Commentary/ T V R Shenoy

If Suzuki wants control of Maruti, let it pay up!

Is there something in the air and water of Madras that offers immunity from Suzuki’s bluff and bluster? It seems so -- because the Japanese firm fared badly in a face-off with another Tamilian long before Murasoli Maran entered Udyog Bhavan.

As you may know, Suzuki has a tie-up with the TVS group down south in making two-wheelers. When Venu Srinivasan took over, he came with detailed plans for expansion. But Suzuki refused to put up any cash.

Srinivasan went to Japan to meet the big bosses, who turned him down. Suzuki subsequently claimed that Srinivasan was 'unfit'. He ignored the snide remarks, and went ahead with his plans, using TVS own hard-earned money.

Lo and behold! Srinivasan’s expansion proved to be a roaring success. At which point Suzuki started screaming for more equity...

With a few changes, this could the ongoing controversy over Maruti, could’t it? But the really interesting point isn’t Suzuki’s tactics, it is how the Japanese got a 50 per cent share in Maruti in the first place.

The original Maruti project of the early 1970s was one of Sanjay Gandhi’s hoaxes. The nationalised banks poured out enormous amounts in ‘loans’, and the Haryana government ensured that 330 acres of prime land near Delhi would be available.

But when Sanjay Gandhi died in 1980, not a single example of the 'people’s car' was on the streets. So Indira Gandhi summoned V Krishnamurthy (who had made a success of BHEL and SAIL). And that is how the Maruti of today began.

In the original 1982 contract, the Japanese had an equity of just 26 per cent. That agreement gave Suzuki the option of raising its equity to 40 per cent, and this was done in 1990. But there was no question of giving the Japanese parity.

If he is having a hard time defending India’s interests, Murasoli Maran can thank the industry minister of 1992. Who was it?

Well, the minister of state was Krishna Sahi. But the portfolio was being looked after by none less than Narasimha Rao. It was he who all but gave away Maruti -- aided and abetted by the great 'Mr Clean' of the Congress, Dr Manmohan Singh.

Even Congressmen were aghast at the deal. Pranab Mukherjee, for one, objected strongly in the Cabinet. At which point the finance minister jumped in to vigorously echo his master’s voice.

“Look here,” said Mukherjee, “I was a member of Indiraji and Rajivji's Cabinets when the Maruti deal was finalised. Manmohan Singh was just a bureaucrat. I know more about it than he does!"

But it wasn’t just the actual sale that was scandalous. Just as scandalous was the price at which Suzuki was raised to equality -- just Rs 23 per share! This came at a time when Hindustan Motors and Premier Automobiles shares were being quoted at around Rs 70!

That 10 per cent equity, almost a controlling voice, was sold by Narasimha Rao and Manmohan Singh for about Rs 180 million. (By way of comparison, a single bungalow on Delhi’s Aurangzeb Road is valued at Rs 500 million!) The excuse offered by Narasimha Rao was that it would encourage the Japanese firm to upgrade technology. How has this promise been kept?

Today Maruti has about 80 per cent of the Indian automobile market. But a whopping 90 per cent of this comes from the bread-and-butter model, the Maruti 800. And this is a car which has remained almost unchanged since it was first launched 15 years ago.

Suzuki had also promised to indigenise production. But to this day, Maruti is forced to import heavily from Japan. The result is there for all to see. TELCO manages to make its own gearboxes; Maruti gets them from Japan.

It gets worse. Not only has Maruti not received any technological upgrades, it may have been systematically gouged by overpriced imports. Bhaskarudu, the 'inefficient' new managing director, floated a global tender for paints and presses. He found that the Suzuki bid was more expensive by a massive Rs 3.5 billion!

Suzuki didn’t arrange for the land. It didn’t arrange for tax-breaks. It hasn’t upgraded technology, nor indigenised production. As for capital, the Japanese firm’s total investment is Rs 500 million. On what grounds is Suzuki demanding control of a company worth over Rs 100 billion? I believe the government has no business being in the automobile industry.

Restructuring equity is not the same thing as allowing Suzuki to stage a backdoor take-over. If it wants control of Maruti, let it pay up!

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