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Suzuki Motor: an “SME” Controlling Giant India – Seizing More Than 50% of a Fast Growing Market – Interviewer: Masuda Kazunori

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Suzuki Motor: an “SME” Controlling Giant India – Seizing More Than 50% of a Fast Growing Market – Interviewer: Masuda Kazunori COVER STORY • 5 Interview with Suzuki Osamu, Chairman, Suzuki Motor Corp. Suzuki Motor: An “SME” Controlling Giant India – Seizing More Than 50% of a Fast Growing Market – Interviewer: Masuda Kazunori UZUKI Motor Corp. has seized a share of more than 50% of India’s passenger car market, Swhere automobile sales are rapidly expanding, backed by the country’s brisk economic performance. Suzuki shows overwhelming strength in India, one of the world’s fastest growing economies, outrivaling such renowned giants as Japan’s No. 1 automaker, Toyota Motor Corp., and the world’s largest automaker, General Motors Corp. (GM) of the United States. Suzuki Motor Chairman Suzuki Osamu, who has long served as head of the Japanese automaker, discusses not only the history of the company’s success in India and the background to it but also the future course of the Indian market and the firm’s sales strategy. Photo: Kyodo News In 1981, Suzuki gained the backing We Wanted to from GM through a capital alliance. I had a strong desire to acquire the top Become No. 1 position for Suzuki wherever it might be. It was impossible for us to become India, where sales of motor vehicles No. 1 in any prefectures of Japan. But I almost doubled in the last 10 years thought it might be possible in a foreign to about 1.5 million units in FY 2005, market without other major automakers. has drawn the most attention among If Suzuki could become the No. 1 the four rapidly growing BRIC coun- automaker, it would raise the employees’ tries (Brazil, Russia, India and morale, I thought. We already started China). In October 1982, Suzuki production in Pakistan in 1975. I Motor formally signed an agreement judged that India with much large pop- with the Indian government on joint ulation than that of Pakistan had poten- automobile production which made tially huge demand for motor vehicles. Suzuki the first Japanese automaker to set up operations in the fast growing Indian market. Suzuki Personally Suzuki: Our mainline products were Escorted Indian small vehicles and we were strong in that field. That was our distinctive feature Delegation compared with other Japanese automak- Your decision was quick. You ers. The Indian government-led national thought it more beneficial to pro- Many major Japanese automakers car project was designed to establish a mote a highly profitable business showed their willingness to become joint venture (JV), which was very conve- project abroad than to compete with a partner of India’s national car pro- nient for us as we were smaller in corpo- such larger automakers as Toyota ject. India chose as its partner rate scale than major makers and faced Motor and Nissan Motor on the Suzuki, much smaller than major difficulties in setting up overseas opera- Japanese domestic market. automakers like Toyota which had tions on our own. Suzuki was a small Suzuki’s top executives did not hesi- already won global appreciation. and medium-sized enterprise (SME) tate to launch an in-house team to One of the reasons for the Indian whose fundraising capacity was limited. promote the India project. decision was your sincere response Suzuki did not waste resources and had as you were well versed in forefront always thought really hard. For the Suzuki: We ranked at the bottom matters. Indian project, we thought it should be among Japanese automakers 24 years safer for us to link up with the govern- ago. It was my fourth year as the presi- Suzuki: Suzuki was the last to file its ment than with a private firm, a partner- dent of Suzuki. I was very serious about applications, just ahead of the deadline. ship with which would pose major risk. how to improve the company’s earnings. Later, an Indian survey mission came to 16 JAPAN SPOTLIGHT • September / October 2006 COVER STORY • 5 Japan for a round of visits to Japanese technology. Suzuki has no sufficient Suzuki made the same production automakers. Suzuki was also the last of funds but can transfer its technology formula take root in India as that for the makers to receive the Indian delega- politely and with heart and soul as it is a its domestic plants in Japan. That tion, which had already visited Toyota local company.” Finally, we reached an led to its success in that country. and other automakers. I met with the agreement for Suzuki to invest about ¥5 However, the introduction of the delegation in Tokyo, but could not pro- billion, or a 26% equity stake which, Japanese-style production formula vide enough time for the session because under the Indian law at that time, pro- ran into difficulties that stemmed I was scheduled to leave for the United vides the investor with the right to veto. from India’s unique obstacles like States for talks with GM. In such a lim- Even so, Japan’s automobile industry the caste system. ited time, I did brief the delegation by viewed our Indian project as a major myself about our plant layout and our gamble. Suzuki: Before launching the JV, I told plan for the management of the Indian the Indian side that Suzuki has no knowl- project. The Indian delegation had been It was not easy for Suzuki to begin edge of Western-style management and scheduled to leave for home before I was production in India where the auto- will introduce Japanese-style one. They to return to Japan. Yet they had mobile industry had yet to be estab- agreed cordially. But various differences remained in Japan until I returned lished and India did not have the emerged between the Japanese and home. Next, we met at our head office necessary infrastructure. Notably, Indian styles just before commencing the in Hamamatsu, Shizuoka Prefecture. I you faced great difficulties in operation of the Indian auto plant. For heard, after India picked Suzuki as its procuring auto parts in India where example, Indians are traditionally indi- partner, that the Indian delegation was the manufacturing industry was vidualistic and often resisted such impressed with Suzuki because only undeveloped. Japanese practices as requiring employees senior officials showed up at other to wear workers’ uniforms and providing automakers but the chief executive treat- Suzuki: Many Japanese parts makers are both cadres and rank-and-filers with ed them in a polite manner at Suzuki. I active now in India. But we experienced meals of the same quality at the canteen. think the two sides had objectives in extreme hardships in procuring auto We could not gain an understanding of common as we excelled in small vehicles parts there. Many parts makers declined the Japanese style so easily in India, once while India wanted to produce fuel-effi- our requests to produce parts in India a strong class-based society, when we cient small cars. because there was no guarantee for us to attempted to strengthen unity among the be successful. Many parts makers did Indian employees or to raise their sense of not believe that motor vehicles could be loyalty to the company. But many Hardships in produced in India. We first applied the Indian cadres at that time helped us by so-called knockdown production formu- taking the initiative of wearing uniforms. Procuring Auto la under which key parts were imported I nearly wept for joy when I saw all the from Japan for assembly in India. Indian employees with the same uni- Parts Production in India managed to begin. forms attend a ceremony marking the Annual output reached 50,000 vehicles start of auto production in 1983. Suzuki’s earnings performance was in 1985 and was doubled in 1988. not necessarily favorable at that Then, Japanese auto parts makers came Securing human resources was a key time. Suzuki’s investment capability to produce in India gradually. Other point for Suzuki to complete prepara- was limited in the Indian JV project. Japanese and foreign automakers began tions for production in a short period You promoted talks with the Indian production in India around 1995 after and get its Indian business on track. side energetically while stressing the Indian government lifted its eco- You needed to make Indian employ- the company’s desire to launch nomic control measures in 1991. I ees experience production at domes- business operations in India. think those latecomers found it much tic plants in Japan in order to gain easier to launch production because broader understanding from among Suzuki: Frankly speaking, Suzuki was many parts makers had already been them of Japanese-style management, small in scale in those days and had not active in India. although it cost a great deal. been in a financially favorable situation. India first asked us to provide about Suzuki: Key members of the Indian sur- ¥7.7 billion, or 40%, of the investment Trust Is Basis for vey mission joined the JV, giving a major needed. It was out of the question for helping hand for Suzuki. I think us. I said to the Indian side, “It is better Human encounters with local people are very to forge a partnership with a major important in any foreign project. In a automaker if you need both money and Relationships society of different manners, customs, JAPAN SPOTLIGHT • September / October 2006 17 COVER STORY • 5 environment and languages, there are government threatened to deterio- Suzuki: More than 10 automakers, many matters that cannot be understood rate and Suzuki continued to experi- including US and European ones, have only with the knowledge from books. ence difficulties. set up operations in India. Competition Establishing reliable human relationships has definitely intensified.
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