India must invite component makers first before OEMs: R C Bhargava

Foreign investment will come readily if the supply chain already exists, says Maruti Suzuki chairman

It has been 40 years since Suzuki, the Japanese small carmaker, signed an agreement with the Indian government for a joint venture. The government exited Maruti Suzuki, the joint venture, in 2002. R C Bhargava, who as chairman of Maruti Suzuki has led the company in its journey to transform India’s automobile sector, talks to Surajeet Das Gupta about the lessons from that experience for today’s manufacturing sector.

Here are edited excerpts from the interview.

The story of Maruti Suzuki is well known. What lessons one can replicate as the country pushes manufacturing once again through 'Atmanirbhar Bharat'?

I think one key and basic thing is to understand what customers want. If you want to progress you must have a proper feel in the ground level what consumers want and not what we think, or replicate what the west is doing. Our market is very different we have a huge two-wheeler market who use it for personal commute, which other countries don’t and they want to upgrade. So our consumers are different. Our decision on the product was based on a market survey which gave us an insight of what their transport requirements are.

The country is grappling with building supply chains in manufacturing, like in mobile devices and electronics. You started to build it from the scratch. What was your experience?

When we started the vendor development program, we saw our vendors as being our partners which has never existed in the country. The relationship was that suppliers would attempt to reduce costs, improve quality, reduce defects and control inventory better, while we will closely work with them in helping to achieve these objectives and help them in upgrading their technology and their processes.

The partnership model straddled the entire supply chain ecosystem--the steel supplier would also try and see how they can reduce costs for instance. We also went for joint ventures with vendors taking minority stakes to show our involvement. This is why the country got a vibrant component industry and today exports to the world. And carmakers from the world came into India after the supply chain was build up. The lesson in this is that foreign investment will come far more readily if India has built up the supply chain. And we should invite component makers in India before we invite OEMs in India.

Has frugal management helped the company, and why is it important for today’s companies?

We have gone grown completely with internal resources after the initial investment by the two partners. Today, we have Rs 41,000 crore of cash reserves, so the question is why do we have and only a few in the country have? Frugal management and growth will be an essential requirement for Indian companies now--it leads to more investment, more money put in R&D, expansion and modernization.

Is choosing the right partner not necessarily not the biggest important factor?

I think that is the key. While elaborating on the reasons why we thought Suzuki was the right match I remember what was put on the file was that it is small but aspirational, more accessible and had a culture of frugality and low-cost and high-quality products. We had a lot of learning available from them. And it is to our credit also that we were good students, we did not allow our ego come in our way that we are all accomplished bureaucrats or Mr Krishnamurty had run many PSUs so why should we learn Japanese management style. But we knew we had zero knowledge about making and running a car company and they had.

But did you merely replicate the Japanese model? Does that work when you say that the markets are very different?

Yes, we realised that we could not cut and paste and use the same model. We had to modify it for India-for instance one key area was building the trust and confidence of the workers. In Japan because of the strong discipline and homeogenity of culture respecting seniors is built in. In India there was a huge gap between the fresh worker coming from villages and what the senior management [was] thinking. Of course, there was a trust issue .

So to build that cooperation and partnership we went through a long process of education for them to understand the industrial culture. Then to build trust we had rules which were common for workers and management, wore the same uniforms, went to common toilets, had similar rules on punctuality and common canteens. We made things more transparent- all cash transactions in the company were stopped, car bookings were computerized, assets like cars could not be used for personal use. All this bought trust. Today we have achieved inclusive growth-64 per cent of out workers have cars and 98 per cent are tax payers.