COVER STORY • 5 Interview with 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, 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 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

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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,

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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. Suzuki is with local people is extremely important Suzuki: Keeping pace with the JV’s entering a crucial stage in India from for a business company to take root in growth, our equity stake in it went up now on. Suzuki urgently needs to beef another country. If both sides are in per- gradually and reached 50% in 1992. up its production capacity to catch up fect harmony, one can delegate authority But in 1995, Suzuki and the Indian gov- with India’s auto market growth. Our to the other. About 3,000 employees ernment disagreed over an expansion of production was 570,000 vehicles in FY have come to Japan from India so far on the plant. The Indian government one- 2005. A new auto plant is due to begin training programs. At first, Suzuki sidedly designated a new president of the operation at the end of 2006. The new taught the Japanese style in India. But JV in 1997. We filed a suit with the plant is expected to produce 250,000 the Indians did not understand it easily. International Court of Arbitration, a dis- vehicles from FY 2008 onward. Our Now, employees who had actually pute-settlement panel under the output capacity in India will top worked at the Japanese plants are back at International Chamber of Commerce. 800,000 vehicles. We have acquired a home teaching their fellow Indians how After seeing it was in an unfavorable situ- vast tract of land around the new factory, to do the work effectively. ation, the Indian government proposed a which will enable it to produce 750,000 compromise settlement. There appeared vehicles a year in the future. We can to be disunity on the government side expect the new factory to serve as a key Suzuki Visited behind the proposal. After that, we have base for exports to Europe. come off well. Suzuki raised its stake in India More Than the JV to 54% in 2002 to seize its con- With a population of over 1 billion, trol. After the Indian government sold a India is drawing global expectations 100 Times part of its shareholdings in the JV, we that it will become a major auto mar- gained a freer hand over the venture’s ket. If the Indian economy contin- You visited India many times after management. We could reorganize the ues to grow at the current high pace, reaching agreement on the JV pro- Indian sales network and revise the the number of automobile buyers ject. Your energetic activities are employment system at our own initia- will definitely increase and their said to have helped you establish tives. This led to strengthening the JV’s needs will vary accordingly. smooth relationships with the com- competitiveness. In India, generally pany’s Indian executives. speaking, the government reduced its Suzuki: On top of its huge population, involvement in corporate activities and India has achieved nearly double-digit Suzuki: I have been to India more than helped open its economy. This had economic growth. As the income levels 100 times. I did go, see it, and decide helped to create a more favorable envi- of Indian buyers of Maruti 800 vehicles everything by myself. It probably ronment for foreign investors. grow further, we will be required to pro- helped the project that the top manager duce a full line of automobiles ranging spearheaded it. I have persisted in my from mini-vehicles to larger cars. Other strong belief that I will push through at Suzuki in Crucial automakers might seize customers from any cost as long as I decided to begin us unless we offer a wider variety of production in India. Stage with Rivals’ models. Our main products are current- ly small cars, but we will be required to The first product of the JV was a Entry produce all types of vehicles, including minivehicle called Maruti 800, known those with larger engines. Suzuki’s total as Alto in Japan, which exerted a South Korea’s Hyundai Motor Co. power will be tested. We will be unable revolutionary impact on the Indian and India’s local automaker Tata to maintain our current market share automobile industry. Suzuki market- Motors Ltd. are trying to catch up unless we cope with the tough situation ed Maruti 800 at about half the price with Suzuki in the Indian auto market with totally firm determination. It is of an ordinary vehicle in India at that recently. Among major Japanese something like the fable of the hare and time. As Maruti 800 was not only automakers, Toyota and are the tortoise. The loser is the one who low-priced but had excellent perfor- going all-out to seize a share of the took breath in midcourse. Suzuki has so mance, the number of would-be buy- Indian market. It appears it will not far been engaged in a battle with weak ers showed a marked increase. But be so easy for Suzuki to maintain the manufactures. We can never relax our after Suzuki got its production in 55% share of the Indian market guard after the world’s top-level India on track, its ties with the Indian recorded in FY 2005. automakers have entered India.

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Photo: Suzuki Motor Corp.

Royal Road for Safety, Environmental Measures

Indian automaker Tata is trying to expand its market share with vehi- cles at lower prices than those of Suzuki’s. Each rival automaker is aiming to catch up with Suzuki.

Suzuki: Tata says it will release a model Maruti 800, known as Alto in Japan, is one of the best selling cars in India priced at around ¥300,000, a level between a motorcycle and a Maruti 800 Many Japanese corporations are car. I wonder whether Tata will be suc- Suzuki to considering branching out into India cessful if safety and environmental due to the recent India boom. aspects are taken into consideration. Cooperate with Suzuki was the first Japanese We will never ignore technological automaker to begin production in aspects of safety and environmental Nissan and GM India and has been successful. measures and will follow the royal road Suzuki’s experiences are precious for manufacturers. Tata is a giant busi- As Suzuki beefs up its alliance with for Japanese firms of various indus- ness concern and its capability cannot Nissan there has emarged a plan to tries. be taken lightly. We need to pay suffi- produce Nissan vehicles at Suzuki’s cient attention to Tata and to compete plants in India. Nissan has so sharply Suzuki: As there are differences in the with it. fallen behind other major makers like business cultures between Japan and Toyota in setting up operations in India, an equity stake of more than 51% Some people say that Suzuki needs India that it expects cooperation from is desirable to launch a JV in India and to tighten its sense of caution the front-running Suzuki in the Indian to take management initiatives. against employees who they say are market. The plan is beneficial for Business opportunities are expanding in too proud that the company has Nissan which does not need to find a India with its economic development. long remained the top automaker in new production base and can keep its However, it is important to conduct fea- the Indian market. financial burden to the minimum. sibility studies fully to advance into India and find out both merits and Suzuki: Employees at the JV may feel Suzuki: That plan emerged by chance demerits. This is true not only for contented because they have been pro- after Nissan revealed its desire to produce automakers but for other industries. ducing the same models for more than small cars in India as Suzuki has provided You may fail if you are pulled by others 20 years. It is obvious that those old Nissan with its mini-vehicles under the to follow suit blindly. It is important to models bring huge profits because they Nissan brand. We talked about a plan for consider what you can do and to find are produced at facilities whose deprecia- joint production if Nissan wants to pro- out what you should do. In India, the tion has been completed. From now on, duce cars of the same size as Suzuki’s. automobile industry will absolutely face the JV must release attractive models in This will lead to a reduction in costs, and intensified competition but at the same tough competition with powerful rivals. an output increase will also help to boost time an expansion in national income But the JV apparently lacks a sense of our earnings performance because profits will increase the number of customers. competitiveness. Therefore, I am plan- from small cars are limited. So, the talks Such a trend will continue for some ning to make a new plant compete with went smoothly. This stemmed from the time. Suzuki must never be on the the existing one. India’s domestic law idea that the two makers should utilize defensive but it needs to continue efforts prevented the new plant from being each other’s capabilities. Suzuki will con- to gain its strength. We will continue to operated by a new independent manage- tinue its cooperative ties with GM, even remain on the offensive. ment entity. But we will let the two though GM has sold most of its share- plants compete head-on with each other holdings in Suzuki. A corporation of our Masuda Kazunori is a reporter for the without allowing any personnel size cannot survive without cooperation Economic News Section of Kyodo News. exchanges. with various companies.

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