 The Factories Act prohibits employing children of less than
14 years of age. It applies to all the factories employing ten
or more people using electric or other forms of power. It also
applies to factories which employ twenty or more people
without the use of power.
The Contract Labour The Act regulates the use of contract labor and its abolition
(Regulation and Abolition) Act, in certain industries based on the discretion of the state or
1970 central government.
Fair Wages Act, 1999 The Act contains a provision that all persons employed by
the contractor or subcontractor or any other person doing or
contracting to do the whole or any part of the work of the
contract shall be paid fair wages.
Compiled from various sources.

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