Osamu Suzuki’s son may join Maruti board4 min read . Updated: 28 Jul 2013, 11:51 PM IST
Move could be another step by Japanese firm towards exercising greater control amid strikes, declining profit
New Delhi: Suzuki Motor Corp. chairman Osamu Suzuki may induct his son Toshihiro Suzuki on the board of Maruti Suzuki India Ltd, the country’s largest car maker’s managing director and chief executive Kenichi Ayukawa said in an interview.
This could be yet another step by the Japanese parent towards exercising greater control over the Indian subsidiary in the wake of a series of labour strikes and declining profits.
To be sure, in the March and June quarters, the firm’s net profit grew 80% and 49%, respectively. But prior to that, the firm’s net profit had declined for five quarters in a row primarily because of repeated labour strikes at its Manesar plant in Gurgaon.
All this led to various changes in Maruti’s top management, and Osamu Suzuki began visiting India every three months instead of once a year previously for the car maker’s annual general meetings.
“I think, indirectly, he (Toshihiro Suzuki) is already receiving information about Maruti. He knows what is happening at Maruti and in India. At this moment, he is not a director in Maruti. But in future he will be a director," Ayukawa said.
India has become the most important location in Suzuki’s global scheme of things. While the Japanese market has dried up for the firm, it has already pulled out of the US, the world’s second largest auto market. In Europe, it has a minuscule presence.
Mint on 9 April reported on a reorganization of the top management at Maruti. Key officials from Japan, including a joint managing director, were brought in areas such as human resource management and corporate affairs.
The Japanese auto maker has also been reorganizing its Indian operations to streamline production systems across its subsidiaries. Suzuki has moved personnel from Maruti to key roles in production, supply and human resources at Suzuki Motorcycle India Pvt. Ltd. It also proposes to create new business segments at Maruti.
“Maruti is the big one but its criticality is increasing. The importance of Maruti is very much increasing. Its performance is critical for Suzuki’s success," Ayukawa said, as he charts out a strategy for the growth of the Indian market for Suzuki. “That’s why he (Osamu Suzuki) frequently visits to look at what is happening at Maruti and what is going on in India. He wants to know by himself, to see and feel."
Ayukawa said his directive from Japan was to expand the business in India, both in terms of size and quality. “During my assignment here, I will try to develop the company," he said.
Last year, Maruti announced a massive expansion plan, investing as much as ₹ 18,000 crore in Gujarat to set up manufacturing facilities that would cater to export markets.
On Saturday, the firm said it will begin manufacturing light commercial vehicles, a plan it had shelved 30 years ago.
Maruti aims to increase its net profit by 5-10% every quarter, Ayukawa said. “We are focused on making profits. By making profits, we can reward our employees, contribute to the government, etc. We also try to challenge our profit margins," he said.
Maruti aims to sell at least 1.2 million cars this financial year; it sold 1.17 million units in 2012-13.
“As far as we are concerned, this year we (will) try to sell a total of 1.2 million units. We have to achieve that. I cannot compromise on that," said Ayukawa, who was overseeing Suzuki’s Europe operations before he took up the job at the Indian subsidiary in April 2013. He has big shoes to fill as his predecessor Shinzo Nakanishi had an illustrious career in India.
Ayukawa would not give any market share target for the company.
“I don’t have any market share target in mind. I try to consistently increase the volume. That is a very important thing. Of course, if someone is going up quickly, we try to follow them. But the result is sometimes we are at 39% or 41%," he said. “We try to keep 40%, but I personally expect that we try to enhance the market share, may be to 45% or if possible 50%. But that is quite difficult to do."
An industry consultant said it is “obvious" that India will be a driving force for Suzuki, but added that a lot would depend on how Maruti performs in the export markets while maintaining its dominance in the local market.
“In India, it may be very difficult for them to grow market share as the competition is going to get intense and they do not have products for the next two years for compact SUV (sports utility vehicle) segment," this consultant said, declining to be named.
“At the exports front, Suzuki needs to differentiate between India and Japan in terms of geographies, products, technology, etc.," he said.
To be sure, Maruti’s market share in the passenger vehicle segment has been declining—from 45% in 2005 to 38% in 2012. Its share in the market was 39% in fiscal year 2013.
Ayukawa is banking on small SUVs to drive sales, along with the small car segment that has been Maruti’s stronghold for a long time.
“We expect the growth to come from SUVs. We have to bring in some models. We are specialists in the small car. We have a chance to consider the big ones but nobody expects Suzuki to make big ones," he said.
For exports, Maruti has created two departments in its international marketing team. While one will look after markets such as Latin America, South-East Asia, Oceania and Europe, the second will focus on West Asia and North America.