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May 15, 2002 | 1050 IST
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Maruti changes gears

BS Corporate Bureau

The government's endeavour of providing an affordable car to the Indian masses crossed a milestone on Tuesday with the Cabinet deciding to hand over the reins of Maruti Udyog Ltd to its joint-venture partner in the company, Suzuki of Japan.

Though the government had first talked of developing the domestic car industry in 1952, when it had set up a tariff commission to this effect, Maruti started life in the mid-1970s as a brainchild of Sanjay Gandhi.

The company acquired 330 acres of land at Gurgaon near Delhi. A board of directors was constituted, which included Sonia Gandhi, the present Congress president, and Mamaji, a close aide of godman Chandraswami.

The project hit a roadblock when the Janata government led by Morarji Desai came to power in 1977.

It appointed the Reddy Commission to go into the whole affair. The commission could not come up with much. When Indira Gandhi came back to power in 1980, her resolve to set the project rolling was stronger than before. She brought in V Krishnamurthy, a seasoned technocrat, to spearhead the project.

After considering a number of names, the government decided to rope in Suzuki of Japan as a partner in the company owing to its expertise in the small-car segment.

Originally, the Japanese company had a 26 per cent stake in Maruti Udyog, which it scaled up to 40 per cent. Then, in 1992, Suzuki was sold another 10 per cent stake in the company at Rs 23 per share.

In 1983 the company launched the Maruti-800 at a price of Rs 42,000. The keys to the first owner were personally handed over by Indira Gandhi.

Over the next few years, Maruti totally decimated the competition with its market share crossing 80 per cent. It also became the biggest success story in terms of market share for Suzuki. That apart, Maruti Udyog for the first time brought in modern management practices like kaizen and just-in-time inventories to the country.

In August 1997, a major dispute broke out between the joint venture partners over the appointment of RSSLN Bhaskarudu as managing director after RC Bhargava had retired.

Suzuki objected to the appointment, saying its five directors on the nine-member Maruti Udyog board had opposed the proposal. The government argued that as per the amended agreement between the two partners in 1992, each partner could nominate a managing director for five years and there was no need for any discussion.

With both partners unyielding, Suzuki took the Indian government to the International Court of Arbitration. The then Industry Minister, Murasoli Maran, went to the extent of announcing that the government was looking for a new partner for the venture.

The issue was finally resolved in June 1998 when the Bharatiya Janata Party-led government took over at the Centre.

A compromise was worked out between the two partners wherein it was decided that Bhaskarudu would retire on December 31, 1999, instead of the scheduled time of 2002.

Jagdish Khattar, an executive director, was appointed joint managing director and he took over the reins from Bhaskarudu in January 2000.

It is only in the past one year that the government has decided to give up control in Maruti Udyog in favour of its Japanese partner to meet the future funding needs of the company.

Though its competitors have been nibbling at its market share, Maruti Udyog is still the undisputed leader of the Indian car market.

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