Technology upgradation need of the hour -- Suzuki

Technology upgradation need of the hour -- Suzuki

Back in India, two and a half years after a bitter feud with the government, which ended last year when the government saw reason, Suzuki Motor Corporation's chief executive, Osamu Suzuki should be elated. More so, when his Indian joint venture Maruti Udyog Ltd, is celebrating his arrival with the inauguration of a spanking new state-of-the-art automobile plant, the flagging off of two brand-new models (the Baleno and the Wagon R), and the promise of at least one new model each year. The feisty Osamu, however, is a model of cautious optimism this time. He ducks questions on whether the government will go along with his investment plans this time around (this was the root of the previous feud), and blandly says `the government wants new models and the other side of this coin is fresh investment'. `How good is Maruti's quality' is met with `if we don't keep upgrading technology, and that of our vendors, we cannot survive the intense competition'. And `does a 50:50 joint venture like that withgovernment work' is countered with `if both drivers know how to drive, there's no problem.' Suzuki met with Sunil Jain to discuss Maruti's future. Excerpts:
One of the high points of your visit has been your announcement that Maruti'll introduce at least one new model a year. This means big investments. Is the government committed to make big investments?
The government clearly says it wants new models, and fresh investments are the other side of this same coin. Introduction of any new model costs at least Rs 400 crore, in terms of the development cost of upgrading vendors, jigs, dies and so on. As for the total investment needed, it depends on what our rivals do. In a few years, for example, we'll probably have to have separate facilities for automatic transmission cars as more customers want this. Let's see. But it's clear that if we don't invest, Maruti's market share will fall. The choice is simple: invest and survive, or don't.

Investors must recognise this point. Investment, new models, productivity will be the deciding factors.

How will Maruti be affected by the increased competition of the last few years?
A. The US had the Big 4, then the Big 3, now the Big 2. This happened in Japan also, first 10 then 5. Everywhere, it's the same. In India, 3 or 4 firms will disappear in 5 years, perhaps just 4 or 5 firms will survive in their present form after 10 years. And once India opens her economy, the competition will become very tough. Globally, profit margins of top auto firms is 2 to 3 per cent. In Maruti it is around 8 per cent. Because till 1997, Maruti was a monopoly. Only distribution of cars required, not marketing. So its profit margins have to fall. Even Nissan which produced 4 million cars was crushed by competition, Maruti makes just 4 lakh cars. You just have to make quick decisions, and go on investing. Will Suzuki pick up the government's stake in Maruti if it does decide to disinvest?If, if, if!

Apart from the 50:50 joint venture with the government in Maruti, you also have a 50:50 JV with General Motors in Canada. Do such JVs work successfully, even with private sector partners?
As long as there's just one steering shaft, having two steering wheels is no problem! Two shafts and two steering is also all right if both drivers know how to drive.

Is India a better investment decision today as compared to 5 years ago? Is the bureaucracy more co-operative?
India's a very big market and Indians are very hard working, so it's definitely a good investment. It's geographical location is also very good, for exports. I cannot recognise and difference in bureaucracy since we touched only very few bureaucrats this time.

There's a feeling that Maruti is soft towards Japanese vendors, but is aggressively cutting prices of Indian vendors?
If this is so, I'll have to ask (managing director) Jagdish Khattar about this. But generally the principle is to cut costs across the board. You must appreciate though, that the exchange fluctuations are a big factor and must be kept in mind. The solution is to indigenise quickly and that is our goal.