Government and Suzuki reach settlement
By Our Corporate Bureau | 23 Sep 2004
New Delhi: The government yesterday reached an amicable with Suzuki Motor Corporation (SMC) over the issue of fresh investments.
Representatives of the government and SMC told waiting newspersons that they had agreed to a ‘major role’ for Maruti Udyog Limited (MUL) in the manufacturing facilities to be established in the country by the Japanese auto major as part of its Rs1,000-crore investment announced last week in Tokyo.
Terming the settlement as a ‘happy ending in the nation's interest, the minister for heavy industries, Santosh Mohan Deb, said that the new or the second car facility would be ‘under the flagship of Maruti Udyog’.
Deb was confident that the understanding reached with SMC today would not only take care of the interests of the existing shareholders in MUL, but also enhance and expand the reach of the Indian car company, which would market the product from its new ventures.
A final decision on the structure of new ventures would, however, be taken by the MUL board at its meeting on Thursday.
"We can have up to 70 per cent equity in the car venture. In the diesel engine unit, they have offered us as much equity as we want but propriety demands that the decision be taken by the MUL board," Deb said.
Deb also pointed out that the new company, proposed to be named as Suzuki Maruti India, would not hurt the interests of Maruti Udyog. "Maruti has been insulated from any competition as the new company will manufacture only high-end cars," he said.
He further said, "The new corporate entity will share common vendors, marketing and servicing network and R&D infrastructure of MUL, thus enhancing the value of Maruti."
Currently, Maruti's plant at Gurgaon (Haryana) has a manufacturing capacity of five lakh units and the proposed plant is coming up in nearby Manesar, also in the same State.
As part of the settlement reached, Maruti would have a significant presence in the diesel engine venture. However, as per available indication, it would have up to 49 per cent equity as Suzuki was bringing in the latest technology, including that for gear box and foundry for production of engines, both domestic and exports.