Home >Companies >People >Shinzo Nakanishi leaves behind mixed legacy at Maruti
Nakanishi has been with Maruti ever since it was set up, becoming managing director and chief executive in December 2007. Photo: Ramesh Pathania/Mint  (Ramesh Pathania/Mint )
Nakanishi has been with Maruti ever since it was set up, becoming managing director and chief executive in December 2007. Photo: Ramesh Pathania/Mint
(Ramesh Pathania/Mint )

Shinzo Nakanishi leaves behind mixed legacy at Maruti

Nakanishi was the first person to come from Suzuki in 1981 when the govt was negotiating the joint venture

New Delhi: The first Japanese managing director and chief executive of India’s biggest car maker, Shinzo Nakanishi, will retire at the end of the month, leaving behind a mixed legacy. On the one hand, his tenure saw Maruti Suzuki India Ltd developing local engineering skills and launching models that were designed at home and not at Suzuki’s Hamamatsu base.

But his tenure also saw the company struggle to hold its own against competition and maintain profitability. Worst of all, Maruti Suzuki faced some of the worst labour trouble it has ever had to deal with in its 30-year history while Nakanishi was at the helm.

He will be succeeded by Kenichi Ayukawa, who has been associated with the European operations of parent Suzuki Motor Corp., on 1 April. His appointment was approved by the Maruti Suzuki board on Friday in the presence of Suzuki chairman Osamu Suzuki.

Nakanishi, 65, has always been the ultimate Suzuki insider—not only is he a close confidante of Osamu Suzuki, he was a member of the team that held the negotiations with the Indian government in the early 1980s, which led to the formation of the venture. Nakanishi has been with Maruti ever since it was set up, becoming managing director and chief executive in December 2007.

“He was the first person to come from Suzuki in 1981 when we (government) were negotiating the joint venture with them," said Maruti Suzuki chairman R.C. Bhargava, who moved to Maruti Udyog Ltd, as it was then called, from Bharat Heavy Electricals Ltd. “He came across as a positive and committed person with good communication skills in English. He has been a major architect of the growth at Maruti."

The veteran is stepping down at a critical juncture in Maruti’s evolution—market share is on a seemingly inexorable slide from more than 50% to 38% now, and expected to decline further to 31-32% by some analysts. The company itself, while admitting that getting back to 50% would be impossible, wants to boost its share to 40% at least. But with the economy seen slowing to a 10-year low and car sales at their worst in 12 years, how well has Nakanishi been able to prepare his company to deal with the future?

An industry consultant said Nakanishi made Maruti formidable in Suzuki’s global scheme of things and with the parent pulling out of the US, the Indian unit has gained further importance.

Nakanishi made the Indian market more important for Suzuki than perhaps even Japan, said Deepesh Rathore, managing director, IHS Automotive India, an automotive consulting firm.

“What was needed of him was to consolidate the company’s capabilities and prepare it for the future," said Rathore. “The biggest achievement is growing R&D significantly but unfortunately he will not be there to see the results of that as products from the India R&D centre will start rolling out only in the near future."

That vision will stand the company in good stead, Rathore said.

In the last five years, Nakanishi has been focused on scaling up Maruti’s R&D capabilities. Besides a three-fold increase in the number of engineers engaged in this activity, the company is also setting up a state-of-the-art R&D centre in Rohtak, Haryana.

Rathore said the lowest point in Nakanishi’s career will be the labour violence at Maruti’s Manesar plant that broke out in 2011 and then again in 2012. The second bout of violence saw the death of a human resource manager at the plant.

Nakanishi spoke about this at a press conference after the violence in July.

“It is the biggest challenge in my career. I have put a bad dot in the company’s history. We are all shell-shocked because we have never experienced this kind of violence," he had said. “There have been many disputes across the world. Even in Japan, after World War II, we have had disputes, but never like this. It’s not grim, it’s criminal."

Nakanishi wasn’t above a little humour when it came to making a point. With regard to Maruti Suzuki’s plan to build a plant in Gujarat, he was asked whether the company was thinking about shifting out of its Haryana base because of all the violence and labour strife.

He replied: “Although my English is poor, I know the difference between shift and expansion."

The company announced last year that it would invest at least 18,000 crore in setting up manufacturing facilities in Gujarat, a move that Rathore sees as fuelling Suzuki’s export plans. The firm has plans to manufacture 3 million units in Gujarat starting 2016-17.

“I think 75% of the volumes will be for exports. This kind of expansion indicates that Nakanishi knew India will be a most significant market for Suzuki both in terms of learnings and returns," he said.

The success of any CEO’s term can be judged on two basic parameters—profitability and market share, said Mahantesh Sabarad, senior vice-president (equity research), Fortune Equity Broking Pvt. Ltd.

“While there has been a decline in the company’s market share, the firm has not been able to improve its profitability significantly, barring 2010 and 2011," he said. “But he can’t be blame for all of it. Sadly, he came on the board just before the global recession of 2008 and he is ending his tenure when the market is again depressed."

In 2007-08, when Nakanishi took over from Jagdish Khattar, the firm’s net profit was 1,731 crore; in the last fiscal year, it stood at 1,635 crore.

Nakanishi’s successor Ayukawa is a law graduate from Osaka University who joined Suzuki in 1980. He’s been a non-executive director on the board of Maruti since July 2008.

With the Indian unit contributing 40% of Suzuki’s consolidated net profit, Ayukawa will have his work cut out. Apart from pulling out of the US market, Suzuki faces stiff competition in Europe from Volkswagen AG and Hyundai Motor Co., making India all the more critical for Suzuki.

Bhargava agrees that the new managing director’s major challenge will be to start production in Gujarat.

“That plant will hold a lot of volumes for exports. His immediate challenges will be to get that going and look after R&D space as we will be launching a lot of models in the next two years and will strengthen our presence in the SUV segment," Bhargava said. “Going forward, India will be one of the major geographies for Suzuki as the growth potential for Suzuki here is higher than in any other market."

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