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Maruti Suzuki

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Maruti Suzuki India Ltd
Company typePublic (BSE MARUTI, NSE MARUTI)
IndustryAutomotive
Founded1981[1]
Headquarters Gurgaon
(Delhi metropolitan area), Haryana, India
Key people
India Jagdish Khattar, CEO
Japan Shinzo Nakanishi, Managing Director
ProductsCars
RevenueIncrease~$2.5 billion (2005)
Number of employees
3,334 [2]
Websitehttp://www.marutisuzuki.com/

Maruti Suzuki India Limited (Hindi: मारुति सुज़ूकी इंडिया लिमिटेड) is a publicly listed automaker in India. It is a leading four-wheeler automobile manufacturer in South Asia. Suzuki Motor Corporation of Japan holds a majority stake in the company. It was the first company in India to mass-produce and sell more than a million cars. It is largely credited for having brought in an automobile revolution to India. It is the market leader in India. On 17 September, 2007, Maruti Udyog was renamed to Maruti Suzuki India Limited. The company's headquarters remain in Gurgaon, near Delhi.

Profile

The old logo of Maruti Suzuki India Limited. Later the logo of Suzuki Motor Corp. was also added to it

Maruti Suzuki is one of India's leading automobile manufacturers and the market leader in the car segment, both in terms of volume of vehicles sold and revenue earned. Until recently, 18.28% of the company was owned by the Indian government, and 54.2% by Suzuki of Japan. The Indian government held an initial public offering of 25% of the company in June 2003. As of May 10, 2007, Govt. of India sold its complete share to Indian financial institutions. With this, Govt. of India no longer has stake in Maruti Udyog.

Maruti Udyog Limited (MUL) was established in February 1981, though the actual production commenced in 1983. Through 2004, Maruti has produced over 5 Million vehicles. Marutis are sold in India and various several other countries, depending upon export orders. Cars similar to Marutis (but not manufactured by Maruti Udyog) are sold by Suzuki in Pakistan and other South Asian countries.

The company annually exports more than 30,000 cars and has an extremely large domestic market in India selling over 500,000 cars annually. Maruti 800, till 2004, was the India's largest selling compact car ever since it was launched in 1983. More than a million units of this car have been sold worldwide so far. Currently, Maruti Alto tops the sales charts.

Due to the large number of Maruti 800s sold in the Indian market, the term "Maruti" is commonly used to refer to this compact car model. Till recently the term "Maruti", in popular Indian culture, was associated to the Maruti 800 model.

Maruti Suzuki India Limited, a subsidiary of Suzuki Motor Corporation of Japan, has been the leader of the Indian car market for over two decades.

It’s manufacturing facilities are located at two facilities Gurgaon and Manesar south of New Delhi. Maruti’s Gurgaon facility has an installed capacity of 350,000 units per annum. The Manesar facilities, launched in February 2007 comprise a vehicle assembly plant with a capacity of 100,000 units per year and a Diesel Engine plant with an annual capacity of 100,000 engines and transmissions. Manesar and Gurgaon facilities have a combined capability to produce over 700,000 units annually.

More than half the cars sold in India are Maruti cars. The company is a subsidiary of Suzuki Motor Corporation, Japan, which owns 54.2 per cent of Maruti. The rest is owned by the public and financial institutions. It is listed on the Bombay Stock Exchange and National Stock Exchange in India.

During 2006-07, Maruti Suzuki sold about 675,000 cars, of which 39,000 were exported. In all, over six million Maruti cars are on Indian roads since the first car was rolled out on December 14, 1983.

Maruti Suzuki offers 10 models, ranging from the people’s car, Maruti 800, for less than Rs 200,000 ($ 5000) ex-showroom to the premium sedan SX 4 and luxury SUV, Grand Vitara.

Suzuki Motor Corporation, the parent company, is a global leader in mini and compact cars for three decades. Suzuki’s technical superiority lies in its ability to pack power and performance into a compact, lightweight engine that is clean and fuel efficient.

Maruti is clearly an “employer of choice” for automotive engineers and young managers from across the country. Nearly 75,000 people are employed directly by Maruti and its partners.

The company vouches for customer satisfaction. For its sincere efforts it has been rated (by customers)first in customer satisfaction among all car makers in India for seven years in a row in annual survey by J D Power Asia Pacific.

Maruti Suzuki was born as a government company, with Suzuki as a minor partner, to make a people’s car for middle class India. Over the years, the product range has widened, ownership has changed hands and the customer has evolved. What remains unchanged, then and now, is Maruti’s mission to motorise India.

Further information: Timeline of Maruti Suzuki

Partner for the Joint Venture

Pressure started mounting on Indira and Sanjay Gandhi to share the details of the progress on the Maruti Project. Since country's resources were made available by mother to her son's pet project. A delegation of Indian technocrats was assigned to hunt a collaborator for the project. Initial rounds of discussion were held with the giants of the automobile industry in Japan including Toyota, Nissan and Honda. Suzuki Motor Corporation was at that time a small player in the four wheeler automobile sector and had major share in the two wheeler segment. Suzuki's bid was considered negligible.

In the initial rounds of discussion the giants had their bosses present and in the later rounds related to the technical discussions executives of these automobile giants were present. Osamu Suzuki, Chairman and CEO of the company ensured that he was present in all the rounds of discussion. Osamu in an article writes that it subtly massaged their (Indian delegation) egos and also convinced them about the sincerity of Suzuki's bid. In the initial days Suzuki took all steps to ensure the government about its sincerity on the project. Suzuki in return received a lot of help from the government in such matters as import clearances for manufacturing equipment (against the wishes of the Indian machine tool industry then and its own socialistic ideology), land purchase at government prices for setting up the factory Gurgaon and reduced or removal of excise tariffs. This helped Suzuki conscientiously nurse Maruti through its infancy to become one of its flagship ventures.[3]

File:Maruti img factory.jpg
An aerial view of the Gurgaon Facility

Relationship between the Government of India, under the United Front (India) coalition and Suzuki Motor Corporation over the joint venture was a point of heated debate in the Indian media till Suzuki Motor Corporation gained the controlling stake. This highly profitable joint venture that had a near monopolistic trade in the Indian automobile market and the nature of the partnership built up till then was the underlying reason for most issues. The success of the joint venture led Suzuki to increase its equity from 26% to 40% in 1987, and further to 50% in 1992. In 1982 both the venture partners had entered into an agreement to nominate their candidate for the post of Managing Director and every Managing Director will have a tenure of five years [4]

Initially R.C.Bhargava, was the managing director of the company since the inception of the joint venture. Till today he is regarded as instrumental for the success of Maruti Udoyog. Joining in 1982 he held several key positions in the company before heading the company as Managing Director. Currently he is on the Board of Directors. [5] After completing his five year tenure, Mr. Bhargava later assumed the office of Part-Time Chairman. The Government nominated Mr. S.S.L.N. Bhaskarudu as the Manging Director on August 27, 1997. Mr. Bhaskarudu had joined Maruti in 1983 after spending 21 years in the Public sector undertaking Bharat Heavy Electricals Limited as General Manager. Later in 1987 he was promoted as Chief General Manager, 1998 as Director, Productions and Projects, 1989 Director, Materials and in 1993 as Joint Managing Director.

The Suzuki Motor corporation didn't attend the Annual General Meeting of the Board with the reason of it being called on a short notice. [6] Later Suzuki Motor Corporation went on record to state that Mr. Bhaskarudu was "incompetent" and wanted some one else. However the Ministry of Industries, Government of India refuted the charges. Media stated from the Maruti sources that Bhaskarudu was interested to indigenise most of components for the models including gear boxes especially for Maruti 800. Suzuki also felt that Bhaskarudu was a proxy for the Government and would not let it increase its stake in the venture. [7] If Maruti would have been able to indigenise gear boxes then Maruti would have been able to manufacture all the models without the technical assistance from Suzuki. Till today the issue of localization of gear boxes is highlighted in the press . [8]

The relation strained when Suzuki Motor Corporation moved to Delhi High Court to bring a stay order against the appointment of Mr. Bhaskarudu.The issue was resolved in an out-of-court settlement and both the parties agreed that R S S L N Bhaskarudu would serve up to December 31, 1999, and from January 1, 2000, Jagdish Khattar, Executive Director of Maruti Udyog Limited would assume charges as the Managing Director. [9] Many politicians believed, and had stated in parliament that the Suzuki Motor Corporation is unwilling to localize manufacturing and reduce imports. This remains true, even today the gear boxes are still imported from Japan and are assembled at the Gurgaon facility

Disinvestment and public listing

The National Democratic Alliance Government headed by Atal Behari Vajpayee passed the resolution on December 22, 2003 to dilute its stake in the venture. Maruti was not a special case, but it was the policy of the government to reduce the public debt by offloading its stake in many public sector companies and joint ventures. The preparations had began much earlier. The Suzuki Motor Corporation suggested the government to offload its stake in the Capital Market. Some believed this was a ploy to gain control of the company at cheap price due to the unhealthy conditions of the capital market. [10]

The red herring prospectus was filed with the Securities and Exchange Board of India on May 2, 2003. The Union Government made an offer of 7.22 crore shares representing 25 percent of the fully diluted equity state of the Maruti Post offer. After the dilution, the government's stake was reduced to 20.8 and the Suzuki Motor Corporation's stake increased to 54.2 percent. The remaining equity belonged to institutional and individual investors [11]. As the offer was oversubscribed by the general public, the Government raised the size of the Initial Public Offering by 10 percent. Investors had submitted bids ranging from Indian Rupees 115 to 360 per share. As per Bombay Stock Exchange data, about 69% or 5.83 crore (58.3 million) bids received were for Rs 120 per share. [12]

The company has 28,89,10,060 shares As on February 15, 2006 the government stake reduced to 18.28% and the Suzuki Motor Corporation has a stake of 54.21%. As on May 10, 2007 the government sold its complete stake to financial institutions. Currently 71.06% of the equity is held by foreign investors including Suzuki Motor Corporation [13]

Following are the codes assigned to Maruti Udyog Limited on Stock exchanges and news services

  • Bombay Stock Exchange: 532500
  • The National Stock Exchange: MARUTI
  • Bloomberg: MUL@IN
  • Reuters: MRTI.BO

Industrial relations

For most of its history, Maruti Udyog had relatively few problems with its labour force. Its emphasis of a Japanese work culture and the modern manufacturing process, first instituted in Japan in the 1970s, was accepted by the workforce of the company without any difficulty. But with the change in management in 1997, when it became predominantly government controlled for a while, and the conflict between the United Front Government and Suzuki may have been the cause of unrest among employees. A major row broke out in September 2000 when employees of Maruti Udyog Ltd (MUL) went on an indefinite strike, demanding among other things, revision of the incentive scheme offered and implementation of a pension scheme. Employees struck work for six hours in October 2000, irked over the suspension of nine employees, going on a six-hour tools-down strike at its Gurgaon plant, demanding revision of the incentive-linked pay and threatened to fast to death if the suspended employees were not reinstated. About this time, the NDA government, following a disinvestments policy, proposed to sell part of its stake in Maruti in a public offering. The Staff union opposed this sell-off plan on the grounds that the company will lose a major business advantage of being subsidised by the Government.

The standoff with the management continued to December with a proposal by the management to end the two-month long agitation rejected with a demand for reinstatement of 92 dismissed workers, with four MUL employees going on a fast-unto-death. In December the company's shareholders met in New Delhi in an AGM that lasted 30 minutes. At the same time around 1500 plant workers from the MUL's Gurgaon facility were agitating outside the company's corporate office demanding commencement of production linked incentives, a better pension scheme and other benefits. The management has refused to pass on the benefits citing increased competition and lower margins.[14]

Services offered

Sales of automobiles

Maruti 800
File:P1090247.jpg
Maruti Zen Estilo

In the order they were launched:

  1. Maruti 800: Launched 1983. Largest selling car in India, until 2004.
  2. Maruti Omni: Launched 1984.
  3. Maruti Gypsy: Launched 1985.
  4. Maruti 1000: Launched 1990
  5. Maruti Zen: Launched 1993 with a facelift in 2003.Production ended in 2006.
  6. Maruti Esteem:Launched 1994
  7. Maruti Wagon-R:Launched 1999 Modified 2006
  8. Maruti Baleno:Launched 1999. Production ended late 2006/early 2007.
  9. Maruti Alto:Launched 2000. Currently the largest selling car in India
  10. Maruti Grand Vitara:Launched 2003
  11. Maruti Grand Vitara XL-7
  12. Maruti Versa: Launched 2004
  13. Maruti Swift: Launched 2005
  14. Maruti Zen Estilo Launched in 2006
  15. Maruti Swift Diesel Launched in 2007
  16. Maruti Suzuki SX4 Launched in May 2007
  17. Maruti Grand Vitara Sports Utility Vehicle Launched in July 2007

Authorized Service Stations

Maruti is one of the companies in India which has unparalleled service network. To ensure the vehicles sold by them are serviced properly Maruti had 1545 listed Authorized service stations and 30 Express Service Stations on 30 highways across India.

Service is a major revenue generator of the company. Most of the service stations are managed on franchise basis, where Maruti trains the local staff. Other automobile companies have not been able to match this benchmark set by Maruti. The Express Service stations help many stranded vehicles on the highways by sending across their repair man to the vehicle. [15]

Maruti Insurance

Launched in 2002 Maruti provides vehicle insurance to its customers with the help of the National Insurance Company, Bajaj Allianz, New India Assurance and Royal Sundaram. The service was set up the company with the inception of two subsidiaries Maruti Insurance Distributors Services Pvt. Ltd and Maruti Insurance Brokers Pvt. Limited [16]

This service started as a benefit or value addition to customers and was able to ramp up easily. By December 2005 they were able to sell more than two million insurance policies since its inception. [17]

Maruti Finance

To promote its bottom line growth, Maruti launched Maruti Finance in January 2002. Prior to the start of this service Maruti had started two joint ventures Citicorp Maruti and Maruti Countrywide with Citi Group and GE Countrywide respectively to assist its client in securing loan.[18] Maruti tied up with ABN Amro Bank, HDFC Bank, ICICI Limited, Kotak Mahindra, Standard Chartered Bank, and Sundaram to start this venture including its strategic partners in car finance. Again the company entered into a strategic partnership with SBI in March 2003 [19] Since March 2003, Maruti has sold over 12,000 vehicles through SBI-Maruti Finance. SBI-Maruti Finance is currently available in 166 cities across India. [20]

"Maruti Finance marks the coming together of the biggest players in the car finance business. They are the benchmarks in quality and efficiency. Combined with Maruti volumes and networked dealerships, this will enable Maruti Finance to offer superior service and competitive rates in the marketplace".

— Jagdish Khattar, Managing director of Maruti Udyog Limited in a press conference announcing the launch of Maruti Finance on January 7, 2002[22]

Citicorp Maruti Finance Limited is a joint venture between Citicorp Finance India and Maruti Udyog Limited its primary business stated by the company is "hire-purchase financing of Maruti vehicles". Citi Finance India Limited is a wholly owned subsidiary of Citibank Overseas Investment Corporation, Delaware, which in turn is a 100% wholly owned subsidiary of Citibank N.A. Citi Finance India Limited holds 74% of the stake and Maruti Udyog holds the remaining 26%. [23] GE Capital, HDFC and Maruti Udyog Limited came together in 1995 to form Maruti Countrywide. [24] Maruti claims that its finance program offers most competitive interest rates to its customers, which are lower by 0.25% to 0.5% from the market rates.

Maruti TrueValue

Maruti True Value is a service offered by Maruti Udyog to its customers. It is a market place for used Maruti Vehicles. One can buy, sell or exchange used Maruti vehicles with the help of this service in India.[25]

N2N Fleet Management

N2N is the short form of End to End Fleet Management and provides lease and fleet management solution to corporates. Its impressive list of clients who have signed up of this service include Gas Authority of India Ltd, DuPont, Reckitt Benckiser, Sona Steering, Doordarshan, Singer India, National Stock Exchange and Transworld. This fleet management service include end-to-end solutions across the vehicle's life, which includes Leasing, Maintenance, Convenience services and Remarketing. [26]

Accessories

Many of the auto component companies other than Maruti Udyog started to offer components and accessories that were compatible. This caused a serious threat and loss of revenue to Maruti. Maruti started a new initiative under the brand name Maruti Genuine Accessories to offer accessories like alloy wheels, body cover, carpets, door visors, fog lamps, stereo systems, seat covers and other car care products. These products are sold through dealer outlets and authorized service stations throughout India. [27]

Maruti Driving School

File:111020074704.jpg
Maruti Driving School

As part of its corporate social responsibility Maruti Udyog launched the Maruti Driving School in Delhi. Later the services were extended to other cities of India as well. These schools are modelled on international standards, where learners go through classroom and practical sessions. Many international practices like road behaviour and attitudes are also taught in these schools. Before driving actual vehicles participants are trained on simulators. [28]

"We are very concerned about mounting deaths on Indian roads. These can be brought down if government, industry and the voluntary sector work together in an integrated manner. But we felt that Maruti should first do something in this regard and hence this initiative of Maruti Driving Schools."

— Jagdish Khattar, at the launch ceremony of Maruti Driving School, Bangalore

Exports

Maruti Suzuki has helped India emerge as the fourth largest exporter of automobiles in Asia. Shown here is Maruti Gypsy in Malta.

Maruti Exports Limited is the subsidiary of Maruti Udyog Limited with its major focus on exports and it does not operate in the domestic Indian market. The first commercial consignment of 480 cars were sent to Hungary. By sending a consignment of 571 cars to the same country Maruti crossed the benchmark of 300,000 cars. Since its inception export was one of the aspects government was keen to encourage. Every political party expected Maruti to earn foreign currency.

Angola, Benin, Djibouti, Ethiopia, Europe, Kenya, Morocco, Sri Lanka, Uganda, Chile, Guatemala, Costa Rica and El Salvador are some of the markets served by Maruti Exports [29]

Key competitors

See also

References and notes

  1. ^ Maruti Udyog Ltd. Milesones,[1]
  2. ^ Yahoo! Finance, Maruti Udyog Ltd. Company Profile [2]
  3. ^ The Hindu, Business Published on Monday, November 24, 2003. Osamu Suzuki's article was published in Kenshu, a Japanese quarterly publication of the Association for Overseas Technical Scholarship. [3]
  4. ^ Rediff on the Net: A successful marriage goes to court September 19, 1997 [4]
  5. ^ Rediff, On the Net - Date: September 3, 1997 [5]
  6. ^ Rediff, On the Net Date: August 27, 1997. [6]
  7. ^ Rediff on the Net Bhaskarudu: The man Suzuki loves to hate [7]
  8. ^ Business Linte: Maruti disinvestment — Releasing the clutch Sunday, May 19, 2002 [8]
  9. ^ Rediff: Government, Suzuki resolve Maruti row June 8, 1998 [9]
  10. ^ The Tribune, Online edition Clearance to Maruti disinvestment today Saturday, December 23, 2000, [10]
  11. ^ Business Line - Internet Edition May 04, 2003 Maruti's public offer process begins [11]
  12. ^ Business Line Internet Edition Jun 18, 2003 "Govt to retain part of Maruti oversubscription" [12]
  13. ^ The Bombay Stock Exchange [13]
  14. ^ Article Timeline of Maruti Labour Unrest, World History Archive [14]
  15. ^ 5 Paise Stock Broking's report on Maruti Udyog Limited before the IPO (.pdf file) [15]
  16. ^ The Hindu Business:Saturday, May 11, 2002 - Maruti launches car insurance[16]
  17. ^ The Hindu Business Line Sunday, December 18, 2005 -Maruti Insurance ramps up sales [17]
  18. ^ Press Release by Maruti, Cached page from Google [18]
  19. ^ Business Line, Saturday, Mar 15, 2003, SBI ties up with Maruti for car loans [19]
  20. ^ Retail Yatra. Com, August 8, 2003 -Maruti, State Bank of Bikaner & Jaipur join hands for car financing Jaipur [20]
  21. ^ Press Release by Maruti, Cached page from Google [21]
  22. ^ Press Release by Maruti, Cached page from Google [22]
  23. ^ The Hindu, Online edition of India's National Newspaper, Published: Thursday, July 26, 2001, Citicorp Maruti Finance gets P1 plus [23]
  24. ^ Maruti Finance, Joint Ventures [24]
  25. ^ — The Maruti TrueValue website —
  26. ^ Writeup about the Maruti N2N Fleet Management Solution
  27. ^ Maruti Genuine Accessories [25]
  28. ^ Deccan Herald, Online edition of Sunday, March 20, 2005 "Maruti's first driving school in Bangalore"[26]
  29. ^ Official website of Maruti Exports Limited. [27]
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