Game Set & Match,Suzuki

IT'S a clear coup. After losing out to a defiant United Front government and an uncompromising industries minister last year, Suzuki Motor Corporation has finally found an ally in the swadeshi government led by the BJP.

Contrary to expectation, the government, which professes swadeshi, has effected an out-of-court settlement with Suzuki on the controversial issue of top-level appointments in MUL. The deal, which amounts to a virtual give-in to the demands of Suzuki and which is raising many eyebrows, has been cleared ostensibly to protect the government of India from an apparently weak case at the International Court of Arbitration (ICA) in Geneva. The present settlement puts an end to the year-long standoff between the two warring partners of MUL.

Suzuki approached the ICA late last year after its efforts to put its own nominees at the helm of MUL's affairs fell flat before a determined Murasoli Maran, the UF's industries minister. It opposed the appointment of managing director R.S.S.L.N. Bhaskarudu on grounds of incompetence and pushed its own nominee, executive director Jagdish Khattar, for the hot seat. It also challenged the appointment of chairman Probir Sengupta, saying it was Suzuki's turn to appoint the chairman of MUL.

Suzuki seems to have played its cards well since the deal is heavily tilted in its favour. The deal includes: removal of Sengupta and appointment of Y. Saito, vice-president, Suzuki, as chairman; cutting down Bhaskarudu's term to two-and-a-half years, till December 31, 1999; appointment of Khattar as managing director from January 1, 2000, and making it compulsory for both partners of MUL, the Indian government and Suzuki, to consult each other on the appointment of the chairman and MD. Khattar has been promoted as joint managing director. Most of these have been long-standing demands of Suzuki. In return, it has promised to continue supply of technology, introduce new models and withdraw the arbitration case.

The man at the receiving end, Bhaskarudu, is non-committal. "I am a government employee and have to abide by its decisions," he says, but keeps quiet when asked if he feels cheated. He has reportedly received lucrative job offers from auto MNCs to head their Indian operations.

The fresh deal does not say much about some pending contentious issues, primarily the transfer of gearbox technology to MUL, on which Suzuki is yet to give a clear reply. Sources allege that decks are being cleared for an aluminium foundry, owned by a former MUL executive at Noida in Uttar Pradesh, to which the gearbox technology will be transferred by Suzuki.

However, while the government says that the new deal will put an end to the uncertainty regarding the future of India's most dominant automobile company, it has led to large-scale opposition from all quarters, including all major Opposition parties in Parliament. The Congress, Janata Dal and the Left parties came together to condemn the move. Questions are also being asked about the way the settlement was arrived at. Alleging a handover of MUL to the Japanese company, Janata Dal MP Jaipal Reddy says: "It is a clandestine and corrupt arrangement to sell a profitable Indian joint venture. The government talks about swadeshi but is not practising it."

Opposition leaders allege the deal was worked out at the highest political level under the aegis of the Prime Minister's Office with the active participation of people like BJP leaders Pramod Mahajan and Shatrughan Sinha. They say that the cabinet wasn't taken into confidence. Sources add even industries minister Sikander Bakht was kept in the dark about the settlement and was informed only a day before the actual announcement. He, though, insists that the deal was worked out under his own guidance.

Says CPI MP Gurudas Dasgupta: "The government has totally sold out the country's interests and let Suzuki have virtual control over the company. There was no compulsion for this kind of a settlement. How can the deal be finalised without informing the cabinet?" Apparently, firebrand trade union leader and defence minister George Fernandes too was not aware of the proceedings and was against any settlement with Suzuki.

Dasgupta alleges that Suzuki's primary interest in MUL was to take control of the company as this was Suzuki's only profitable venture worldwide. He says while there has been no indigenisation in MUL vehicles after 1992, Suzuki, on a total investment of Rs 103.4 crore, had repatriated Rs 284.73 crore in 10 years.

At MUL too, there are sounds of protest. The MUL Workers' Union—an internal union so far—joined hands with national trade unions and demonstrated before Parliament on June 11 to protest the settlement. Says union general secretary Matthew Abraham: "We will challenge the settlement as MUL was not represented. All other settlements have been tripartite with MUL being one of the parties. How can this one be different? We will challenge this in court." Joint secretary G.K. Walia threatens dire consequences and says the union can go to any extent to protest the deal. If necessary, it will go on an indefinite strike, something unheard of in MUL's 20-year-old history.

The government says the agreement is aimed at reducing the impact of Japanese sanctions imposed on India following the nuclear tests. Says Bakht: "The company issue was being made into a national issue by the previous government. It cannot be bigger than the country's interest. This decision will work in India's overall interests. Indo-Japanese cooperation and business relationship will grow to new heights with this decision." The government hopes to send a message to the Japanese government, which has cut off aid to India, that India would continue to welcome and assist investment from Nippon.

The other issue is the arbitration case, where, the government insists, India was on a weak wicket. Some MUL top brass disagree. Says Reddy: "Our case was very strong. They should have consulted the Law Ministry and the Attorney General before finalising the deal." Bhaskarudu too feels that the government had gone by the book and had nothing to fear.

THERE are already allegations that the settlement is a prelude to the sale of further stake in the company to Suzuki which will tighten the Japanese company's control over MUL. While Bakht asserts that the government has no immediate plans for such a move, MUL falls under the nonstrategic PSUs where the government intends to reduce its stake to 26 per cent.

The government says the present settlement will work out in the long-term interests of the company and will make all the parties concerned happy. But the announcement of an MD nominee one-and-a-half years in advance is sure to disturb the balance in the company. Says a top MUL official: "By announcing Khattar's name as MD from January 2000, the government has created an alternate power centre, which will affect the working of the company over the next one-and-a-half years and create uncertainty among workers."

 The Maruti row began a few years ago when K. Karunakaran was industries minister. The story doing the rounds at that time was that Karunakaran wanted Maruti to set up its new plant in home state Kerala. Since this made no economic sense, Suzuki and then Maruti CMD R. C. Bhargava refused. Karunakaran retaliated by sacking Bhargava. The sufferer was Maruti with its expansion plans put on hold. When the UF came to power, the foreign investor-friendly Maran took a surprisingly tough stance against Suzuki. Other foreign companies in India, like Daewoo and Hyundai, announced their coming assaults on the country's most-loved car, the Maruti 800, through small cars that would have better features. And when the swadeshi BJP came to power, Suzuki seemed to have lost the battle.

But despite this scenario, hectic behind-the-scenes negotiations have clearly turned the tables on Bhaskarudu. The nuclear bombs also appear to have helped Suzuki's cause. Now the question is whether Japan and Suzuki will reciprocate the Indian government's generosity.