February 16, 2020
Home  »  Magazine  »  Business  » Maruti »  Pressure Tactics

Pressure Tactics

The Government attempts to pull its weight in MUL's management

Pressure Tactics

THE one-paragraph press note issued by the Press Information Bureau on June 13 hid more than it disclosed,merely stating that the Government—well within its rights—had replaced its nominees on the Board of the Rs 6,673-crore Maruti Udyog Limited (MUL). But what the Government actually achieved with this one move was to score major points in its running battle with joint venture partner Suzuki Motor Corporation and its nominee as Managing Director, R.C. Bhargava.

The Government nominated E.A.S. Sarma, additional secretary and financial adviser, Ministry of Industry, and Anup Mukherji, joint secretary, Department of Heavy Industry, in place of Jagdish Khattar, director (marketing), and Dr Krishna Kumar, director (engineering). The new appointees are part-time directors and though the two sacked directors are expected to remain as chiefs of their respective departments, they will have to forego their places on the Maruti Board.

But Khattar and Kumar are merely pawns in a much larger game. Though the reasons for their dismissal were not articulated in the press note, Government sources insist that the grouse against the two was that despite being Government nominees they seemed more in sync with Suzuki's point of view. It would be pertinent to note that the decision to replace the two directors was taken by the Congress government, but it was eventually implemented just prior to a crucial Board meeting, scheduled for June 18 which was postponed to June 25 to accommodate Suzuki Chairman O. Suzuki. Speculation is rife that it was the sacking of these two directors which forced O. Suzuki to fly in for the Board meeting, which he had earlier decided to skip.

The Board meeting was scheduled to discuss MUL's expansion plan, which has been a major bone of contention between the two partners. Right from the time the expansion was conceived, both partners have consistently indulged in shadow boxing through the press, attempting to put pressure on the other to bow to their demands. The sacking of Khattar and Kumar at this juncture is the latest pressure tactic adopted by the Government.

It was sometime last year that the Government went on a media offensive attempting to browbeat Suzuki and Bhargava. While the Government's methods are definitely questionable—after all, it has washed its dirty linen in public without discussing the issues at the Board level—it has within a year done enough to force Bhargava, a consummate public relations man, on the backfoot. So much so, that quite uncharacteristically, he has shunned the media ever since the two directors were sacked. In fact, after winning the media war, the Government has even sent out peace signals to Suzuki, from a position of strength for the first time.

But Government sources insist that to make their voice heard in MUL, utilising the media was their only option, considering that Bhargava ran MUL practically like his personal fiefdom. And the fact that he did such a good job of running the company made his writ run unquestionably, not only in MUL, but within the Government as well.

Probably that's where the crux of the matter lies. "Though the Government holds half the equity in Maruti, and half the directors on the MUL Board are its nominees, we had virtually no say in the running of the company," say Government sources. And when Bhargava and Suzuki rubbed former industry minister K. Karunakaran the wrong way—though they were right in doing so—by refusing to set up an automobile plant in Kerala, Karunakaran took the lead in pressurising Bhargava and Suzuki 'to fall in line' with the Government's point of view, which it seemed to have formulated overnight. In this endeavour, Karunakaran was ably assisted by T.R. Prasad, secretary, Department of Heavy Industries, who Karunakaran appointed as chairman of Maruti in January this year.

But MUL sources say that despite Karunakaran's departure, Prasad seems to be following the same policies, with the tacit support of the new minister, Murasoli Maran. Obviously, the Government's desire to wield power in Maruti remains unsatiated. The question, however, remains: what moral authority does the Government have to wield its power, considering that it is unwilling to shoulder the responsibilities that come with it? Simply put, over the last year, the Government hasconsistently refused to shell out any money to help Maruti expand and upgrade.

Besides, the sacking of the two directors and appointing part-time nominees instead are bound to hurt Maruti, in an automobile market getting increasingly competitive. Bhargava's lieutenants—there aren't too many left these days—also question why in this era of liberalisation the Government wishes to get involved deeper in the business of making automobiles, rather than leaving it to a professional auto company like Suzuki. While the drama continues, MUL's future in a competitive marketplace begins to look cloudy for the first time ever. 

Next Story >>
Google + Linkedin Whatsapp

Read More in:

The Latest Issue

Outlook Videos