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Maruti Udyog Limited
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ABSTRACT
Maruti Udyog Ltd. (MUL) was set up in
1980 by the government to produce
automobiles. By collaborating with
Suzuki Motor Company in 1982, it was
hoped that the famed Japanese style of
management would catalyze the small and
backward car industry and some of the
others to which it was linked. Maruti got
off to an excellent start by public sector
standards. However, by 1985, fiscal,
balance of payments, and technology
transfer problems began to surface. With
current order books winding down by
1990, questions arise as to MUL's mission,
its product-market strategies, its pricing
policy, and the value of Japanese
participation. Questions also arise
regarding the coherence, long term
stability, and developmental aims of
government's policy towards the
automobile industry.
Indian Car Industry
The Indian car industry dates back to the 1920s when
American automakers opened assembly plants in
Bombay, Calcutta, and Madras. These were re-opened
after World War n and others were subsequently set
up with Indian partners. But when the new govern-
ment insisted on local parts manufacturing program-
mes, the foreign companies decided to close down
their operations around 1954.
Thereafter, the industry developed entirely in
the private sector because government gave low
priority to passenger car production and even to
truck transport. Consequently, the state-owned rail-
ways became the single largest undertaking in India.
A survey published some years ago showed that out
of about a dozen global industries, the automobile in-
dustry was the only one in which state ownership
was nil in India. All the others (and several more be-
sides) were 100 per cent state-owned except steel
which had a 25 per cent private sector share in the
Indian context.
MUL: The Early Years
Maruti Ltd was nationalized in October 1980 and its
assets were transferred to the newly created public
sector company Maruti Udyog Ltd. in April 1981.
Thus, MUL began with Mrs Indira Gandhi's personal
blessings though its prospects were otherwise rather
bleak.
Perceptions regarding the project differed at
that time. A local management consultant took a
look at Maruti's run down plant and machinery and
suggested that for export purposes a new and coastal
plant would be advisable. But overseas circles noted
that the 300 acre site offered a good opportunity to
introduce a new "people's" car for the home market
with modern technology.
Major European and Japanese companies, 13 in
all, were again approached by the government.
Nothing much came of this, however. The situation
changed with the constitution of MUL's board in
April 1981 and the appointment of professional
managers. Mr S Moolgaokar (the Chief Executive of
Tata's highly successful truck company, TELCO) was
made the Chairman and Mr V Krishnamurthy was ap-
pointed Vice Chairman and Managing Director.
Indo-Japanese Relations at MUL
In a speech at IIMA to top public sector managers, Mr
V Krishnamurthy noted that the main lesson of
Japanese management was that one could get great
benefit from human resource development. Their cor-
porate success was due to a high level of employee
motivation. He thought individually Indians were
far better. The Japanese did not neglect individual
brilliance either but they were very strong on team
work. They had the feeling that they were one. If there
was any problem, they all got together. They shared
information. They also showed tremendous concern
for their employees. They spent more time on
employees than on purely technological matters.
Compared to this, he felt, we in India had scant con-
cern for our employees.