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November 11, 1997


General Motors offers to mediate in Maruti dispute

General Motor Chairman and Chief Executive Officer John F Smith has said his company is willing to help the Indian government and Japanese carmaker Suzuki Motor Corporation to resolve their battle over the management control of their joint venture Maruti Udyog Ltd.

Smith, however, neither confirmed nor denied rumours that the GM was planning to pick up a stake in Maruti, or in getting involved in the Suzuki-government of India joint venture. General Motors has a 50:50 joint venture with the C K Birla group in India and manufactures the Opel Astra car at a plant near Baroda.

On his week-long maiden visit to India, Smith spoke about helping to end the dispute. "We know Suzuki well. We have a joint venture with them in South America, a major project in Canada, a joint venture is under way in East Europe. So we asked them if we could do anything to help. They said 'Yes, you could ask the government to change'. We then talked to the Indian government whether we could help. They said 'Yes, you could get Suzuki to change'."

He said the problem was that the Suzuki and the government are not talking to each other. "We have said that if there is anything we can do, we will be happy to help," he added. Smith gad met Industry Minister Murasoli Maran on Monday. Earlier, on Saturday, he met Prime Minister I K Gujral.

Smith said the initiative to intervene in the Maruti dispute came from GM. The chairman of the $164 billion company insisted that it was "premature" to discuss a future role for his company in Maruti Udyog. But he added: "Maruti is a success story. It is important that they have new technology."

Incidentally, Maran had declared in the past that if Suzuki was unhappy with the present situation, it could leave and the government would find a new partner to run Maruti.

Smith warned that the Maruti dispute could hit investor sentiment. "It is important that the conflict is eliminated as it does not bear well with multinationals doing business in the country. I think that the two parties need to come together and talk."

Turning to India as an investment centre, Smith declared that the country was second only to China, where GM is due to set up a major car project. But he was firm that China was ahead, and that disparities existed between the two giants of Asia. "I will give the nod to China. Two months ago I would also have said Thailand, but the market has slowed down there. India is next after China," he said.

Smith was hopeful that GM would soon reach the $1 billion investment mark in India through its four joint ventures: automobiles with the C K Birla group; automotive components with Delphi Automotive; software and telecom with Hughes Electronics; and financial services with 20th Century Finance. GM has already invested $300 million through these ventures.

The GM chief executive officer said that despite its investments, he felt GM was underrepresented in India, along with China and Russia, and said that he saw a great future in these three nations. Smith added that he saw India expand its reputation as a brainpower giant. "There is such potential among the Indian people," he said.

Smith hinted at the possibility of GM producing two new models: one placed between between the Maruti 800 and the current Opel Astra version, and the other between the Astra and the Mercedes-Benz. The company also plans to introduce its upgraded Opel Astra model in India. However, GM has no plans for introducing heavy commercial vehicles in India.

Maruti, with a market share of over 80 per cent in India, will remain one of GM's main rival in the years ahead. "It is hard to predict who will be our main competitors. Certainly Maruti is a major player. Over time, Maruti's share will decline, but it will be a major player." The GM chief admitted that competition in India was more fierce than first expected.

He insisted that cars from India would not be exported. "The rest of the world has virtually all the capacity needed. So there is little export potential for cars. But we export auto components," he added.

The Suzuki-government row over Maruti

Compiled from the Indian media

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