Who is the ‘Ravana’ in the Maruti story gone wrong?

Rakesh Khar

With just about 70 days left for the showpiece joint venture that put India on the world map to complete 30 years of unprecedented success in the country, this indeed should have been celebration time in the run up to announce a few big ticket announcements on October 2, 2012.

Ironically though the joint venture company is now busy thwarting a lengthy shut down at its Manesar plant in Haryana with an estimated $ 15 million production loss estimated every day besides regular supply of its best selling hatchback Swift getting adversely hit.

The shutdown threat comes in wake of the brutal killing of a senior official and injuries to several others in a sudden rampage by about 3,000 workers at Maruti Suzuki Manesar plant on July 18.

The company tirelessly aimed to embrace the growth trajectory post a tumultuous industrial relations scenario that put the Indian passenger car leader for years by about $ 500 million production lost in 2011 with the workers Union and the management engaged in a bitter battle at the Manesar plant.

The unfortunate turn of events puts a dampener on an otherwise impressive performance in a difficult last fiscal. Maruti Suzuki posted a better-than-expected quarterly profit and guided a sales volume growth of 10 percent in the current business year. The first quarter results are due next week but the ominous developments have already cast their shadow on among most successful companies in the country.

So is there a pattern in what is happening at Maruti? Late last year the company suffered the union unrest at a time when it was gearing to stay the leadership course having announced a slew of expansion projects in line with its commitment to India. And the aftershocks of the riot are now set to go well beyond the death of a senior company official.

It may be recalled that the company sought to buy peace last year with the politically surcharged unions who accused it of unfair treatment by reiterating its India focus. Maruti stayed the politically correct course hinging its prospects mainly on the twin plants of Gurgaon and Manesar in Haryana, which can produce 1.4 million vehicles a year. The company is currently adding to its production at Manesar, where a third assembly line for 250,000 vehicles a year will go on stream before 2014.

Earlier this year the company kept reinforcing its commitment as it announced to set up a plant in Gujarat: 40 billion rupees ($719.7 million) initially to build a factory that is expected to start producing by end of March 2016. The initial goal is to produce 250,000 vehicles a year. Suzuki Motor Corporation, the parent, also announced a motorcycle plant around the same time in Haryana.

As things began to settle down this year the industrial relations issue assumed dangerous proportions as the boardroom was sought to be divided on the lines of Indian versus Japanese management positions in total disregard for returns on investment to stakeholders. The fact being that out of 12 directors five are Indians. The bigger truth being that the company has essentially been driven since its inception by one or the other Indian notable among them being R C Bhargava who quit service to become company managing director in 90’s and is now the non executive chairman and the public face of the company in good and bad times.

But the trust deficit theory did not lose steam. Talk of work culture differences-genuine and imaginary-often got blown out of proportion climaxing now into a full-fledged armed conflict earlier this week.

The parent, Suzuki Motor Corporation, that draws about 50 percent of its profits from its Indian subsidiary, has in contrast stood by the India story, especially post initial hurdles it crossed when government of India ceded majority ownership to the Japanese major.

Suzuki forecast in May a 9.8 percent rise in global sales this fiscal year to 2.811 million vehicles, led by a 12 percent jump in Asia. This year Suzuki announced stepped up investments in Vietnam & Thailand (new projects), and an upgrade in China. The company has subsidiaries in Pakistan, Hungary, Indonesia and Thailand, besides India.

Good intentions apart, O Suzuki, the man who gave India Maruti, would have some tough talking to do as he catches up with Gujarat Chief Minister Narendra Modi, who is due to visit Japan for five days beginning early next week (July 25), to cement the project in his state.

Will Modi be able to exceed his brief and assuage Suzuki? It is not either about Haryana or Gujarat but about India!

(The writer is Editor, Zee Research Group)