Maruti says Suzuki not going solo

Diesel engine plant will be a JV.

Maruti Udyog said it would be a partner in the diesel engine plant planned by Suzuki Motor Corporation in India, thereby contradicting within 24 hours its Japanese parent's announcement that it would set up the venture all by itself.

India's largest carmaker said in a communication to the Bombay Stock Exchange (BSE) that the plant would be "controlled and managed" by Suzuki Metal India Ltd, an existing 51:49 joint venture between Suzuki Motor and Maruti Udyog to make aluminium castings and other engine components.

This company would subsequently be renamed Suzuki Engineering India Ltd, the statement added. The set of proposals was cleared by the Maruti Udyog board which met here today.

Suzuki Motor had yesterday said it would invest $91 million in the plant through a new company, tentatively called Suzuki Engineering India Ltd.

This had sent the Maruti Udyog share price into a tailspin amidst fears that it would get no profits from the venture. The fall continued today "" in heavy trading, the stock fell 6.3 per cent to Rs 354.65 on the BSE.

It is worth noting that Maruti Udyog had in May announced that it would set up the diesel engine plant.

But Suzuki Motor Chairman Osamu Suzuki called it a "misunderstanding" at a news conference in Tokyo yestersday. When contacted, a Maruti Udyog executive said the company's investment in the plan had not yet been frozen.

"We are yet to decide how much of the venture will be funded by debt and how much by equity," said the spokesman.

Also, while Suzuki yesterday said in Tokyo that the Indian diesel engine facility could be used to export to other countries in the region like Pakistan, Indonesia and China, Maruti Udyog today categorically stated that it would be the hub for all of Asia.

"Earlier, the diesel engine manufacturing plant was expected to meet the requirements only of Maruti Udyog. It has now been decided that in addition to meeting the requirements of Maruti Udyog, diesel engines manufactured here will also be exported to Suzuki Motor subsidiaries/joint venture companies in Asia, including Indonesia, China and Japan," the communication issued by the company said.

The plant, which is going to come up at Manesar in Haryana, will manufacture 1,300-cc diesel engines based on common rail injection system for which Suzuki Motor had recently signed a product licence agreement with Fiat Auto and Adam Opel.

The plant will have a capacity to make 100,000 engines annually and is expected to go on stream by the end of 2006.