Go with the wind, finally

You would be hard put to describe it as anything but fate. Just some days ago, the man responsible for auto leader Maruti Udyog8217;s succe...

You would be hard put to describe it as anything but fate. Just some days ago, the man responsible for auto leader Maruti Udyog8217;s successful birth we8217;re not talking of the late Sanjay Gandhi, but former chief V. Krishnamurthy was exonerated of the flimsy charges levelled against him a decade ago, charges about how he, along with successor R.C. Bhargava, favoured a particular supplier of shock absorbers. With its founding father set free, it8217;s particularly appropriate that the firm, named after the God of Wind, Maruti, should also be set free to fly, a little under two decades from the day it first produced the car that set the country8217;s auto market afire. The fact of the matter is, as this newspaper has argued for several years now, the government8217;s presence on the board of Maruti was stifling its growth, not allowing the introduction of new models fast enough, and not allowing the serious changes needed in the former monopolist8217;s management style. To cite just one example, Maruti8217;s management wanted to get rid of its militant trade union leader who engineered massive industrial unrest two years ago 8212; this, at a time when Maruti8217;s workers got paid double what competitor Hyundai paid, and when Maruti was under siege. Thanks to government intransigence, however, removing the unionist took over a year, but when it happened, Maruti8217;s productivity improved dramatically, and it steered one of the biggest turnarounds in India8217;s auto history in recent times.

Enough has been said about the deal whose contours were broadly known for several weeks, to know that it8217;s a good one for both parties. In a nutshell, while former Prime Minister P.V. Narasimha Rao allowed Suzuki to become an equal partner in 1992 it upped its equity stake from 40 to 50 per cent for a paltry Rs 32 crore, this time around the government will get Rs 1,000 crore for giving up just one per cent of its stake. All told, the government8217;s 50 per cent stake will fetch it around Rs 3,000 crore, which is pretty good considering General Motors paid just around Rs 1,250 crore for buying three of Daewoo8217;s auto plants in Korea. For Suzuki, it8217;s now got full control of one of the most profitable Suzuki operations anywhere in the world, including in Japan.

All this, however, is history. The challenge now is to make the most of the sale of the company that, in a fundamental sense, is responsible for India just about beginning to being taken seriously as an auto-production centre 8212; not only is Maruti one of the few joint ventures that Suzuki allows to export cars the Zen, and now the Alto, just last month Toyota chose India in a global bid to produce gearboxes for its utility vehicles the world over. And while O. Suzuki told this newspaper that Maruti8217;s quality was miles ahead of Suzuki8217;s Chinese operations, he also said in an oh-so Japanese manner, it was still miles behind that of the home-country plants. With Suzuki now free to run the plant as it likes, and the management proven to be a quality one, the trick lies in getting Suzuki to genuinely convert Maruti into a global production base. That, by the way, is not going to happen by government fiat. It will happen on its own, but only if the stalled reforms process is genuinely pushed forward.