The Maruti Story : How a Public Sector Company Put India on Wheels by R. C. Bhargava

Author:R. C. Bhargava [Bhargava, R. C.]
Language: eng
Format: epub
Tags: Business, Economics, India, Industries, Motor Industry, Non-Fiction
ISBN: 9788172237806
Google: xqDNvVXeZ6wC
Amazon: B00B24FC0Q
Publisher: Collins
Published: 2010-02-02T00:00:00+00:00

7

PREPARING THE VENDORS

The first 192 cars to roll out of the factory in December 1983 were almost entirely Japanese cars, with only the tyres and the batteries being Indian, supplies coming from Chennai-based MRF and Kolkata-based Chloride India (later renamed Exide Industries) respectively. The indigenization percentage was a mere 2.7666 per cent and it stayed at less than 10 per cent till March 1984.

The December 1983 deadline of starting production and sale of cars necessitated starting production with imported SKD kits. SMC said this could be possible only if painted body shells, along with virtually all of the other components of a car, were imported. Where these components were required to be assembled using fixtures and special tooling like the door, the engine or the transmission system, they were imported as sub-assemblies. There was no time to install the welding and paint shops, without which the body panels could not be assembled. A similar position existed regarding the other major assemblies. An advantage of following this approach was that the workers could learn how to assemble and test the cars, before upstream activities were undertaken. The step-by-step approach to doing complicated tasks, we found as we went along, was typical of the Japanese way. It helped to reduce mistakes and underutilization of capacities.

The use of local components was dictated by their availability—or rather the lack of it. We had to make special efforts with Chloride India and MRF so that there could be some Indian components in the first cars. In any case, the procedure for the acceptance of locally made components for use in SMC was quite elaborate and time-consuming. Any significant use of Indian components in the first cars to be produced could only have been possible if some acceptable components were already being produced in India. This was not the case.

In the project report prepared for approval of investment by the government, Maruti had to indicate the extent to which each vehicle would be localized every year. This was the phased manufacturing programme (PMP), which applied to all foreign technical collaboration agreements. The purpose was to ensure that technology was transferred and absorbed in India, and also to limit the outflow of scarce foreign currency. The government believed that once the components were manufactured in India, technology transfer would have taken place, and the capacity to make further improvements and design better components would automatically develop. This did not happen for many reasons, including the lack of incentive for manufacturers to develop such capabilities. This and other policies regarding the inflow of technology and prevention of competition led to virtually all products, originally produced with the then current foreign technology, gradually becoming obsolete and India never developing, till the 1990s, the ability to export manufactured products. The Directorate-General of Technical Development (DGTD), responsible for technology development, failed to understand that Indian companies operating in a non-competitive environment had no commercial need to create engineering and design capabilities.

In the automobile sector, when a vendor entered into a licence

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