Battling For Road Space

Osamu Suzuki is a small bull. Short, stocky, fierce eyebrows, piercing eyes, he gives the impression of a man capable of both extreme generosity and savage rage. Talking later to Suzuki Motor Corporation (SMC) executives, I figure that, among his subordinates, the 69-year-old eponymous president and ceo of the $12-billion automobile giant evokes respect and terror in equal measure. "He's a pure man, a simple man," confides a senior executive.

Well, the situation Suzuki and his company are facing right now could hardly be less simple. The Japanese economy is floundering. Sales have also been shrinking in Southeast Asia and Latin America. SMC is much better off than some other Japanese car manufacturers like Nissan and Mitsubishi, but it did show a slight drop in sales and profits in the financial year ended March '99. In SMC's largest overseas market in terms of number of units sold, India, competition has suddenly hotted up. South Korean giant Hyundai has sold more than 50,000 Santros (positioned against the Maruti Zen) in less than a year. Fiat, Ford, GM and Hyundai all have rivals to the Esteem either on the road or raring to go. In the coming year or so, Maruti Udyog (current marketshare: 70 per cent) surely faces its severest test yet. But there's nothing Osamu Suzuki likes better than a good fight. In the conference room on the 16th floor of the New Otani Hotel in Tokyo, you can sense him itching to crack his knuckles.

"Let me give you an example," he rumbles. "There's a family with one son. Someone gifts the family four cakes. Father takes one, mother takes one, son gets one, and the extra one too goes to the son. Now this family begets another son. Someone gifts the family five cakes. The four members get one cake each. So who gets the extra one? The elder son is used to getting the extra one, so he assumes it's his, and gets up to leave the room. The younger son is used to fighting for his due, so he's eyeing the cake with greed, waiting for the elder son to leave the room so he can grab it. Maruti is like the elder son. It has been a monopoly for too long, it has never known tough competition. But now, cost and quality will be very important." Does that need a change of organisational culture? "Culture, yes!" he thumps the table. "The culture in Maruti must change! It must change from that one-child family to a multiple-child family. Please write about this."

Meanwhile, Maruti is planning a rush of new models. "Every three months, we'll have something new," managing director Jagdish Khattar had told me in Delhi. "Either a wholly new model or a revamp of an existing one." But Suzuki won't reveal what the new models will be ("Excuse me, this is business, so no comments"). It doesn't matter. Even as I speak to him, in Delhi, Maruti is telling the press that it'll launch the 1.6-litre, 16-valve Baleno next month. But the Baleno, which will probably be priced upward of Rs 7 lakh and positioned against the Opel Astra and Mitsubishi Lancer, is not the real McCoy. More than volumes, it will give Maruti an image rub-off. Then there's the 2.5-litre sports-utility vehicle called Escudo in Japan and Grand Vitara outside, which could be in the India queue. But the Vitara too, if launched in India, will be a niche vehicle, positioned against the Sierra and the Safari. So what's going to be Maruti's big mass-market weapon?

Could it be the Wagon R? Launched in September '93, it was the first tall-boy minicar and has overtaken the Toyota Corolla to be the largest-selling car in Japan. In '97, Suzuki launched Wagon R+, a slightly wider and longer 1000 cc version. In the company's test facilities outside the town of Hamamatsu, 250 km from Tokyo, I watch half-a-dozen Wagon R+s being subjected to pitiless tests to check how they cope with high humidity, temperatures, altitudes. One test chamber simulates an altitude of 10,000 feet at 35 degrees centigrade. "The Himalayas in summer," says an executive.

But if the Wagon R+ is to be launched in India, Maruti may have to first solve a somewhat irritating problem. Suzuki claims that the Hyundai Santro is a copy of the Wagon R+, but executives admit that in India, the Santro could be seen as the original and the Wagon R+ the copy. "Yes, that could be a problem," says a manager from Suzuki's Group IV automobile division, which handles India. "But we're confident that the Maruti quality, reputation and reach will take care of that."

SMC's relations with the Indian government are currently stable. And Suzuki will not talk about the prospect of upping SMC's stake from the current 50 per cent in Maruti. "That issue can arise only when the government decides to lower its stake. We'll think about it then. Meanwhile, I'm very satisfied with the 50:50 partnership with the Indian government. Indeed, this is a very delicate issue and I'm embarrassed to even talk about it," he guffaws.

Forget the government, the key worry for SMC right now is that - and no one knows it better than Suzuki - Maruti has lost vital time. In '95, Narasimha Rao's industry minister K. Karunakaran put a spanner in Maruti's expansion plans for reasons that seemed to have nothing to do with business strategy. Then, just when that mess had been resolved, in '97, the United Front industry minister Murasoli Maran led a bitter face-off with SMC over the appointment of the next managing director of Maruti. The Indian government won the first round, but over the next two years, Suzuki has recouped its losses. For all practical purposes, SMC today has management control of Maruti. But as long as it was suspicious of Maruti's management, SMC hesitated to transfer the technology that Maruti needed to launch new models. Meanwhile, Maruti's rivals rolled out new products.

Maruti is now desperately trying to make up for lost time. Launching a new model usually takes between one-and-a-half to two years. But the company is trying to squeeze that as much as it can. Production capacity is not a problem; at a five-lakh installed capacity, it currently produces 350,000 vehicles a year. The principal hurdle here is the complacency bred in its employees by years of total market domination. So too Maruti's vendors, who have till now led the mollycoddled life of monopolies. "We have vendors whose owners come to office once a week," says a senior SMC executive. "We have to make them more competitive. Costs are going to be the key weapon now. We will cut costs at Maruti and then we'll get the vendors to cut their costs." It's a tough call; but one, Maruti doesn't have a choice, and two, Osamu Suzuki likes tough calls.

If Maruti can dramatically raise its efficiency, it can become a major manufacturing base for SMC's global markets, exporting much more than the 40,000 cars or so it currently ships. Then Suzuki can fit Maruti into the vast endlessly-in-flux jigsaw of the global automotive business. With competition white-hot, markets increasingly uncertain, overcapacities building up and the cost of developing breakthrough technologies going through the roof, the global car market is looking at a large-scale shakeout. When the dust settles, says Suzuki, two things will happen. One, there won't be 50 car manufacturers, but only four or five consortia of manufacturers. For example, GM has taken a 10 per cent stake in SMC. Consequently, SMC has developed the ygm-1, "the small car for Asia", for GM. In return, SMC will get better access to American markets. GM is also working with Toyota on another car.

The second effect of the churning will be that car brands will have no clear nationality, only a worldwide identity. The day before I met Suzuki, a thousand people turned up at the Nissan press briefing at the Tokyo Motor Show. The once-proud Nissan is in ruins; now Renault has picked up a 38 per cent stake and appointed Carlos Ghosn (pronounced Gon) as its chief operating officer. So this is a Japanese company controlled by a French firm with a Brazilian in charge. At the appointed time, Ghosn steps on to the podium and speaks for 10 minutes unaided in Japanese, stunning everyone. "Who is this man?" raged a Japanese journalist standing next to me. "He is Brazilian, his last job was with Peugeot, a French firm, and before that with a US company, and he's trying to act Japanese! What is his nationality, what can be his grasp of things?" Osamu Suzuki disagrees. "Regardless of one's nationality, it is competence in business that will be the first priority from now on," he insists. In fact, SMC top executives take some pains to project Maruti as an Indian company. The next step is to shoehorn it into SMC's global plans.

Can they do it? As we rise and shake hands, the man who fought the entire SMC board to get into India says: "I have visited India more than 50 times. You must understand that I love India, I trust Indians, I am committed to Maruti and to India." Anything else? "Buy Maruti cars," he says and laughs up a storm. I drive one, I tell him. So buy one more, he replies.