Speed Breakers Galore - Maruti

"What it (MUL) did to Premier Automobiles Ltd. and Hindustan Motors is now being done to it."

- AN MUL Rival.

Speed Breakers Galore - Maruti: Empire Under Siege

Jagdish Khattar was a man in trouble. Owner of an empire under siege, Khattar, MD, Maruti Udyog Ltd. (MUL) was facing what was the biggest setback ever for the company. With all strategies backfiring, Khattar seemed to be fighting a losing battle. Problems were aplenty - the Maruti 800 segment was facing demand-erosion, Zen and its arch-rival Santro were very close in terms of volumes, the Esteem was losing ground, Baleno, Wagon R and Alto were yet to prove themselves, while the Gypsy1 was snugly ensconced in its niche. Despite the fact that MUL had the biggest range of products, the cheapest cars in the market and a service network and cost structures that were better than anyone else, it had steadily lost market share - down from 82.62% in 1998 to 52% in 2000. With the disinvestment2 impending, Khattar was facing flak from the Government as well. With market share declining, MUL's valuation had also come down drastically. While it was valued at Rs 8,000 crore in 1996, by December 2000, the figure had touched an abysmal Rs 4,000 crore.

The Building Blocks

MUL was the largest car manufacturer in India with a market share of over 55%. It was a joint sector corporation set up by the Government of India and Suzuki Motor Corporation, Japan. MUL was incorporated in 1981 to take over the assets of the erstwhile Maruti Ltd. set up in June 1971 and wound up by a High Court order in 1978. The assets of Maruti Ltd. were then acquired by the Government under the Maruti Ltd. (Acquisition And Transfer of Undertakings Act, 1980). In 1982, the government signed a joint venture agreement with Suzuki Motor Corporation of Japan.

Suzuki's stake increased from 26% to 40% in 1987, and to 50.25% in 1992. The company was a significant exporter with exports to over 50 countries. The company manufactured passenger cars at its factory in Gurgaon, Haryana with an installed capacity of 350,000 vehicles. The first product, Maruti 800 was launched in 1984, followed by the all-terrain vehicle Gypsy in 1985. Over the years, MUL expanded its portfolio with the launch of the Maruti 1000 (1990); the Zen and the Esteem (1993); Zen Diesel (1998); Baleno, Wagon R and the Alto (2000).

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1] Gypsy was not a volume generating vehicle for MUL.
2] Government's policy of disinvestment in Public Sector Units, included Maruti Udyog Limited also along with other profit making PSU's.

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