The Maruti Story

Title: The Maruti Story – How A Public Sector Company Put India On Wheels

Author: R C Bhargava

Publisher: Collins Business 2010 (First)

ISBN: 978-81-7223-780-6

Pages: 362

Maruti is a household name in India, irrespective of rural or urban settings. The ubiquitous small car, the 800, dominates the roads even now, 28 years after its uncertain introduction in 1983. Different brands and capacities abound the market now, but the 800 has an iconic feel, in that it defined the concept of a car for an entire generation. The author served in the IAS for 26 years, before moving to Maruti and became the managing director for two consecutive terms, first as the representative of the Indian government and then of Suzuki Motor Corporation (SMC). He retired in 1997, but rejoined the board as director in 2003 when the government fully divested its stake and Suzuki became the largest share holder, with 54% shares. Bhargava witnessed a private company owned by Sanjay Gandhi being taken over by the government as a public-sector unit (PSU) and later, being privatized again by changing economic conditions around the world.

Independent India opted for a planned economy, cars never obtaining attention because it was a luxury article. There were only three manufacturers, the Hindustan Motors (making Ambassador brand), Premier Automobiles (Premier Padmini) and Standard Motors (Herald) serving the whole of India. A company had only one brand, introduced decades ago. There were no modifications or upgradations. The supply of vehicles far outstripped demand and waiting periods of several years were common. They all had poor quality too, being unable to carry the riders over long distances without the helpful intervention of mechanics in between. Sanjay Gandhi, the younger son of former Prime Minister Indira Gandhi was much of a playboy, cars and planes being his favourite passions in addition to dabblings in politics. He was apprenticed in Rolls Royce and was given a license to manufacture small cars. In the license-quota-permit raj existed then, having the right connections was the sole criterion of obtaining favours from the government. Maruti Motors Ltd was incorporated in 1971 with noted industrialists like Raunaq Singh of Apollo Tyres and M.A.Chidambaram of SPIC on the director board. A prototype was haphazardly produced, which was a big flop. Even though the company could manufacture no cars, it diversified into heavy vehicles and bus body building. Soon, Indira and Sanjay lost faith in democracy and declared a state of emergency, suspending even the basic rights of people. As long as emergency lasted, Sanjay’s company bagged orders, and after that it courted investigations of various kinds. Sanjay was killed in June 1980 in a plane crash, during a daring exercise soon after Indira Gandhi was returned to power. She nationalized the company, christening it Maruti Udyog Ltd (MUL) in April 1981 and its assets were taken over by the new company.

Indira set a target date of Dec 1983 for rolling out cars from the company. Its directors, Bhargava among them, made frantic searches for foreign partners who could share technology. Renault and Volkswagen were considered in the initial stages, with the R18 almost finalised. In the end, none of the European and bigger Japanese firms had had trust in Indian management of a PSU and the lot fell on a lesser known brand, Suzuki. It was the mortal incarnation of the low-cost concept, having done away with even airconditioning in their offices in Japan! A suitable model, SS80 was selected and introduced in India as the iconic 800.

Maruti had to face all kinds of problems during the startup stage. It built power plants and diverted natural gas lines to serve fuel to the plants. The clout of the directors and the political godfathers served the company in good stead as it steadfastly bypassed any rule or law which hindered the smooth functioning of the company. A case in point is described by Bhargava. When MUL began to supply power to its joint-venture companies producing parts for them, the Haryana electricity authorities objected to it, citing the then existing electricity rules which forbade a company to distribute electricity. MUL overcame this with the clever move of making the power plants under a subsidiary company, whose shares are jointly owned by MUL and its JV partners! They now became the owners of the power plant, and hence could use it, without violating the letter of the law.

The first car rolled out as planned on 14 Dec 1983. There were several rub-offs with Suzuki too, who didn’t want to invest more money in the plant’s automation. He advised for manual pushcarts instead of conveyors, which the Indian management stoutly rejected. Suzuki favoured manual welding jobs, while Indian management lobbied and obtained automated welding procedures. The 800 got a rousing reception everywhere and bookings surpassed supply potential. The advance deposit paid by the customers helped the company financially. New models soon followed, the Omni, Gypsy and 1000 among them. As part of liberalization, the government reduced its shares to 50% from 60 in 1992, becoming equal partners with SMC, thereby ceasing to be a PSU. Bhargava continued as the managing director as Suzuki’s nominee.

Relations with the government and Suzuki soured in the 1990s. The tussle came when K. Karunakaran was the Industries minister and he wanted to have a say in the internal management of the company. He also desired to set up Maruti’s second plant in his home state of Kerala, whereas Maruti was planning to install it at Manesar, nearby the existing plant at Gurgaon. Murasoli Maran, who replaced Karunakaran continued with the interventionist game in the next government. Quarrel with SMC breached all outward appearances and SMC filed a complaint at the International Court of Arbitration at Paris. Government unilaterally chose R.S.S.L.N. Bhaskarudu as the new managing director when Bhargava retired in 1997, who was not favoured by SMC. Things turned positive when the BJP government assumed office, who was sympathetic to the company. Y. Saito was nominated the Chairman, while Jagdish Khattar became the M.D. Labour unrest reared its ugly head in 2000 and the company posted its first ever loss of Rs. 269.4 crores in 2000-01. The company suffered reverses at every corner, with competition from international brands decimating the booking deposits. The dealers were denied the pleasure of advance payment and had to find ways of raising working capital. MUL moved to finance and insurance sectors as avenues of profitable employment. Even with all these efforts, the market share nosedived to 55% from the peak 82%. The company still maintains the market share without much variation.

Meanwhile, the government was increasingly distancing itself from the company, under the logic that it is not a governmental function to do business in cars. In 1992, it renounced its option for a rights issue to SMC and its stake came down to 45.4%. In 2003, it offloaded a further tranche of 27.5% shares in a public issue. When the government saw that the share prices were very high, it sold more equity, to have a ratio of 18.3%. In 2006, it sold a further 8% and by 2007, the remaining 10.27% were sold out. Maruti Udyog Ltd officially became Maruti Suzuki India Ltd (MSIL).

Vendor development was a great achievement of Maruti. The Japanes traditionally believed in just-in-time inventories, with only two or three vendors for supplying each item in various categories. Quality was of utmost concern, though it was of not much concern for Indian companies prior to liberalization. MUL helped the vendors form joint-ventures with Japanese companies to ensure quality of material supplied to Maruti. Some of the companies were housed in the factory premises itself, at Gurgaon. Several vendors, like Amtek, Bharat Forge and Shakti Group had tremendous growth and became multibillion dollar companies themselves. MUL also helped the vendors obtain clearances and licenses from the government. It introduced a vendor rating system based on rejection levels, adherence to schedules and prices. The buying ratios were settled based on the ratings. Ever since Suzuki obtained management rights in Maruti, it began investing heavily in R&D facilities so that small cars can be engineered and built in India itself.

Maruti revolutionized the work culture on the shop floor. Punctuality was sacrosanct and attendance greater than 95% was incentivized. Suzuki wanted a production time of 7hr 45min in each shift of 8 hours. There were only two tea breaks of seven and a half minute duration, and a 30 minute lunch interval was outside the working time. Every employee, whether be a worker or a manager was expected to reach the factory at least 15 minutes in advance. Even directors had to punch in and out at the company. Casual leaves were encashable, attendance bonus schemes were in effect,  and teamspirit and oneness were exhibited through common uniforms, common canteen and common toilets. Offices were open, with no separate chambers for the managers. Maruti was obsessed with transparency and efficiency. The management promoted a single union, with which it interacted on a daily basis. The union was later politicized and became one of the bottlenecks for Maruti. The company also actively encouraged the concept of quality circles, which worked extremely well. In 2008, one such circle suggested and effected a saving of Rs. 479 crores.

The book is easy to read, and explains each aspect of successfully running a PSU with so many strings attached and procedural hurdles to cross. The author was an able and experienced administrator whose skills were effectively utilised in Maruti. Bhargava keeps implicit faith in readers and demonstrates in clever ways how he bypassed draconian laws which bound Indian industry in its stifling embrace. His optimism is contagious and the readers feel the thrill when reading about Maruti meeting deadlines put down by its shareholders. Bhargava also makes in depth and pointed analyses of the plight of PSUs and how they go under the weight of rules and procedures which are to be adhered to. Insightful comparisons to the private sector presented in the book need to be a guideline for future reformers of the existing PSU system. Maruti’s experiments with ensuring quality in shop floor and among vendors are illuminating examples, as was its vendor development programs, from which the whole nation benefitted. Knowledge of Bhargava’s ways of dealing with an intransigent labour union is a requisite for administrators and political leaders alike.

On the other hand, the style of writing is essentially bureaucratic. Though it is easy to read, and effectively structured, the propaganda motive juts out every now and then. The humour, wherever it is,  is artificial and forced. Readers get the impression that the author is not frank and forthcoming on several issues in which his personal honour is involved. Though he was absolved of any wrong doing, a much more detailed narration of the events leading up to it would have provided an honest attempt. Clerical and factual inconsistencies sometimes occur in the book. The year in which Maruti faced its first ever loss is mentioned as 2000-01 on page 181, whereas it is given as 1999-2000 on page 339. Self-glorification attempts abound in the book, which can be expected and indeed pardonable in the work of a retired managing director, but the following line exceed all such limits. “Perhaps the most important reason for the success of Maruti, despite being a PSU, was that both Krishnamurthy and I, even though from a PSU and government background, had the analytical capacity to understand the inherent weaknesses of the system and the intellectual integrity to act in a manner which could overcome them to the maximum extent possible.”  (p.361).

The book is highly recommended.

Rating: 3 Star