R.C. Bhargava > Quotes

“The first purchase order from the army for 900 canvas-topped Gypsies came in January 1991 and the vehicles were to be delivered before 31 March of that year. Maruti manufactured the vehicles and they were parked for inspection in the factory. Army rules required that each vehicle be inspected by their own inspectors. The inspecting team would check only seven or eight vehicles in a day. It was obviously impossible to complete inspection of 900 vehicles in the time available. The inspection agency would not accept our submission that the vehicles were mass produced, following a well-documented system for quality control, and that sample checking should be adequate. They would also generally not accept Maruti’s explanation that what were being pointed out as defects were not really defects. As was foreseen, the delivery date expired before the bulk of the vehicles had been inspected. Once that happened, inspections stopped. The purchase order had to be revalidated before the remaining vehicles could be inspected. The process of revalidation took another nine to ten months. In the meantime, the vehicles were standing in the open in the factory, braving the elements. The system was not concerned about the consequences. K. Kumar made several visits to the army headquarters and met officers at various levels, to explain the Maruti-SMC system for ensuring uniformity of quality and adherence to specifications. He pleaded for expediting the process of inspection, but in vain. Kumar and I then met Lt. Gen. M.S. Bhullar, who was director general quality assurance in the army, and pointed out that exposure to the sun and rain would damage the vehicles and neither Maruti nor the army was gaining by rigidly following tortuous government procedures. Quality, I argued, was produced, not inspected and suggested that the army work out some less cumbersome methods of inspection. But the army was not willing to accept this point of view.”
― R.C. Bhargava, The Maruti Story

“The decision to partner the government was clearly a top-down decision taken by Suzuki himself, based on Nakanishi’s positive report. The speed of decision making was a result of the pressure from the Indian side as well as the dynamism and ability of Suzuki to take truly entrepreneurial risks. When asked as to why he took what appeared to most people, including the Japanese embassy in India, as an unwarranted risk, Suzuki explained that he always believed that it was people who determined how any project performed, and everything else was secondary. He said that at the time of the first meeting with Krishnamurthy and me, he was convinced that he could work with us and ensure success. If he did not have this feeling, he would not have asked the Maruti team to stay back till he returned from the United States. I wonder how many people in the world could take a decision to invest $25 million on this ground. Suzuki showed that his faith in the importance of people as the basis for doing business was better than the technical evaluations which companies made and which showed that India was not a good place to invest money.”
― R.C. Bhargava, The Maruti Story

“Maruti was called upon to take a difficult decision soon after the first bookings had been made. The pick-up truck, a purely commercial vehicle that was part of the original project along with the 800 and the van, got a very poor response—bookings of just 2,000. In the project report, the pick-up truck was expected to account for 20 per cent of total production. The booking response showed that the customers did not want this vehicle, and manufacturing it in small volumes would not be viable. The company realized it had made a serious error of judgement in not recognizing that petrol-driven commercial vehicles could never compete with diesel-driven ones, as the government-determined price of diesel was much lower than petrol. SMC had estimated that the pick-up truck would be very successful because of good experience in other Asian countries. In Pakistan, it was used for rural transport, after being fitted with a canvas top, and sold in large numbers. However, India had a vehicle called the Tempo, which carried a load slightly more than the pick-up truck and ran on diesel. The highly value-conscious Indian customers immediately realized that the pick-up truck would always lose out to the Tempo, because of the Tempo’s lower operating costs. Realizing that the truck would be a failure, Maruti decided to drop its production and to write off the costs incurred till then in tooling and other related activities. This experience was a reminder to Maruti on the importance of correctly assessing the behaviour of Indian customers, and the dangers of transferring experience of other countries to India, without careful examination.”
― R.C. Bhargava, The Maruti Story

“Maruti also changed the system of making payments to vendors. The supply contract with component manufacturers contained the usual provision of thirty-day credit for the buyer. However, after a few years of operation, Maruti offered to make payments in fifteen days, with a 0.5 per cent discount for early payment. The vendors were delighted, as most of their customers rarely paid them even within thirty days, and they were constantly facing cash flow problems. Working capital could not be easily obtained from banks, and interest rates were high. Money from private moneylenders was very expensive. So, getting paid in fifteen days, and by a manufacturer who was buying a large part of their output, was a boon.”
― R.C. Bhargava, The Maruti Story

“At the time of our visit, European manufacturers doubted the robustness of the Indian car market, as well as the merits of being a minority partner in a government-managed company. Their fears were not without basis. Though the Indian economy had grown 7.2 per cent in 1980-81, it was not seen as a very vibrant economy. The demand for cars had been stagnant for a decade. Cars were highly taxed and were considered a luxury item. The economy was still closed and highly controlled and the business environment for foreigners was not friendly. If the number of cars produced was small, royalties would not yield much income. The stringent localization conditions would mean that profits from the sale of imported components would be low. The world car market was going through a downswing at that time and European car makers were battling stiff competition from Japanese cars on their home turf. Getting into an unfamiliar, and what appeared to be an unattractive market, was hardly a priority.”
― R.C. Bhargava, The Maruti Story

“The dealers chosen in the initial years all performed well. However, after some years, with changes in the ministry, the Maruti management and board came under a lot of pressure to accommodate unsuitable persons as dealers. Maruti dealerships were very profitable in those days as there was virtually no competition. The dealer did not have to employ any working capital, and the vehicles commanded a premium. The role of the dealer was virtually that of being a distributor. Naturally, getting a dealership was considered to be a very safe way of making money, and hence became an object of political patronage. While senior ministers like N.D. Tiwari and the late J. Vengal Rao kept away from making recommendations for dealerships, their junior ministers did not exercise the same self-restraint. The common perception was that public sector companies were controlled by the ministry, and ministers therefore had the right to give directions to the management on various matters. A minister probably felt that he would lose face if he were to tell a political supporter that he was unable to direct the management of a public sector firm to do a small thing like award a dealership. Unfortunately, most of the recommendations made were for people who were totally unable to meet the minimum requirements for a dealership. One person who came with a strong recommendation was a ‘social worker’ with no assets and no declared source of income. The inability to award a dealership to him made one minister of state very unhappy. Somehow Vengal Rao heard about this matter. He called me and said that under no circumstances was a dealership to be awarded to this person, as it was not a clean case. Some months later, after Vengal Rao had quit his post, the minister of state ordered an enquiry against me in the Kandla transportation case and the extension of my term as managing director was delayed.”
― R.C. Bhargava, The Maruti Story