The Maruti Story

Do you remember the feeling of looking out for something in your room and being surprised by seeing an item you had purchased with lot of interest but somehow got hidden from view and you end up wondering how you left it there? That’s the feeling I got when I stumbled on this book “The Maruti Story” by R.C.Bhargava (Published in 2010) in my own library during the recent Pongal holidays.

For Indian Middle class families of 1970s or earlier, life was of simple choices not exceeding two. Personal transportation for the family meant (then) ubiquitous “Hamara” Bajaj or old “Vespa” scooters. Little well to do families upgrading to a car had two choices – Premier Padmini (Fiat) or Ambassador (Morris Oxford) cars.

In India of 70s, Population growth was the biggest problem facing the country, food shortages and rations were not far from memory, nationalisation was the trend, general public were used to behaving subservient to those in power. A company selling a product or service considered itself to be doing a favour to the customer, with the customer feeling privileged to be given a chance to buy it (ironical for a country whose Father of Nation has penned a famous quote about how to treat a customer).  If this was true for Private companies, State owned companies (called PSUs or Public Sector Units in India) performed (the word itself here feels ironic) more badly. Everything was controlled by licenses and quotas, Political interference was the norm, making common man feel they were freer before Independence. Most of the companies that were born in this hot chamber died immediately once the economy was liberalised in 1991. The Maruti story is an attempt by a veteran Indian Civil servant in narrating how in this hostile environment a PSU called “Maruti” was born and is thriving even today after three decades to tell its story.

My personal experience as a school kid in late 1970s when my family upgraded to a new model Ambassador car which was what my father called as buying “nothing more than a new metal box & four Wheels”. The process of buying a car in those days involved paying money upfront to book it and then waiting for months at the mercy of the dealer for the delivery. To make the new vehicle usable meant visits to over half-a-dozen outside vendors to improve it. For the Ambassador we bought this involved doing a complete chassis rust-proofing, changing the poorly performing Petrol engine to a Diesel engine from matador, changing the seats and doing interiors (it came barren) to something that’s comfortable, finally if you had the money adding an audio system & Air conditioner. Many of that changing (the waiting period was still there) when I bought my first car nearly a decade and half later, and it was a Maruti 800 (the first car produced by Maruti).

R.C.Bhargava starts his story soon after the nationalisation of Sanjay Gandhi’s Maruti Motors Limited to Maruti Udyog Limited as a PSU in 1981. If Mrs.Indira Gandhi’s vision for Maruti was to fulfil her late son’s (Sanjay Gandhi) dream of producing world class cars in India, then Mr.Bhargava and his boss Mr.V.Krishnamurthy were the most unlikely candidates to have even found a place in the team. To produce world class cars in a country where there was no Automobile industry in its true-sense meant first changing the system. The obvious choice for this would have been to import an established Automobile CEO to India, but that was politically unpalatable for a government proclaiming self-reliance and this was few years after India had kicked out multinationals like Coco-Cola and IBM. Instead of expatriates Mrs.Gandhi had drafted Mr.Sumant Moolgaokar (then Chairman of TELCO a commercial vehicle manufacturer from the house of TATA) as Non-Executive Chairman and Mr.Krishnamurthy from BHEL (another PSU) as Managing Director to head Maruti. Mr.Krishnamurthy then assembled a leadership team for Maruti comprising mostly of other insiders (Civil Servants and PSU employees) including the author. When Mr.Bhargava became a Maruti employee in 1982, he had spent nearly twenty six years in the Indian Administrative Service (IAS) known for its Red Tape culture of bureaucracy and outdated processes inherited from its colonial rulers. In his wildest dream the author wouldn’t have dreamt that 30 years from that start, he will be serving as Chairman for a Maruti that’s private and majority owned by Suzuki Motor Corporation.

The Chairman & other Directors of a PSU in India get to enjoy luxurious Lutyen bungalows in New Delhi complete with garden, staff, butlers, chauffeur driven car and status in society. This is the mental image we carry of what’s it to be a director in a PSU when we open the book. Instead the author starts with a long safety message of what’s it like to be in the management of a Government owned entity in India. The Directors turn out to have limited powers where it really matters which is in the board roam of the company they head. Whether it is capital investments, pay scale, service terms of employees, entering into partnerships, investing surplus funds, all the decisions are taken external to the board by the ministry and the bureaucracy. Adding to this handicap, PSUs directors are governed by the same rules as public servants and are subject to Prevention of Corruption Act (PCA) 1988 which has contrary objectives to running a profitable enterprise. An example of good intentions turning out to have unintended consequences. The act with its power to prosecute even after a person retires from civil service is perceived as a hanging sword by those covered by it, preventing them from taking any decisions. There are more restrictions placed by being a PSU including audits by Comptroller and Auditor General of India, Equal Opportunity rules to be followed in every transaction which can turn out to be an impediment for promoting talent over quotas, and PSU Directors spending considerable time and effort to answer numerous parliamentary committees which oversee their working.

Though the parentage of Maruti had raised concerns then, it got lucky on several fronts. The very political interference environment of India and its Babus (Indian Civil servants) turned out to be its best new born gift. It got assigned Mr.Arun Nehru (second cousin’s son of then Prime Minister Mrs.Indira Gandhi) as its point men who navigated the project through the maze of government corridors. Second was a hard set date (December 1983) for production and a PM who was committed to see through it as a memory of her late son. Third was inheriting from Sanjay Gandhi’s Maruti over 297 acres of prime land along with 1 million square feet of covered factory which meant work can start without spending years on land acquisition. Last and most important was getting Suzuki Motor Corp (SMC), Japan as its partner. SMC as the partner not only gave Maruti the Automobile technology, but brought with it the much needed Japanese work culture & ethos which was in those days anti-thesis to what was prevalent in India. Maruti also got lucky with getting full support of Mr.Osamu Suzuki who was the CEO of SMC, who ensured Maruti’s management team had direct access to him at all times.

Continuing with Mr.Bhargava on the journey we first encounter the Market survey called for by Maruti and conducted by Indian Market Research Bureau to understand the market needs and the consumer (a term unheard of in India till then) which influenced the team to move away from Ministries choice of Renault to explore Japanese small car manufacturers. When the author quotes one of the earliest minutes of meeting off the company board he drafted “should produce cars and commercial vehicle in accordance with the decision of the government and that immediate should action be taken to collect all relevant information on the various options which could be examined by the board for selecting the specific models to be assembled/manufactured by the company” he pats himself in his back by saying this to be his bureaucratic experience cutting in to keep all options open, we are left with a smile on how Governments functions. There are many examples recalled by the author on how Maruti’s team navigated the bizarre laws of India without falling foul to any of them. One was how they managed to share the power from their captive Gas turbines with their vendors (Joint venture of component manufacturers) when the law in those days prevented from sharing power to anyone outside. The solution was to transfer the Gas turbines to a subsidiary and issuing equity in that subsidiary to all the Joint venture companies making all of them part owners of the turbine.

In any technology partnership when you are in the knowledge transfer phase there is no replacement to having your engineers travel onsite to the principal’s location. Maruti in its first fifteen years had sent over 979 workers to Japan to get trained and it was helped greatly by the subsidy it got for those travels from Japanese Government under Association of Oversears Technical Scholarships (AOTS) scheme. Next to having best technology was to have a good working culture, Maruti’s workers got their example set in the days of commissioning itself by a Director of Production from Japan Mr.Shinohara who picked up a broom, a bucket of water cleaning the shop floor without waiting for a sweeper.

The author talks of various board decisions that helped Maruti .The huge booking advance it got from thousands of customers which saved the company from paying interest for working capital needs, the decision to voluntarily include workers union on major policy decisions, decision to have one common uniform for blue & white collar employees, having common restrooms for all (yes you read it correct – restrooms!), common lunchrooms, open cubicles for managers, hiring Diploma holders for shop floor, and productivity (and production) based metrics for calculating bonuses and.

Two examples in Maruti story I enjoyed which exemplifies Indian creativity/workaround called Jugaad. One was how the quality plywood that SMC used in wrapping painted SKD (Semi Knocked Down kits) after getting discarded by Maruti ended up in streets of Delhi with boards in front of shops announcing “Maruti Ply sold here”. The next one was a fine idea of clever thinking, on how a crack team headed by one Joga Singh solved the problem of moving a heavy vehicle inspection equipment from Anzen of Japan weighing several tons into large pits in the floor without having modern machineries which were common in Japan. The Indian team without waiting for the Japanese engineers had brought huge blocks of ice and filled the pits with them, then rolled the equipment over the ice, then in the night the ice melted and the machines went down and settled in the pit automatically.

Not everything was rosy in the Maruti story. The author writes about the delay in 1994 and 1995 over the issue of extension of licensing agreement between Maruti & SMC preventing it from getting access to latest Japanese technologies. How then Secretary of Industries Ministry Mr.T.R.Prasad and then minister Mr.K.Karunakaran turning out unfriendly, with the ministry and Maruti involved in several collisions. Many decisions got affected then and following years even after Secretary and Minister changing to Mr.Anup Mukherji & Mr.Murasoli Maran respectively. The decisions that got stuck included the choice of location for the second factory to increase production, appointment of Directors in the board by Government and on the issue of SMC brining in fresh capital for capacity expansion. There were other missed opportunities including in early days of Maruti, Indian Railways a Government of India undertaking refusing to invest in adapting its coaches to carry Maruti cars which would have resulted in huge benefits for both the arms of the same government.

The book switches to high gear after this, around the time when Government of India starting to dilute its stake eventually exiting entirely and SMC increasing its stake above 50%. This meant Maruti’s export to Europe happening in small volumes started to grow exponential. The author goes into detail on Maruti invested heavily in preparing their vendors, even playing midwife in getting its vendors to partner with their Japanese counterparts ensuring best technology flowed from Japan to India at all levels of its manufacturing, with some of those vendors grown to Billion Dollar multinationals today. We learn on how Japanese were obsessed with following to the dot written instructions (in contrast to Indian habits) and on how SMC was looking for reduction of costs at every level continuously. Maruti in its early days had to develop the whole idea of marketing cars, show rooms, dealers and even train extensively on the attitude of its own sales departments. And any mention of Japanese is not complete without mention of their quality processes and inspections, the author walks us through of what Maruti implemented which includes establishment of Quality circles and Job rotations between cross functions.

The-Maruti-Story

As you come to the end of the book you are left wondering on the huge strides India has made in the last three decades in which Maruti had grown and on how many of the things remain stubbornly the same in the way her Government functions. As a consumer I have time travelled from an India where to get a car allotted(!) I needing a letter from a MP (Member of Parliament), to an India where I could get sales representatives of all major car companies to my door step waiting for me. On the things that remain the same are the inefficiency of Indian Bureaucracy and corruption which having resided in the decade after the end of license raj in1991 seem to have made a comeback with a vengeance in the last 5 years.

As I put down the book I feel it to be a nice read just like the comfortable cars manufactured by Maruti, whose cars are not premium, not luxurious but certainly Made for India and value for money.

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