BackSuzuki gives more power to Maruti in group affairs
Suzuki to move personnel from Maruti to production, supply, HR at motorcycle unit; proposes new segments at Maruti
Premium(Ramesh Pathania/Mint)
New Delhi: Japanese auto manufacturer Suzuki Motor Corp. is reorganizing its Indian operations in an attempt to streamline production systems in a country where it is the biggest car maker by sales, but is lagging behind rivals in the motorcycle market.
As part of the reorganization, Suzuki will move personnel from Maruti Suzuki India Ltd to key roles in the departments of production, supply and human resources at Suzuki Motorcycle India Pvt. Ltd. At the same time, it also proposes to create new business segments at Maruti.
While this move is expected to give Maruti a larger say in Suzuki’s two-wheeler unit, for its parent Suzuki, the move entails a realignment of its businesses in the world’s second fastest growing automobile market at a time when sales are declining in other markets.
Maruti’s chief operating officer (human resources and administration) S.Y. Siddiqui has extended his role to the motorcycle unit, and some more key managers from the car maker will be deputed to the plant to oversee production as part of the exercise, according to three people familiar with the development and some documents reviewed by Mint.
The Japanese company has a 39% share of the Indian passenger car market, but its two-wheeler subsidiary, which separated from its joint venture partner TVS Motor Co. 12 years ago, has struggled. In the fiscal year that ended on 31 March, Suzuki Motorcycle had a mere 3% share of a market in which 13.8 million two-wheelers were sold.
Suzuki lags way behind the motorcycle market leader Hero MotoCorp Ltd, Honda Motorcycle and Scooter India Pvt. Ltd, Bajaj Auto Ltd and TVS Motor.
“This will be like a hand-holding exercise for the motorcycle unit," a senior Maruti official said about the reorganization, requesting anonymity. “We will help them in procurement of raw materials, identifying common vendors as we have a larger vendor base that could help them in saving costs."
According to a second person familiar with the development, while Siddiqui has been overseeing operations at the two-wheeler plant for sometime, more officials from Maruti will be part of Suzuki Motorcycle’s production activities.
“There will be a team of about 30 key managers and engineers who will be deputed at the motorcycle plant from time to time," said this person.
Responding to a questionnaire from Mint, a Maruti spokesperson confirmed that it is exploring synergies in buying and procurement with Suzuki Motorcycle.
“Maruti Suzuki routinely collaborates with suppliers for bulk buying of material. This benefits the company as well as the supplier. Similar synergies with SMIPL (Suzuki Motorcycle) are being considered," the spokesperson said.
There have been some significant changes at Maruti, too.
Mint on 9 April reported that there has been a reorganization of the top management at Maruti as its Japanese parent wanted to more closely oversee several critical functions, including human resources.
Maruti has extended some important departments at the car maker into full-fledged business segments, according to internal office orders reviewed by Mint.
The organizational changes “should aim to step up business performance and create a new curve in business excellence", Maruti’s Siddiqui said in an office order on 30 April. “Quality functions are being consolidated and Quality Assurance has been created as a separate business vertical."
This new segment will be led by joint managing director Toshiaki Hasuike, who joined Maruti after the board meeting on 26 January and will report to new managing director Kenichi Ayukawa. Hasuike will also oversee engineering, supply chain and production directorates.
Other prominent, newly formed business segments are rural marketing and institutional sales, which will be overseen by Mayank Pareek, chief executive officer (marketing and sales). Maruti expects its growth to be driven by rural sales at a time when the overall market sentiment is weak because of a slump in economic growth.
As the firm gears up to increase its presence substantially in export markets, it has created two new departments in its international marketing team. While one department will look after markets such as Latin America, South-East Asia, Oceania and Europe, the second will focus on the Middle-East and North America.
A new division called Rohtak Project has been created to monitor Maruti’s first integrated research and development centre in Rohtak, Haryana, which is expected to be operational in 2015.
According to another office order, Siddiqui also promoted at least 48 mid-management employees, while there has been just one promotion at the top level. Rajiv Gandhi, who was chief general manager (production) at the Gurgaon plant of Maruti, has been elevated to executive officer in the same department and will now report to M.M. Singh, chief operating officer (production).
The reorganization is taking place at a time when competition is increasing both in the car and motorcycle markets. The exercise is welcome, but the company should be careful when it comes to commercial transactions, said Mahantesh Sabarad, senior vice-president of equity research at Fortune Equity Broking Pvt. Ltd.
“They are gearing up for challenging times. Competition is not only intensifying in car segment, but also two-wheeler segment. So, it is a good practice to make its subsidiaries cooperate, but it needs to be cautious on commercial transaction front and that should be kept at arm’s length," he said.
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