Locked out at Toyota

The prolonged lockout at global auto major Toyota’s Indian facility over a wage dispute with its workers highlights the fragility of its famed production system.

Employees outside the Toyota facility in Bidadi near Bangalore after the company halted production at its two factories on March 20 amid a dispute regarding wages.

THE world’s biggest carmaker, Toyota, has an India-specific problem. More than 4,000 full-time employees—not counting the several hundreds employed on terms that offer no security of tenure—have been locked out of their workplace at Bidadi near Bangalore since March 16. Although the dispute is ostensibly over the annual wage hike for the financial year 2013-14, the year that just ended in March, the apparently narrow difference between what Toyota Kirloskar Motor (TKM) Pvt. Ltd, the Indian subsidiary of the Japanese company, is offering and what the unionised workforce is willing to accept, conveys the impression that this is much more than a mere wage issue.

The lockout has hit production at Toyota’s twin plants at Bidadi, the only location at which Toyota has operations in India. The company claimed that the year-long negotiations with the Toyota Kirloskar Motors Employees Union (TKMEU), the sole representative of the workers, had ended in a deadlock. While the union had demanded an average increase of Rs.4,000 per worker a month, the company said it was capping its offer at an average increase of Rs.3,050. C.S. Prasanna Kumar, president, TKMEU, said: “The last wage hike was of Rs.4,000 a month, which is what we are demanding this time too, despite the steep inflation.” Later, as the deadlock continued into its third week, the company made a “final offer” of an average increase of Rs.3,100. The mediation brokered by the State government’s Labour Department appeared to have broken the deadlock, but just as the issue appeared to have been resolved, the company upped the ante. It suspended 17 workers even as the negotiations were on and, in a move that clearly precipitated matters, asked each worker to sign an undertaking of “good conduct” as a condition for lifting the lockout. Incidentally, the company had suspended 13 workers on the eve of the lockout. Prasanna Kumar promptly rejected the conditional offer, saying the demand that workers give an undertaking of good conduct was “in bad faith and in bad taste and aimed at humiliating the workers and their union”.

The young workforce—the average age, according to the union, is about 27 years—was equally determined to get the suspensions revoked and not to accept the “disgrace” of signing any kind of undertaking. However, the workers made it clear that they were willing to stay engaged in talks over wages.

The Toyota ecosystem

What explains Toyota’s intransigence in the context of a sluggish car market, which epitomises the continuing slowdown of the Indian economy? Hit by the lockout, the company produced just 9,160 cars this March, compared with 21,143 units in March 2013. The answer perhaps lies in the way Toyota—and, following in its footsteps a host of other Japanese and American car manufacturers—makes its vehicles, using the famed Toyota Production System (TPS). The production system is geared to be Just in Time, a euphemism for a tightly integrated system of production that has, in the last decade, put in place a “Toyota ecosystem” around the company’s plants at Bidadi, says Shekar Viswanathan, vice chairman and director.

TKM now has a cluster of 15 suppliers who are integrated into the “mother” plant’s production process, supplying it with components ranging from transmission systems to wiring harnesses to car seats. These companies, in some of which Toyota has invested, employ 7,000-8,000 permanent workers, but counting those with more tenuous terms of employment, the numbers employed in the “Toyota ecosystem” near Bangalore could be well over 25,000 workers, says S. Meenakshisundaram, secretary, Karnataka State Committee of the Centre of Indian Trade Unions (CITU).

Ironically, the tight integration of the production system is precisely what has paved the way for the possibility of a more effective unionised action. Realising that an ecosystem-wide collective would significantly enhance the avenues for more effective collective bargaining with the multinational, the TKMEU initiated the formation of the All India Toyota and Ancillary Employees Federation earlier this year. In order to highlight common wage and service issues across the ecosystem, the Federation organised a successful one-day strike in February involving the workers not only at the main plant but also in the supplier units.

Viswanathan admitted that the hike in wages of the magnitude demanded by the TKMEU would have a “ripple effect” on wages in the rest of the Toyota ecosystem in India. He said the floor wage in the supplier units may have to increase to remain in line with wages at the main plants. In effect, this explains why the company remains steadfast in its resolve not to agree to a hike in wages that is of the same magnitude as the one the company agreed to give the workers in the previous round of negotiations.

Viswanathan says Toyota workers earn “a handsome wage” for the work they do at its plants. Company sources said an “experienced worker” earns a monthly salary of more than Rs.46,200 on a cost-to-company basis. Satish R., general secretary of the TKMEU, who was among the first batch of workers recruited at the plant in 1999, contradicts the company version by presenting his own case. He says his gross monthly salary is only Rs.34,500 and that his net monthly take-home pay is about Rs.28,000, after 15 years of employment at the plant.

The company has maintained that the lockout was precipitated by the “indiscipline and abusive behaviour” of the workers on the shop floor. Viswanathan said the personal safety of the company’s supervisory staff was “non-negotiable” and that discipline and pay-related issues “are completely unrelated”.

Of course, the workers reject this contention. Satish says: “The suspension of our fellow workers on trumped-up charges of indiscipline is aimed at arm-twisting us into submission.”

Since the “partial” lockout, as the company termed it, the two plants, which at a theoretical full tilt are geared to roll out 1,115 cars a day (at the rate of 278 working days a year), are producing about 300-350 a day, according to Viswanathan. “We are currently operating at half our normal capacity of producing about 700 cars a day,” he told Frontline . About 1,200 supervisory staff and about 800 apprentice-trainees were operating the plant during the “partial” lockout, he said.

However, Satish disputes the company’s version. He observed: “The numbers do not add up. If 2,000 workers can produce half of the output, why would they need the 4,200 workers who have been locked out for over three weeks?” Either the company is overstating the number of cars it is actually rolling out, or it is using more non-unionised workers of various types—contract workers, apprentices and others—than it is willing to accept, says Satish.

“The issues at the plant are being framed within the narrow confines of a mere wage dispute, but in reality, there is much more that is wrong,” says Satish, who has been a union activist since he joined the company. Several workers told Frontline that the pace of the conveyor dolly, the mobile production platform in the car assembly plant that is tuned to move at specified speeds, depending on the vagaries of the market, is highly stressful. Detailed and programmed worksheets determine every move of the worker on the shop floor, often in the constrained space of a work “pitch” within which a batch of normally four or five workers are required to operate at great speed.

Highly stressful

Although the TPS was hailed in the 1990s as the great innovative production process in automotive manufacturing, critics such as Darius Merji, who undertook a three-year study as a “covert participant” within a Toyota Group company in Japan, paint a more sceptical picture of the acclaimed process (see The Darker Side of Lean: An Insider’s Perspective on the Realities of the Toyota Production System , published by the Academy of Management Perspectives, 2006). Merji observed that the speeding-up process associated with the Just in Time (or Lean Manufacturing) process was highly stressful and even responsible for accidents on the shop floor within the Toyota system in Japan. “Lean work has little to do with improving the lives of workers and much to do with producing vehicles with the least amount of money in the quickest time,” he observed.

At the TKM assembly line at Bidadi are three main lines: the chassis line where the main frames are assembled; the trim line where the vehicle body, wiring harness, instrument panels are fitted; and the “final line” where the windshield, seats and other parts are fitted to the vehicle. Satish observes that the workload is constantly tweaked to market needs. This is done by not only varying the speed of the dollies in the line but by adding or reducing the number of workers deployed at the pitches, he says. “When demand is high, it is not unusual to try and deploy more persons at a pitch, but that can be difficult in the constrained space of a few square metres,” he observes. Referring to the wage issue, he says: “The company prefers to talk in terms of nominal wages without ever referring to the fact that wages have not kept pace with the sharp increase in labour productivity in the past few years.”

Clearly, the stand-off at Toyota is hitting the company hard. It admits that the waiting list at its dealers is growing by the day but in the same breath it says it will not agree to a wage hike though it has been overdue for more than a year. Meanwhile, the young and increasingly restive workforce, which is now on a relay hunger strike, prepares to use its trump card of organising a strike that will cripple the “ecosystem” in Bangalore. But it remains to be seen whether Toyota will be moved by an escalated conflict.