Govt, Suzuki get over speed bumps

Maruti will be partner in new car, engine plants.

The government rolled back its offensive against Suzuki Motor Corporation (SMC) after the Japanese company gave an assurance that Maruti Udyog would be a key player in its proposed investments in India. Suzuki also added a sweetener ""it would revive its proposal to set up a gearbox plant in the country.

Maruti's participation in the proposed car assembly plant ""which would have a capacity of over 250,000 units ""at Manesar in Haryana is expected to be finalised at a meeting of the company's board of directors here tomorrow morning. In a meeting held a week ago, the board had approved the company's participation in the proposed venture for diesel engines also at Manesar.

"We can have up to 70 per cent equity in the car venture. In the diesel engine unit they have offered us as much equity as we want but propriety demands that the decision be taken by the Maruti board," said Santosh Mohan Dev, the heavy industries minister.

But sources close to the development told Business Standard that Maruti Udyog will have a controlling stake in the joint venture with Suzuki for the car assembly venture.

All cars produced by this company will be marketed by Maruti and Suzuki will not set up its own sales and distribution network in the country. However, the company will have a minority stake in the diesel engine venture and SMC will have the controlling interest.

"Both sides have expressed their full and abiding commitment to the covenants of agreements enshrined in the revised joint venture agreement signed by the two sides in May 2002," the two parties said in a joint statement after a two-hour meeting between Maruti Udyog Chairman S Nakanishi and senior heavy industry ministry officials. Maruti Managing Director Jagdish Khattar was also present in the meeting.

Speculation that Suzuki would start selling cars on its own had led to a sharp fall in Maruti's share price in the last few days. It had also raised the government's concern that this could seriously damage the future prospects of the company in which it holds a stake of 18.4 per cent.