Respite For Maruti

The formal conflict is not over yet. The case over the appointment of Mr RSSLN Bhaskarudu as managing director is still pending before the international court of arbitration and the conflict cannot be considered to be resolved until both parties accept with good grace whatever verdict is handed down. But there are several straws in the wind which indicate that the verdict, when it comes, will be used to bury a dispute that is already largely over. The first such sign is that the Maruti board has approved extension of the royalty agreement for Maruti and Omni models, which was in limbo since April and without the reactivation of which, neither would royalty be paid nor would technological collaboration continue. More important, the board has set up a committee to look into the urgent issue of introducing new models.

 

One old bone of contention is also now out of the way. Suzuki has submitted a project report on manufacturing gearboxes in India; the government was making much of the Japanese parents reluctance to let go of the supply of this component. For its part, the government has taken two steps to ensure that an equable dialogue continues with Suzuki. First, Prabir Sengupta, no longer heavy industry secretary, continues to preside over the Maruti board and second, he has been succeeded in the ministry by P Shankar. The Japanese, it seems, find it easy to talk to both.

However, so far nothing has materially changed. Suzuki may have agreed to co-operate in the setting up of a gearbox unit but the issue of financing the project will bring the argument back to square one: how can the government continue to hang on to its stake in the company at a time when heavy investment is required, as it has no money to take up its share of a necessarily expanding equity base? What seems to have changed, however, are the sentiments and atmospherics. This is a substantial gain as the two sides can now rationally approach issues in a way which does not destroy the company.