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As the iconic Maruti 800 brings in its fortieth birthday, we bring you a conversation with the man who has seen the company grow from the very beginning. RC Bhargava, Chairman of Maruti Suzuki India shares stories and insights from when Maruti cars were conceived and started.
It’s no secret that Maruti Suzuki India is one of the largest and most successful automotive companies in India, producing a wide range of cars and dominating the passenger car market. The partnership between Suzuki Motor Corporation and the Indian government has played a pivotal role in the development of the Indian automotive industry.
Maruti Udyog Limited was established in February 1981 as a public sector company in India. It was formed as a collaboration between the Indian government and Suzuki Motor Corporation.
The company’s focus on small, fuel-efficient cars and its commitment to quality and affordability made it a dominant player in the Indian market. In September 2002, the company’s name was changed from Maruti Udyog Limited to Maruti Suzuki India Limited to reflect the increasing influence of Suzuki in the joint venture.
End of Licence Raj
RC Bhargav (RCB): In 1993, when the industry in India was delicensed, nobody could make new cars. The best Hindustan Motors and Fiat could do was the Contessa and 118 LE, 118 and things of that kind.
Hormazd Sorabjee (HS): But there was never a plan to make a car. I would say a plane crash created a car company.
RCB: If Sanjay Gandhi didn’t have this accident, there would have been no joint venture of this kind. What would be the condition of automobiles in India by this time? Okay, after 2003, companies would have come in. But would the industry have grown the way it has grown? Because the whole way in which the component industry grew, the way the small cars led to the growth of motorisation in India, it would never have happened with the bigger companies.
One of the factors which attracted all these guys to come at that time was the fact that India was the only country which had a well-established, developed component industry. Look at the size of the component industry. It’s unbelievable. They’re exporting more than USD 20 billion worth of components now.
HS: But at that time, even the supplier thing must have been quite intriguing. But the Japanese understood the game. You just followed how they wanted to do it, right?
Suzuki interest in India
RCB: The kind of support which Osamu Suzuki gave to Maruti, I don’t think any other president of Maruti, or any other car company, would have given… The type of interest he took, the amount of time he devoted to the project.
HS: He said he was physically present when the concrete was being poured in the factory.
Lengthy negotiations
RCB: We started negotiations with Suzuki from April 1982 and it took over two months to move all the licence agreements. We signed the agreement in October 1982. We told Suzuki, when we were negotiating, that we had to do the agreement by October that year. Suzuki said, what are you talking about? It can’t be done. We’ve been negotiating our agreement with General Motors for two years now. You’re talking about three or four months. I said we have to finish it by August so that I can go back and get the government’s clearances. They said, how will we sign on October 2? So late at night, we used to continue the discussions. Saturday or Sunday, nothing mattered. Every day, you continue from the morning to late at night. I said, you have to do it. There’s no choice.
HS: And it did help that it (Suzuki) had the company structure of one man, running it. You could not have done this in Honda.
RCB: What can you do, more than negotiations? You had a director who was doing this. The Japanese still have a very conservative mindset and as a company, they have their own legal processes too. We didn’t have a lawyer with us. It was DS Gupta and me with V Krishnamurthy in the background. We didn’t join any of the negotiations. Suzuki said, if you have a problem, come to me. If there’s a disagreement, come to me. Otherwise, you guys go ahead and do it. So, what we would do is, we would negotiate, and then, every five, six days, we would frequently travel to Tokyo because Suzuki’s lawyer Yana Sei was based out there.
HS: So, every five, six days from Hamamatsu to Tokyo. So, how much time did you spend in Japan in one shot?
RCB: It ranged from as long as two weeks to as short as an hour after which we would return to India, and they would visit us for further talks. It was a continuous process, but we did manage to get the agreement completed, and then, we had to push it. We had to push it through various government departments.
Deciding on the quantum of investment and equity
HS: And how did you decide on (the quantum of investment and equity), at that time — seventy-four-twenty-six, and not fifty-fifty? What was the rationale?
RCB: Suzuki had a limit to how much money they would put in. They said, you know, they were also worried about the risk factor. And they said the total cost of the project must be limited to two hundred million dollars. And we will only take twenty-five percent equity. No more. But everything in the project has to be done within that cost.
HS: But strategically, 26 is the key number.
RCB: The government direction from the beginning was 40 percent foreign equity in the project. In one of those meetings, when we talked with the government, I said, they are not ready to give 25 percent. With these numbers, we can’t sign this agreement.
So, we came back — and this was in Delhi — and I said, look, you have to find a solution for us. I told them (Suzuki) that under the Companys’ Law, if you go from 25 to 26, you acquire these extra rights, which they didn’t know. That also created a great deal of trust in me. They saw me as the guy who’s helping them to understand things which they didn’t know. So, I said, now having come to 26 percent, I need to go to 40 percent. So, we came up with a compromise that says that you will go to 40 percent, but within a period of five years.
So, the agreement will say that Suzuki will go to 40 percent of which 26 percent will be taken initially and the remaining will be added within a period of five years. So that kept governments’ face, that yes, 40 percent is there.
HS: And when did you finally go to 40 percent with Maruti?
RCB: Five years. At that time, they were only too happy to go to 40 percent. They would have gone to anything higher also by then. Because I don’t think they could have imagined the response. We prepared the budget and said they will have a profit. Suzuki said, how long have you guys been in the automobile industry? I said, I’m not sure if we have ever been in the automobile industry. Clearly, you know nothing about the industry, and it doesn’t happen like this. You don’t make a profit in the first year. You don’t get customers to book cars which they have never seen. It is not even in production. He said, just let it be. If it doesn’t happen, it won’t happen, but let’s try. What do you lose? So, they were very surprised when this came out and we had 1,20,000 bookings.
HS: But you couldn’t have fulfilled them all because you made only 50,000 the first time.
RCB: Our target was to make 20,000 cars in the first year, 40,000 in next year. The whole production plan had to be changed. The ratio between the vehicles had to be changed completely because it was all passenger cars. Vans were only a small part of the business.
Four decades later…
HS: What does it feel like 40 years after you’ve delivered this car?
RCB: The most important part is the realisation that in many walks of life, we are losing an enormous amount of knowledge and capabilities of people because we do not value experience, as a learning form. We only value academic degrees as learning.
HS: They say skills are more important than degrees.
RCB: To my mind, this is the most important outcome of knowledge to me. You will not believe the amount of learning which people with experience of doing work have. What experience and learning! If you train them how to channel correctly and utilise and motivate them, how much value it can add! Something which cannot be done by the best of engineers. When I say you want to utilise the learning and experience of people who actually do the work, then you have to make changes so that they are motivated to listen to you, to learn from you and contribute to your company. Which you can’t do if you take away all the credit for what is happening in the company.
HS: How did it get to this level of efficiency of the workforce? Or was it just the Japanese company systems and work culture?
RCB: It was a number of things. In fact, that’s part of what my new book is going to be all about. And why did Maruti become different? What motivated guys to work differently from what others were doing? A major part was played by the extensive exposure to Japan and the training in Japan. That’s where Suzuki played a huge role.
HS: So a lot of people went to Japan for training?
RCB: A lot of people went there and spent long periods. You know, agreements that are signed for training. Foreign collaboration agreements by any public sector. They provide for a certain amount of free training in the works of the foreign company. And for the rest, you have to pay if you want more training. When we went into this whole business of how to get the new culture introduced, we came to the conclusion that you need people to spend time and see for themselves. What the Japanese do. Live there. Otherwise, they’ll never believe, sitting in India, that it can be done. How to do it? How to find the money? In those days there was no foreign exchange available and there was no chance of the government releasing foreign exchange.
Suzuki said, I’ll waive this condition in the agreement that beyond so many hours, there should be no free training. He saw the value in that. The Japanese are very big on training and communication.
They were in fact surprised that we were willing to do it. Yeah. Second thing is, we got AOTS to support this programme.
HS: Sorry, AOTS?
RCB: AOTS is a Japanese government organisation that brought in foreign employees of Japanese joint ventures companies for training in Japan. They host the guests for three months and even pay for their stay. So, a lot of people went to Japan under the AOTS. All we had to spend was airfare and airfare was in rupees because it was Air India. And nothing else had to be spent. So, the government couldn’t really say no because we were not asking for money.
A large number of initial employees went to Japan. Many early employees mention training as a major factor in influencing their work. They were so excited to see the difference in what was happening there and what was happening here. I think a lot of people were motivated by working in an automobile industry which was going to use Japanese technology. In India, there was no technology at that time. The idea that you would get experience. I have motivated a lot of youngsters to feel that this is it.
The third factor was the idea of getting involved in building a new industry in India. That I am doing something bigger than just working in a company. We are doing something different. There was a lot of motivation. It had a kind of pioneering spirit. Then our whole organisation. We didn’t work with any kind of hierarchy. Everybody had access to everybody. People could walk into my room, Krishnamurthy’s room.
