The Maruti Story – How it evolved over…

Maruti 800 – My uncle had this legendary car during the 90′s and it was a great pride for all of us.Every one of us loved the car and it seemed to be an object of fascination and status symbol.It was the latest car at that point of time other Premier Padmini and other set of big cars. I believe , it was the first major hatchback to hit India.

So when i saw the book The Maruti Story – How A Public Sector Company put India on Wheels ,i became interested and wanted to understand how the whole thing worked out.

Why i wanted to read this book:

• When my uncle sold the car few years later , he still sold  it for almost the same price for which he bought.I was always amused about how it was possible.

• Maruti Udyog / Maruti Suzuki – these names always confused me as in to whether  it is a government company and how a government company was able to evolve and stand up over test of time and be so popular even today.

• If you are in car market today , Maruti Suzuki is the king with major marke share. Come how many big auto giants ,they still cannot beat Maruti , especially  in the small car segment . Usually a company when small can be managed well but even after evolving into a big company, Maruti Suzuki is able to retain the numero uno position which made me wonder how they are keeping themselves above every one else.

So when i picked up this book , i was expecting to seek answers .

P.S: Since this book is written by Bhargava ,the Managing Director of Maruti Suzuki , his views may be generally biased and very positive about what they did . Hence i’m not going to research or being nitpicking but just share how the history evolved of the people’s car evolved  in India as i read in the book

So how did happen ? 

• Maruti seems to be the pet project of  Sanjay Gandhi, son of Indira Gandhi. He started the company Maruti Udyog and initially involved during 1970′s to bring out the people’s car – an affordable , low-cost means of transportation for masses. Although Wiki reveals that Sanjay Gandhi was favored this project by then Prime Minister Indira Gandhi, but the project didn’t exactly kick off as expected , there was a factory setup , prototype being tried out which didn’t work out  and he was killed off in air crash before realizing his dream.

•  In 1980′s , again the project was kick started and Indira Gandhi was very critical about the success of this project as tribute to her son’s unrealized dream and has shown personal interest by making sure all the required approvals are obtained in time with help of ministers looking over and taking care of any government side intervention.

• Maruti Udyog was established as a PSU – Public Sector Undertaking , which means people money is used for the project and hence the Planning Commission was critical for this people’s car project as this project  did not encourage public mode of transport . Since the govt, favored the project , this critical road block was cleared out eventually.

• At that time , the two other car manufacturers were Padmini and Standard Motors in this segment who were in the business for long time but still could not get it right with the pulse of Indian consumers and both these company ran out of business in due course of time, one reason could be of Maruti which had great help from Govt. in ways of getting exemption on import goods and bypassing some govt. policies.

• So it all started off with setting up the management team , hand-picked officials who were working in other PSU’s  but performed exceptionally well . Due to limited technical expertise prevalent in India, Maruti was looking for a suitable foreign collaborator to provide technical and process expertise and to work 60/40 agreement.

• Management Team initially went looking for European car majors – Fiat , Renault , Volkswagen and other companies and initially zeroed on a bigger car with powerful engine and less fuel efficient. Management Team was bit skeptical about the choice being made and hence carried out a market survey in  India to understand the expectations from the market which were :

1. Smaller car and space for not more than 4.
2. Price to be around 12 times the salary of average employed which was around that time 3000 rs and hence at any cost the car cannot exceed 45000.
3. Car has to be fuel-efficient

• VW was coming close with offering Golf and Jetta but did not materialize for some reasons. Had it happened during that time, VW would not have been a premium car maker like now and could have enjoyed major market share.Ironically VW means People’s car but in India , it is being sold as premium brand.

• One main reason for auto majors to be apprehensive in their partnership with Maruti was that it was afraid of the Govt. intervention and their understanding of how badly other PSU’s were run in India.This was a big drawback for major autos to show any interest in the very capable market of the developing country.

• When the team shifted focus to Japan to look for collaborators, Suzuki Motor Corporation(SMC) was  finalized after having discussions with Toyota/Mitsubishi . SMC had the best people car running in Japan and it fit the requirement that came out of the market survey and also Suzuki the CEO was personally involved in this setup in India as he saw great potential in this untapped market.Since the direct CEO was involved , it was easy to take decisions quickly . It should be noted that a good trust was built between Maruti and SMC that led to the long-term success of the joint venture.

• One significant point re-iterated over and over again in the book was that the Japanese not only brought the technical expertise but also the process excellence by means of cost cutting continuously , training and motivating the employees to be punctual , disciplined  and dedicated to their  workers.5s and other management best practices helped in taking the company to the next level.

• This Japanese culture initially was difficult to be adopted by Indian managers who were used to hierarchical work structure and experienced being the major aspect of it. But slowly it changed and all became aligned to the company’s goal . Uniforms were provided all of them in company – workers to top managers , common canteen and rest room facilities , open cabin offices with anybody can approach others in the company gave a sense of equality to every one associated with the company.

• It seems when the car was announced initially , there was great response for the car and the booking amount itself went to a huge 135 crores making this PSU profitable from the very first year.The first car launched was Maruti 800 and later was followed by OMNI . Both were run away success and waiting period for all these cars ran to years which was unprecedented in any other part of the world.

• Significant effort was put out in engaging with the vendors and establishing dealerships. This experience as a whole helped the country when it was open for other autos to enter India freely in 90′s. By this time, since Maruti was established and making profits , a slew of auto majors came to set up their company with great confidence since the vendor industry has substantially matured by the time.

• Maruti was having  60% and Suzuki 40% at the start and in the 90′s , it was 50% each and in 2007 , govt. exited out of partnership after establishing the indian auto industry on its path  and it was re-christened as Maruti Suzuki.

• It has to be noted that there were  innumerable tussle between the Govt. and Suzuki that actually hampered the progress and the strikes that followed by employees.There was some lack of trust between the Govt. and SMC followed a brief period of mull which resulted in loss.

Over all , it was interesting to read how a Govt. PSU, which usually was not very accountable had made great strides to operate with great degree of excellence and not only brought profit to the company but also made a revolution to the Indian auto industry there by putting India in the global auto market.

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