One question put in a meeting, however, gave me some uncomfortable moments. I was asked what Suzuki should do next. In reply, I said two things. First, the only advantage Suzuki had in India was that it was an open society. The press had reported both sides of the argument insofar as they were available, and certainly the anglophone press had been very fair on the whole to Suzuki. I said that Suzuki should take the Indian public, the press and other involved institutions into confidence. Second, I said that Suzuki should wait: that the chances were that industry minister Murasoli Maran would go.
Marans government fell faster than I had ever expected. Even before it fell, Suzuki wrote a letter to the vendors of Maruti; as soon as it fell, Suzuki issued a full-page advertisement in Indian newspapers alleging that the government had indulged in a disinformation campaign and answering the charges that had been made. The industry ministry reacted characteristically: it called together the reporters on whose beat it is, and rebutted some of the charges. The industry ministry is in a strong position as far as publicity is concerned: the beat reporters are obliged to give it favourable publicity if they want to avoid being cut off, so the ministry is assured of extensive, supportive coverage. Suzuki, not being a large-scale news manufacturer, cannot compete; it has to spend its own money to put forward its view. It is worth asking how things stand at the end of this new round.
Many Indians have a certain lack of regard for Suzuki, which they think is a minnow in a world of giant vehicle manufacturers. Just why this should matter is a mystery to me; how is it better to have a General Motors or Volkswagen than a Suzuki operating in this country? The big boys do not come to India with its tiny market and vexatious import restrictions; they go to China with its fast-growing market and to Thailand with its open borders. So the likes of Suzuki are the best India can get. Now we have Ford and will soon have Honda and Toyota, who will set up base just in case the Indian market grows. Even when they come in, I do not see why we have to make facile judgments on the basis of size; we should open our market to imports and let the best manufacturer win. Suzuki is a niche player which has survived perfectly well in the world market. It will survive in India if given a level playing field, which it is manifestly not being given just now.
The government people also give the impression that Suzuki makes unreasonable profits out of Maruti and that a large proportion of its profits comes from Maruti. In reply, Suzuki says that Maruti contributes less than 1.9 per cent of its sales and even less of its profits; Marutis technology payments to it come to less than 1 per cent of Marutis sales. I dont think Suzuki is quite accurate in these figures. Its share of Marutis net profits surely amounts to more than 1.9 per cent of Suzukis profits; the point is that these profits have been largely ploughed back, and the dividend has added little to Suzukis cash flow. The bulk of Suzukis profits are in the form of a rise in Marutis market capitalisation; that capitalisation is worthless if the government expropriates Suzuki, as it has done for the present.
To the charge of overcharging for components, Suzuki says it has taken losses on supply of components by agreeing in 1982 to charge for supplied parts in US dollars. On the row about the gear box, Suzuki says that the cost of a gear manufacturing outfit could pay for two new models, and that two new models had greater priority in a market in which competition was intensifying. Actually, the gear box is a part of a bigger issue. The government, meaning the finance ministry, has refused since 1992 to put in more equity funds, to let Suzuki do so, or to allow a public equity issue; as a result, Maruti has been quite capital-starved. This shortage of capital has forced a choice to be made between making gear boxes and introducing new models. T R Prasad preferred indigenising the gear box because it would sever Marutis last dependence on Suzuki; Suzuki preferred new models because they would be designed by it, identified with it and subject to royalties. Prasad wanted to take Maruti away from Suzuki; Maran has said in public that he favoured doing so. Suzuki saw through the game and hence wanted new models to tie Maruti down for a longer period. But the government should really have put in more capital or let others do it. In the absence of capital, new models made and make better sense than the coveted gear box.
Finally, Suzuki thinks Marutis success is due to Suzukis technology and management, while the government thinks it is due to the favours it gave to Maruti cheap land, a protected market, exclusion of other makers etc. Both are right. But in future, the government should stop manipulating the Indian market for the sake of its own companies; in a fairer and more open environment, technology and management would be all-important. Suzuki has some of both, the government has none.
A fair and more open environment can help prevent rows like the one witnessed between Maruti and Suzuki
