Anyone seeing the glitzy malls, the high-rise condominiums, plush housing colonies and steel-and-glass towers housing the India offices of some of the largest multinational companies would find it hard to believe that Gurgaon, a satellite town of Delhi and the epitome of new India, has a very ancient history.
Its origins can be traced to the time of the Mahabharata. It is said that the village was given by the Pandavas as gurudakshina (donation to a teacher) to Guru Dronacharya. Guru Gram got distorted over time to become Gurgaon.
It is also difficult to imagine that only twenty-eight years back, in 1981, Gurgaon was just a small town in the largely rural state of Haryana, set amid a flat, dusty and barren landscape. There was no industrial activity worth the name, with the Maruti factory Sanjay Gandhi had set up in the mid-1970s being the only prominent landmark. Agriculture too was nominal, since the area faced a serious water problem. Things started looking up for the small town only in the early 1980s when real estate developer K.P. Singh started buying tracts of land from impoverished villagers for his company, DLF, to build posh housing colonies. That was also around the time the public sector Maruti Udyog started operations and several automobile ancillary units started coming up in the vicinity. Today, the auto and auto component industry in Gurgaon and surrounding areas is larger than in any part of India, producing goods worth Rs. 28,000 crores. With close to 500 large and medium-sized factories and over 8,000 small-scale units, Gurgaon generates over 200,000 jobs a year and is the second highest contributor to Haryana’s tax revenues, after the industrial town of Faridabad, on the south-eastern border of Delhi.
When Maruti Udyog was established, the site on which the by-now defunct factory that Sanjay Gandhi had built was overrun with weeds. When Suzuki first visited the factory, he was startled to find that the place was swarming with monkeys. Tongue firmly in cheek, I told him that the monkeys were there because Maruti was another name for Hanuman, the mythological monkey god, and the faithful servant of the god Rama! I explained to him that it would not be possible to kill or hurt the monkeys. They would go away on their own at the appropriate time. And this is exactly what happened. Hanuman was the son of the wind god and, though it is not clear if Sanjay Gandhi had this in mind when giving the name Maruti to his company, the name turned out to be appropriate for a 630 kg car that was to signify lightness and speed, in contrast to the ponderous, slow image of the 900 kg Ambassador and the 700 kg Premier Padmini.
The fact that the land and factory building of Sanjay Gandhi’s Maruti was transferred to Maruti Udyog considerably reduced the difficulties in starting production by the end of 1983. Acquiring land is always a very difficult and time-consuming process, as the procedure often gets held up by court orders. While the location in Gurgaon was not ideal by any means, especially if Maruti was to export cars in the future, the proximity to Delhi and being on the national highway was a big advantage. There was also a sense of dismay when the building was inspected. It was literally coming apart at the seams. The roof was extremely weak. The concrete on any roof has to be supported by steel girders. What passed off for these girders in the factory were thin steel coils, similar to those used in parks to border flowerbeds and pathways, and often not welded together. Expansion joints (metal joints so that the roof doesn’t crack when it expands in the heat) had not been provided in the roof. As a result, the RCC (reinforced cement concrete) roof had developed big cracks and leaked heavily whenever it rained, leaving those present wondering whether they were inside or outside. There was no proper provision for rain to drain off from the roof as the sloping was improperly done. The skylights had cracked and it was a minor miracle that the building was still standing. It was a clear case of professional negligence by those who had designed and constructed the factory building.
The project report had been prepared so that production of vehicles would start in October 1983, and sales from December 1983. In those three months, 192 vehicles would be produced and a little over 2,000 vehicles would be assembled up to March 1984. The first cars had to be produced from SKD (semi-knocked down) kits—that is, the entire painted body, along with most of the components, were imported from Japan, and these were assembled at the plant, using a very few Indian-made components. The general operation sequence of car manufacturing starts with huge steel coils being cut into rectangular sheets. These are then stamped in the press shop into the various parts that make up the outer car shell—the floor, bonnet, doors, roof, and the rear portion. These parts are then welded together in the welding lines to form the body in white. This name is given because at that stage the car shell looks like it is made of stainless steel. The welded body gets painted in the painting booths so that the car looks attractive, and is also protected from rusting. The painted body then goes to the assembly line where all the components, including the engine and the transmission, are fitted. At the end of the assembly line, the car is complete, and it is started and driven to the test area. Here it undergoes rigorous and exhaustive testing to ensure that there are no defects, including leakage of water, malfunctioning instruments, or any inadequacies in performance.
In the SMC system of project management, all the constituent shops of a car factory are not constructed simultaneously. In our case, the last stage—the car assembly and testing line—was set up first. After this had stabilized, it was followed by the paint and weld shops. When these shops were working well, the press shop was commissioned. The decoiling and slitting facility to handle the steel coils was the last to come up. The idea was to make sure that when any facility was commissioned, the downstream facility for using its output was already fully functional. That ensured that no capital expenditure incurred would remain unutilized for want of a downstream user facility. This approach to installation of capital equipment ensured that in Maruti there was no equipment installed that did not reach 100 per cent capacity utilization within six months or less of its installation.
Suzuki also decided that initially the production capacity to be installed would be 40,000 units a year, and it would be increased to 100,000 later. This was another example of how SMC reduced cost as underutilized equipment meant waste, especially in India, where interest costs were high. This concept of installing capital equipment in a step-by-step manner was not practised in India, especially in the public sector. The discussions about why SMC was following this system made engineers and managers aware of the cost of unutilized capital investments, and was an excellent start to inculcating a culture of cutting costs at all times.
Before the assembly- and testing-line equipments could be installed, it was necessary to undertake the civil and electrical works. The most critical obstacle was the condition of the roof. Not only had the heavy leakage to be stopped, but the roof itself had to be strengthened so that it would not collapse. On more than one occasion, wooden poles had to be used to shore up the roof, while repairs were carried out, so that portions of it would not fall down. It was a minor miracle that no serious mishap happened, though there were several narrow misses.
To advise on what could be done about the roof, a structural consultant, Dr Murthy, was hired from the Indian Institute of Technology, Delhi. After carrying out a study, he was clear that the roof could not take any additional weight. Stopping the leakage and the correction of the slope so that rainwater would flow to the drains could not be done using conventional technology or materials. One option was to remove the existing roof and re-erect it properly. The process would take two years to complete, and cost Rs. 16 crore. The time schedule did not permit this option to be seriously considered.
The other alternative was to first properly weld the steel supports and strengthen them to the extent possible. Thereafter, foam cement, which is light in weight, could be applied on the roof to seal the cracks and provide correct slopes for the water to drain out. Expansion joints could also be provided. These measures could be implemented much faster and would cost only about Rs. 1.91 crore. This option was accepted and work commenced at full speed. SMC engineers also visited the site in the searing May heat to supervise the work. They spent hours at the factory site and two of them fell ill. After that, a jeep with an icebox full of Thums Up would follow them all the time!
Work was slow because there were no plans, structural designs or calculations of the work done in Sanjay’s time. That led to bizarre situations. While digging up the floor, in what was to be the paint shop, the labourers found a solid block of concrete under the floor. There was no indication of this existing, and no one could explain what it was for. It took a couple of weeks to break it up, and this delayed the schedule for completing the civil works.
Even after the repairs, the roof had no load-bearing capacity and, therefore, cranes and other load-bearing equipment could not be fixed on it. A separate steel structure had to be put up for this purpose. This was not the ideal way to build a car factory, but there was no other alternative.
The Maruti top management was clear about two things—all deadlines had to be met and there would be no compromise on the quality of the car. It wasn’t an easy task, considering the problems and obstacles the company had to face. The economic environment of India in the 1980s was hardly business-friendly, even for the private sector. The public sector—to which Maruti belonged—was even more constrained, its hands tied by various laws, rules, regulations and procedures applicable to government companies. No concessions could be allowed in this respect, despite the fact that Maruti was being dealt with in a special manner. The management had to work within the system and yet introduce a work culture which would be radically different from that prevailing in government companies. Cost and time overruns just could not be allowed to occur. Employees had to become result-oriented and not cite compliance with procedure as an alibi to justify failure to meet targets. Continuous improvements in productivity and quality and recognizing the importance of customers had to become the way of life for all employees. This was the real challenge in the initial years of the company.
Krishnamurthy had been very successful in turning around BHEL and making it a highly profitable organization. BHEL produced equipment for generating and distributing electricity. Even though BHEL was perhaps the best-run government company, the State Electricity Boards, who were its customers, had numerous complaints about quality, delays in delivery and responsiveness of the company. The organization had multiple labour unions, all politically affiliated, and it would be hard to claim that workers were involved in making improvements to quality and productivity.
The challenges facing Krishnamurthy in Maruti were very different, and despite his reputation as a very capable manager, many people were sceptical about his ability to make Maruti a success. Manufacturing automobiles, and making Maruti profitable was a different ball game compared to BHEL, which had almost a total monopoly in providing power equipment, and more or less a captive market. State Electricity Boards had no choice but to place orders with BHEL. They did not have the option not to install generating capacity as the Five-Year Plans required them to do so. BHEL had only to produce equipment according to the Plan targets. On the other hand, cars were to be sold to individuals and there was competition from two well-established and politically powerful companies. Making good quality competitive cars would not be enough, as the market size for cars had also to be enlarged rapidly. A nationwide sales and service network was required and components had to be developed by hundreds of vendors. Japanese standards of quality had to be attained. This was a daunting task. But Krishnamurthy and I both had a strong motivation to succeed. Krishnamurthy had to uphold his reputation as being one of the best managers in India. I had topped in the 1956 batch of the IAS and was in a good position to become the Cabinet Secretary if I had stayed on in the government. If Maruti failed, all those who had advised against my leaving the IAS would have been proved right, and I would have thrown away a good, secure career.
It was one thing to be determined not to allow time and cost overruns and another to make this actually happen. The reasons for such overruns—an intrinsic part of projects executed by government companies—is not lack of competence on the part of the managers or a lack of will to achieve their targets. The problems faced in project execution are related to the systems which need to be followed and the fear of vigilance inquiries if procedures are circumvented in order to save time and cost. Often, the delays and cost overruns happen because the projects have not been prepared in a precise and knowledgeable manner. Maruti had an advantage in this area because the Japanese had a very good idea of costs of equipment and machinery, and the projects estimates were prepared in great detail. I also had over twenty-six years of working in the government and was very aware of how to manage the paperwork to ensure that there were no serious problems with audit and vigilance.
The project implementation schedule was prepared in great detail and the work to be done each week had been identified. It was still necessary to monitor progress and find a way of making up slippages if they did take place. Accordingly, Krishnamurthy formed a project review committee which he headed. This group of officers met every Tuesday from 9.15 a.m. till lunch, in the toolroom that once served as Sanjay Gandhi’s office and was to become the hub of Maruti Udyog’s activities in the initial months. Punctuality was stressed and the committee would start work exactly at 9.15 a.m. The workers also saw how strict management was on the issue of punctuality, and the message was not lost on them. The culture of adhering to deadlines and not allowing even a few hours of delay was inculcated through the working of this committee. Excuses were just not tolerated.
For almost a year after Maruti Udyog Ltd was formally incorporated, it functioned with minimum staff—the top management and some secretarial staff. Recruitments at the senior- and middle-management level started only after February-March 1982, when the choice of the collaborator had been almost made. Managers had, almost without exception, to come from the public sector or the government, since Maruti could not offer more than government-determined salaries for the public sector As a result, Maruti recruited several senior executives from BHEL, the Railways and other public sector undertakings. Recruitments for factory operations began after the joint venture was signed, though engineers were signed up earlier for the civil works, so that work on the factory building could start.
Maruti took a conscious decision that as far as possible, it would not hire people working with the car companies operating in India, because they would come with the baggage of the work culture in their organizations, something the management was very clear it didn’t want. If the entrants to the company were new to car manufacturing, they could learn how to work according to SMC systems from the beginning. If engineers and managers were hired from Indian car companies, they would first need to unlearn their past experiences, and that itself would take time and cause problems. Thus Maruti opted largely for fresh engineering graduates, with a sprinkling of experienced persons from other automobile companies like Eicher Motors and Tata Motors, which were seen as being more professionally run. All persons at the executive level were interviewed by me before they were finally selected. Surprisingly, Maruti did hire a couple of persons from Scooters India, despite the performance of that company, and they did a good job in Maruti.
Public sector companies are seen by politicians as opportunities for providing employment to their supporters. In a country where jobs are fewer than those seeking employment, it is very difficult for any politician to refuse to recommend persons who come to them for help in finding employment. The more enlightened politicians would, however, tell the head of the public sector undertaking that while it was the minister’s job to make recommendations, it was the job of the PSU to take decisions on merits and see that the company’s interests were not hurt. However, it was expected that the person who came seeking a job or some other favour was made aware of the fact that the politician had spoken about him and that the recommendation would be given weight. Unfortunately, the number of such enlightened politicians has declined over the years.
The Maruti management was aware of this reality and worked on the principle that if the recommended candidate was as suitable for a job as any of the others, he would be preferred. At the same time, those making recruitment should not be given total discretion in making selections, as they would find it hard to resist pressure from politicians. Thus, it was decided to frame recruitment rules that minimized the element of discretion. It was decided that only first-class engineering graduates would be eligible to apply for the job of a graduate engineer trainee with Maruti. They would have to appear in a written examination, conducted by an outside agency, and only those who qualified would then be interviewed for final selection. Thus the discretion element was only with respect to those who came through the examination.
For workers, where the pressure was even more, it was prescribed that the minimum qualification would be a two-year trade certificate from an Industrial Training Institute. Such persons would again have to appear in a written examination, to be conducted by an outside agency, and those who cleared this would be interviewed. Later, when enough apprentices were passing out from Maruti, recruitment was limited to those who had done well as apprentices in the company. These recruitment rules were endorsed by SMC and Maruti could tell politicians that the Japanese would not allow relaxations in the system. The number of posts to be filled in each category was also approved by SMC. As a result, Maruti could recruit on merit, and also prevent overstaffing, the bane of most public sector companies.
Soon after Maruti started production, the Haryana government demanded that all recruitment of workers should be made from people living in the state, especially those from areas near the factory. However, Maruti argued that this was not possible as Maruti was a national project and it could not adopt a sons-ofthe-soil recruitment policy. To its credit, Haryana did not insist on enforcing its stand. There was, however, pressure from the families of those whose land had been acquired when Sanjay started his project. Every effort was made to ensure that at least one member of each such family was given a job in Maruti. The problem lay in obtaining authentic records of whose land was acquired. Besides, in the period of about fifteen years since the time of the land acquisition, families had grown and split, and now each branch wanted employment. Over time, Maruti could work out a solution which satisfied everyone.
In terms of the recruitment policy, workers were mostly hired from within a 200 km radius of the factory, but this included states other than Haryana. Maruti also made a conscious effort to hire workers from other parts of India, including from the south and the west. Workers in Maruti actually come from all parts of the country. The first lot of supervisors and workers joined around April 1983.
Meanwhile, construction at the factory was proceeding rapidly and equipment had started arriving from Japan. Maruti had got special permission for customs clearance of the capital goods at the factory itself, so that they were not stuck in the ports for days, as was common. The first consignment consisting of components of the conveyor system—on which the cars moved as they were being assembled—arrived at the Chennai port and caused a bit of drama. A Maruti executive had been stationed at the port to receive it and he informed me that the container was on its way to the factory. Two days before it was to reach came the realization that the doors of the factory were too small for the 40-foot container. It was mid-December but Amitava Nandy, who was in charge of projects, and M.M. Singh, who was executive engineer, spent an entire night in the winter drizzle, shored up by a packed dinner from Nirula’s restaurant in Connaught Place, over 30 km away, supervising the breaking of the wall to create a passage for the container.
As equipment started arriving, Maruti was faced with a serious problem of power supply. The plant needed 20 MW of power at full capacity. Power supply in Haryana was marked by frequent and long cuts and huge voltage fluctuations. Continuity of power supply was necessary in a car-manufacturing operation, especially in the paint shop. Steady and correct frequency was also essential as Maruti was using a lot of sensitive electronic equipment, having gone in for full computerization from day one—among the early companies to do so.
An arrangement was thought of under which the factory could have a second independent source of supply from the Delhi grid. This would mean a transmission line from Bijwasan on the Delhi-Haryana border. The Central Electricity Authority (CEA) sent a proposal to the Department of Power in the Ministry of Energy and a broad agreement was reached at a meeting in which representatives of the Delhi Electric Supply Undertaking (DESU) and the Haryana State Electricity Board (HSEB) were present. However, things didn’t move and it was learnt that the secretary, Department of Power, did not approve the recommendations and sought further discussions with the CEA. It was later agreed that the factory would get the second line from the Badarpur Thermal Power Station, also in Delhi, to meet emergencies. Though this arrangement was implemented, the problem of fluctuating frequency remained, as it was common to the entire Northern Regional grid. Electronic equipment could not work on the grid and Maruti had to install a 5 MW capacity diesel generator to ensure uninterrupted power supply, with steady frequency. Suzuki was not happy at this additional cost, as the need for stand-by diesel generating sets was never felt in Japan.
This state of affairs continued for a little over two years. By then Delhi too was experiencing power shortages, and it was clear that the situation was likely to worsen over the years. Relying on the Badarpur plant for power, over the long term, was not going to be a good option, especially when power needs would increase with expansion of production capacity. The demand for cars was growing in a manner that it would have been unwise not to think of increasing production beyond the initial planned 100,000 units. It was also obvious that Maruti would not get priority over the needs of Delhi in being supplied power. Increasing diesel-generating capacity was one option, but a better one came by chance. In 1984, the public sector Gas Authority of India (GAIL) had been set up and Vineet Nayyar (who later moved to the private sector to play key roles in software giant HCL, and then Mahindra Technologies) was the first chairman and managing director. He too was from the IAS and a friend of mine.
One day, over lunch, Nayyar complained that GAIL had made investments in gas pipelines, primarily for fertilizer units, but these were not coming up. A great deal of gas would thus remain unsold and the pipelines underutilized. I immediately said Maruti would install gas turbines and enter into a long-term contract to take whatever gas could be made available. GAIL and Maruti engineers worked out that gas for generating 60 MW could be made available. In those days BHEL was able to supply 20 MW turbines and it was decided to install three of them in a phased manner. Suzuki agreed to this investment, recognizing the long-term benefit of having adequate power supply. Getting approvals of the concerned ministries took considerable time and effort, but ultimately the IAS network proved useful.
In May 1991, GAIL and Maruti signed a contract for half a million cubic feet of gas per day and Maruti put up the three gas turbines between December 1991 and December 1997. Multiple fuel capability was provided as, at times, the pipelines would be shut down for maintenance. This proved of considerable value, not only during the shutdown periods, which were comparatively small, but also in 2002, when supply was discontinued for a long period, as the gas was needed in Delhi for supplying the needs of commercial vehicles. The courts had decreed that commercial vehicles in Delhi should be all converted to CNG and there was a considerable shortage of gas till GAIL could arrange to increase supplies a year later.
Having so much captive power generation proved to be of immense value in the years ahead. The Gurgaon site, where originally a production of 100,000 vehicles was planned, was, twenty-five years later, in 2007, producing about 650,000 vehicles. This growth would not have been possible without our own supply of electricity. If diesel had been used for power generation, the cost would have been enormous, as oil prices increased over the years. Maruti could recently also move the aluminium foundry for the engine blocks from Manesar, which is a short distance away, to Gurgaon.
There was enough power for all of Maruti’s needs as well as for the various joint ventures for components that had come up in the meantime within the factory complex. To maintain production in the Maruti factory, it was equally important that the vendors also maintained matching levels of production. The joint venture companies established by Maruti were being hampered by the inability of the Haryana grid to supply electricity. The HSEB had a long waiting list for companies seeking new power connections, and no priority was being given to the joint venture companies. If these JVs did not get power, and could not start production, it would have hampered Maruti’s production. The obvious answer was to supply power to the joint venture companies from Maruti’s own generation, but the HSEB objected to this, as the law in those days did not allow power from captive generation being sold. This law was designed to shield State Electricity Boards from competition and to preserve their monopoly position. In conditions of severe power shortages all over India, and the Boards being unable to increase generation adequately, the law was really against the interests of the national economy. Meanwhile, the problem was solved by Maruti establishing a subsidiary company and transferring the gas turbines to this subsidiary. Then the joint venture companies subscribed to the equity of the subsidiary, and so became part-owners of the gas turbines. Getting power from the gas turbines became legal.
Maruti had surplus power at night, because it worked for two shifts only, and HSEB wanted this surplus power. Maruti was willing to make supplies to the HSEB, provided it was assured of getting paid. A suggestion was made that the sale value of the power be adjusted against the Central sales tax that Maruti had to pay to the state government. However, the Haryana government did not agree, and said that taxes payable to the government could not be adjusted against dues of a statutory Board. HSEB assured Maruti that they would make regular payments but wanted the power to be supplied at the cost of generation. An arrangement on this basis was finalized in the interests of good relations with the Haryana government and worked quite satisfactorily.
While work on installing all the production facilities and developing vendors was going on, the marketing and sales system had also to be established. The first issue was the names for the various vehicles to be manufactured. In January 1983, Maruti’s advertising agency—Rediffusion—suggested Legend or Aries for the car, Car-o-Van or Mascot for the van (Car-o-Van was to denote the multiple uses of the vehicle), Carry for the pick-up truck and Jimny for the proposed four-wheel drive vehicle (both these names were being used by SMC). There was considerable debate on these. However, it was finally decided, with the approval of the government, that the company’s flagship product, the car, should be called ‘Maruti 800’. This would help to build the Maruti brand, a name Sanjay had adopted. The van would be called the Maruti Van.
By then, Maruti had flown in ten vehicles of each model for marketing-related publicity. The cars had to be flown in to save time. We had to display the vehicles all over India, then invite customers to make bookings, do the computer allocation for determining the order of delivery, inform the customers of their priority and start sales by December 1983. Getting an import licence for these vehicles was not easy, since there would be a foreign exchange outgo. Though SMC agreed to supply these vehicles at a concessional price of around $2,000 each, still, with freight, the total bill would come to a little under $70,000, a large sum in those days. The Directorate General of Foreign Trade raised objections about why so many cars needed to be imported. In a reflection of the public sector mindset, no one thought marketing was a necessary activity. However, Maruti could convince the authorities that India was a big country, and it would be physically impossible to display one vehicle of each type in the major cities, within the limited time available, with a smaller number of vehicles. The import licence was issued. Roadshows were organized in different cities. Indian Oil agreed to become a partner of Maruti in these roadshows and made available their facilities. In turn, it became the supplier of lubricants and fuel to the factory.
The displays were held at different venues in various cities, varying from Indian Oil Corporation (IOC) petrol pumps to five-star hotels and parks. Young trainees recruited by us were deputed to present the cars to the public. Maruti got drivers from the Automobile Association of Upper India as well as from some dealers to drive the vehicles from place to place. The displays at each site lasted for about three days. I joined in many of these shows and held press conferences at some venues. Generally media reporting was extensive and we could get a great deal of free publicity for our vehicles.
At a press conference in Kolkata, sceptical journalists mocked that the Maruti 800 would disappear in the city’s famed potholes during the rains! The following year, after the monsoons, at another press conference in Kolkata, I asked them what happened to the car. The journalists admitted that the Maruti 800 was the only car which could keep running even when the roads were flooded. They wanted to know why. The reason, I explained, was that the distributor in SMC vehicles was waterproof, whereas in the Ambassador and Premier Padmini water splashing from the road would enter the distributor and bring the car to a stop. After a heavy rainfall, it was quite usual to see large numbers of stalled cars on the road, with drivers desperately trying to dry the distributors.
For the roadshow in Srinagar, I flew from Delhi and went to the Raj Bhavan, the governor’s residence, along with the young engineer in charge of the team, to show the cars to the governor, B.K. Nehru. The cars were supposed to be displayed the same evening at the plush Nedous Hotel in the city. Just before the display was to start, there was rain and strong winds and the whole arrangement of lights, placards and other paraphernalia went haywire. The engineers worked hard to put the show together. At the same time, I took on the role of a salesperson and explained the features of the vehicles to prospective customers. Later, at the suggestion of the local dealer, I directed the engineers to take the cars the next day to Sopore, famous for its apple orchards, where an impromptu roadshow was organized.
The interest from the public was enormous. This was the first time after several decades that people had seen any vehicle different from the Ambassador and the Premier Padmini. The finish and the paint quality were vastly superior to those vehicles, as were the fuel consumption and other performance data.
A few of the cars imported for the roadshow, not required by the engineering department and for vendor-component testing, were allotted for use by senior officers of Maruti. They evoked a lot of interest on the road. At every traffic light halt, people would stare and often come up to whoever was driving and ask questions about the car and when it was to hit the market. When V.K. Mathur, who had joined from the government as the general manager for projects, was driving one of these cars, he found awestruck occupants of a Mercedes staring and pointing at the car. N.D. Tiwari’s first question on seeing the car, when Kapur took it to Udyog Bhavan, was, ‘Where will you put the holdall?’ The holdall carried the bedding and was in those days an intrinsic part of all travel, whether by road or train. He was shown the boot at the rear, but he felt it was too small. He suggested that provision be made for a luggage carrier atop the car, as was the case with other Indian cars. Maruti did develop a luggage carrier suitable for the car, but it never became popular. People started travelling without carrying their bedding!
The price of the vehicles was critical to increasing the total car market size to over 150,000 vehicles within five years, so that Maruti could sell 100,000 vehicles. The IMRB survey had said that the demand for the small car would depend on its price, and had suggested that it should not be above Rs. 50,000. The project report had indicated that Maruti should try to market the car—which sold in Japan for the equivalent of about Rs. 20,000—at a little under Rs. 40,000. This was based on various market-related considerations. Most salaried people took loans to buy cars. Private companies did not give car loans of more than Rs. 40,000 to employees, while the government and public sector companies gave only Rs. 30,000. Given the cost of servicing loans in those days, and the salary of government employees, the project report had estimated that any amount over Rs. 30,000 would cast a high burden on most individuals, and adversely impact sale volumes. In addition, the cost of renovating and reconditioning old Ambassadors and Padminis was only Rs. 25,000. People could prefer that option to buying a significantly more expensive new car, as in fact was happening before Maruti came into existence.
Selling the car at Rs. 40,000 wouldn’t have been too difficult, given the cost of production. The project report estimated that when the annual production reached 100,000 vehicles, the ex-factory cost of the car and van would be Rs. 32,423 and that of the pick-up truck Rs. 29,563. It suggested that the ex-factory sale price be fixed by adding 7 per cent profit to the cost of production of the vehicle in 1988, when the plant achieved full capacity. The excise duty would be extra.
At a board meeting on 2 March 1983 it was decided that the car and van would be priced at Rs. 45,000 and the pick-up truck at Rs. 43,000, inclusive of central excise, central sales tax and the dealer’s margin. The final price for the customer would include actual transport costs, dealer’s commission and local taxes. In arriving at this price, the board had looked at some international studies, which said a low-cost car would be considered affordable if the price was twelve times the average entry-level salary. The management stretched this to fifteen times and worked out the Rs. 45,000 figure on the basis of the average monthly salary of Rs. 3,000 of a Class I officer of the government.
The production cost of Rs. 32,423 had been arrived at by assuming an import duty of 25 per cent plus 5 per cent surcharge on the CKD components and a 40 per cent plus 5 per cent duty on capital goods. This was the rate of import duty then prevailing on specified components for commercial vehicles, required to be imported to enable manufacturers to increase production of these vehicles. The country had been experiencing a shortage of commercial vehicles and black marketing of vehicles was rampant. Thus increasing production of commercial vehicles was in the public interest, but the ability of the vehicle manufacturers to do so was limited by the production capacity of local vendors of some critical components. Importing these components was the only answer.
However, the import duty levied on automobile components, including car parts, was very high—over 120 per cent. This was because car components were not being imported to manufacture the Ambassador or the Premier. They had been fully indigenized. Components were being imported only for use as spare parts for the limited numbers of imported cars which were being used in India. These cars were often bought by the very rich at astronomical prices. Costly spare parts posed no hardship to them. On the other hand, a 120 per cent duty on imported components would considerably increase the cost of production of the commercial vehicles using them. The government recognized the need to differentiate between the components needed to produce commercial vehicles and those required for use as spare parts in costly imported cars. Accordingly a 25 per cent import duty was fixed for the components to be actually used for commercial vehicle production. Maruti argued that the same logic should apply to the import of parts to be used for the production of its vehicles. At 120 per cent duty, no vehicle could be produced at a price which would sell in the market.
Krishnamurthy went to see the finance minister, Pranab Mukherjee, with two proposals—that the customs duty on imported components should be reduced to 25 per cent for the components to be used for production of vehicles, and that the excise duty should be 15 per cent. Earlier, Maruti had also proposed that customs duty on imported capital goods be waived, as this would bring down investment costs by Rs. 37 crore and reduce production costs by Rs. 740 per car when peak production of 100,000 cars was achieved. This proposal was rejected.
Mukherjee wanted to know on what basis Maruti was making that demand. Apart from referring to the same logic being behind the reduction of duty on components for commercial vehicles, it was explained to him that the car, being much more fuel efficient than what was available in India, would save petrol and thus foreign exchange. Further, without achieving volume sales, the objectives of nationalizing Maruti could not be achieved and the project would fail. Since the car was using new technology, it would take time to develop components locally, and so imports were necessary. Even the phased manufacturing policy (PMP) approved by the government recognized that five years were required to reach 92 per cent local content. It was also shown that in many countries, small cars attract lower excise duty. Maruti, on its part, would keep costs to the minimum as well as pass on any tax benefits to the consumer. Krishnamurthy asked what the government could do to keep the price at Rs. 45,000.
The arguments were accepted but an appropriate system to give effect to what was needed had to be evolved. An across-the-board cut on duties on the import of automobile components would have adversely affected government revenues, as spare parts for imported cars would also have got the benefit. There could also have been an adverse impact on the local automotive component industry, though this was unlikely, as import of components required an import licence. It was decided that the benefit of reduced import duties would be given for components to be used to manufacture vehicles which met specified standards of fuel efficiency. The logic was obvious. A lower customs duty was justified to attain savings in the consumption of imported fuel. The standards would be fixed by the government, and the Pune-based Automotive Research Association of India (ARAI) would test and certify if vehicles met these standards. The duty fixed for fuel-efficient cars was 40 per cent (25 per cent basic customs duty and 15 per cent special customs duty).
Hindustan Motors and Premier Automobiles cried foul and said the government was unduly favouring Maruti, only to be told that they could get the same concession if they also met the fuel-efficiency norms. In reality they were not importing components any way. Later they developed new models which met the fuel-efficiency norms and could thus avail of the lower duty. The system of linking customs duty with fuel-efficiency was given up in 1993. The excise on fuel-efficient cars was fixed at Rs. 5,906.25 per car till February 1986.
SMC felt the price of Rs. 45,000 would result in losses and wanted a higher price. Maruti, however, had worked out its strategy and done its calculations. The company expected to generate large funds from the scheme proposed for the advance booking of cars, by asking for a deposit of Rs. 10,000 per vehicle. The customers would be paid 7 per cent interest on the deposit. Gupta and I had devised this scheme and Krishnamurthy had approved it. I explained to Suzuki that the money collected from bookings could be used for working capital requirements, doing away with the need to borrow at high interest rates. Moreover, the company could also invest surplus funds and earn interest. The scheme of taking a deposit for booking a car and mobilizing a large amount of cash was beyond anything SMC had ever experienced. It was used to selling cars in competitive markets and the idea of people paying 20 per cent of the price in advance and then waiting for years to get delivery appeared bizarre. They had not factored in the absence of any working capital or an enormous amount of interest income when preparing their estimates of the cost of production of cars in India. After some arguments, SMC accepted the price of Rs. 45,000.
The booking scheme generated about Rs. 140 crore, far more than what anyone had expected. The bulk of the money was invested in public sector undertakings—which agreed to pay close to 14 per cent interest—and a small amount with the Housing Development Finance Corporation (HDFC), which agreed to provide home loans to Maruti employees. Public sector companies were preferred over banks, not just because they gave higher interest on the deposits but also allowed Maruti to withdraw the money at short notice whenever it needed funds. One of the consequences of this system was that Maruti was a profitable company from the very first year of its incorporation while normally a car company takes three to four years to break even.
When sales started the ex-factory price of the car was fixed at Rs. 47,500, including excise duty of Rs. 5,906.25 per car. The customer price in Delhi, after including transport costs, dealers’ margin and sales tax was Rs. 52,500. This price was maintained for nearly three years.
In March, the first lot of shop-floor employees—five supervisors for the assembly line—joined and were sent to Japan for training the very next month, after a week’s lessons in basic Japanese. None of them had ever been abroad. I decided to talk to them about how to conduct themselves in Japan so that they created a good impression about Maruti.
I spent some time discussing the differences between the Japanese way of working and what we do in India. I particularly emphasized the importance of punctuality and hard work. I wanted to make sure that the training was effective through close monitoring. I received weekly written reports, and sent back guidelines and observations. In Japan, the trainees first learnt Japanese and then were familiarized with their industrial culture, before starting on the job training. It was an exciting time for them, being in a totally different environment and culture. The training was subsidized by the Japanese government under the Association of Overseas Technical Scholarships (AOTS).
SMC had, from the very beginning, emphasized the need for intensive training at all levels, if the objective of emulating its levels of productivity and quality was to be achieved. The Maruti management was repeatedly told that employees could not be expected to do their job correctly, and make improvements, if they were not educated on what to do and how to do. In many cases the lessons would need to be repeated and managers must have patience if an employee did not fully learn the first time. Taking disciplinary action, or threatening action against employees who made mistakes, would not yield results in the same manner as training and patience would. It had to be recognized that many of the workers were coming from an agricultural background and needed to learn a totally new culture. Most executives too would need to learn a new work culture and new practices. The help of AOTS was taken in order to reduce the burden of training costs. This Japanese government initiative proved extremely valuable in implementing, over many years, training for a large number of employees, and enabling Maruti to achieve high standards of productivity and quality.
All licence agreements provide for training in the factories of the licensor. The number of training man months is usually specified and the licensor charges an extra amount if more training is required. While the agreement with SMC had the usual clauses outlining training in its factories, the understanding was that it would accept a larger number of trainees without charging any extra money. SMC was aware of the foreign exchange situation of the government and how difficult it would be to get additional foreign exchange allotted for training.
Engineers, managers and supervisors were regularly sent for training in batches. Maruti had to obtain clearances from the government each time, as foreign currency was required. It was a constant tussle to convince the government of the value of training in Japan, since there was always the suspicion that Maruti was sending too many people for training, and often training was considered to be just a foreign junket. It was hard for people in the ministry to understand that changing a traditional work culture was an arduous task and could only happen through education and training. The fact that AOTS was meeting part of the training cost helped in persuading the government to release foreign currency. Close to 230 persons were sent to Japan for training during the first five years. The money spent on training gave a higher return than investment in any other facility. Unfortunately, not many investors in India give as much attention to training managers and workers as they should.
In 1988-89, it was decided that SMC would also accept workers for training. These workers would be deployed on SMC’s production lines for a period of six months and would be paid wages. Selection of workers for training would be based on seniority and performance. Since going to Japan was a huge attraction for the workers, this scheme became a means of motivating workers to achieve higher standards of performance, so that they could qualify for selection. The employees’ union also took interest to ensure that selection was made as objectively as possible. It was decided that selection of supervisors from the ranks of workers would be made from those who completed the training in Japan and did well. This scheme operated for fifteen years, during which time 979 workers went to Japan for training.
By the time the first batch of supervisors returned after three months’ training around July 1983, the first SKD kits—painted panels—had arrived, packed in special plywood crates. The quality of the plywood was excellent and Maruti earned good money by its sale. The plywood later found its way into Delhi’s markets for use in furnishings. Across Delhi, signs saying ‘Maruti Ply sold here’ sprang up.
With the arrival of the first kits, the supervisors now had to learn how to actually assemble cars. The tools used by SMC were all new to the Indian supervisors, who were only used to hand tools and had never handled sophisticated electronic and hydraulic instruments. The very first car was assembled by L.K. Gupta and his team of four supervisors in August 1983 in the toolroom. This was a training kit, which was to be promptly dismantled and assembled all over again. The car was to be driven by me at 8 a.m. The assembly was to be over by 6 p.m. the previous evening. However, progress was slow because of the lack of systems and this was the first experience of assembling. It was midnight when all the bolts were tightened, torqued and marked OK.
With a sense of satisfaction at having assembled the first car, Gupta cranked the vehicle to test it. It didn’t start. They did not know what was wrong. It took them the whole night and the morning to find out that the carburettor had malfunctioned because of shipment by sea. In all, it took them seventy-two hours of work before I could drive the first vehicle. That experience highlighted the problems which could occur during sea shipment. Correctives were applied and the problem never recurred.
Even as training in assembling cars was going on, the doors of the factory were being modified. Dust is a perennial problem in Delhi and its surrounding areas, especially in summer, when dust storms are common. The Japanese, who didn’t want a speck of dust on the shop floor, found the doors did not fit properly and would not keep the dust out. That amused many of the Maruti personnel, who wondered how one could avoid dust in India. The solution was to install air washers and to keep the air pressure inside the factory more than the pressure outside so dust would not come in. In addition, at every entrance there was a wet pit and employees had to walk through this so that the dust on their shoes would get cleaned. Caps had to be worn inside the shop floor so that dust and hair would not fall inside. These were all new practices and a good lesson in not assuming that a problem had no solution.
After training in manual assembly, the supervisors started training on the assembly line. During the first few months, cars were assembled by being placed on trolleys, which were pushed from station to station—the normal practice in India then. The Japanese gave process sheets, which were placed at each of the forty workstations, explaining in detail what each person was required to do. All this was completely new to the Indian employees. It was not easy to make them accept the discipline of meticulously following the process sheets and not doing work according to their memory. Mistakes invariably happen when an employee thinks he has mastered his job and starts ignoring the laid-down process sheet.
After a few months, the conveyor system was installed, which avoided the need to push trolleys. Suzuki had agreed to the use of conveyors after a small spat. When SMC first made the layout for the factory, it was without a moving conveyor and the car shell would move on a trolley from station to station. For a cost-conscious SMC, this was an ideal way to keep capital cost low in a country with abundant supply of cheap labour. Even the project report had spoken about the trolley-based assembly till a production volume of 25,000 vehicles was reached. The project report had projected a production rate of over 25,000 cars from the second year. The high interest exhibited all over India in the car made it abundantly clear that demand would not be a constraint on achieving higher levels of production. Moreover, if the Japanese work culture was to be introduced, it could not be on the basis of old technology. So Krishnamurthy insisted that conveyor systems be introduced from the very start. The Japanese agreed to his views after some arguments.
That wasn’t the only issue relating to manual versus automated equipment to be used. Another was about using multi-spot welding machines in the body shop, for the assembling of the underbody of the car, instead of the conventional equipment where a number of welders made one weld at a time. The underbody of a car goes through considerable wear and tear and a high level of reliability and accuracy in welding was important. However, the machine was expensive and Suzuki felt it would be cheaper to have fourteen welders instead of the machine. He was also not prepared to introduce welding robots at this stage. The Maruti management was keen that employees get exposed to the concepts of modern production technology right from the beginning. Suzuki argued that robots were not required when labour in India was cheap. He then made one of his rare mistakes by saying that the other two car manufacturers in India were not using this kind of advanced technology. Krishnamurthy immediately retorted that if the Maruti factory was to be like that of the other car manufacturers, then it didn’t need SMC. ‘Let us call the whole thing off,’ he said. Modernizing the automobile industry and bringing in the latest technology into the country was one of the main reasons for getting a foreign collaborator for Maruti. Faced with such firmness, Suzuki had to step back.
During the commissioning of the project, I noticed an anomaly in the layout design in the Daifuku floor conveyor, which conveyed welded car bodies to the paint shop. The conveyor was installed on the floor and, because it was three feet high, it hindered operations and operator movement, affecting productivity. I spoke to our engineers. The maintenance head of the area, M.M. Singh, assisted by V.K. Arora, constituted a team which virtually redesigned and changed the whole concept and modified the equipment and reinstalled the imported conveyor system below the floor. This facilitated smooth operation.
In the first phase of the project in 1983, the civil and structural work and preparatory work for installation went on almost round the clock. The project team worked in close coordination with the Japanese equipment suppliers and their local contractors. Krishnamurthy would frequently visit the shop floor late in the evenings, arriving unannounced, and reviewing the progress directly with project engineers. He was always concerned about the well-being of the staff working on the shop floor and would invariably ask about their health.
One major challenge was to install the heavy vehicle inspection equipment, supplied by Anzen of Japan, in large pits in the floor. The Japanese were quite concerned about how this would be done. In the evening they went home, expecting to do the job next day. However, the contractors for the installation, Josts Engineering, employed a crack team of riggers from a particular region of Punjab headed by one Joga Singh. They completed the job by the skilful use of forklifts and rollers. When the Japanese returned the next morning and saw that the huge equipment was resting well in the pits, without any telltale signs of overhead slings, they enquired as to how it was accomplished. Before either K.S. Johar or V.K. Arora, who were the project leaders, could answer, Joga Singh saluted and announced: ‘Sir, we brought huge blocks of ice and filled the pits with it, rolled the equipment on the ice. In the night, the ice melted and the machines went down and settled in the pit automatically, while we slept.’ Everyone had a big laugh.
In October 1983, the weld shop had only a main body-assembling jig where all the sub-assemblies coming from SMC had to be assembled. It was not possible to make more than twenty bodies per shift. Our own technicians and supervisors made small modifications on the line, like adding more balancers for holding welding guns, and made a small sub-assembling jig. With this the production went up to forty-eight bodies per shift. This was one of the earliest instances of our engineers making improvements to enhance productivity and total production capacity. Such efforts eventually led to production reaching 140 per cent of installed capacity.
The side body was coming in an assembled state from SMC and would suffer many dents during transit. Two SMC persons taught our people how to repair them. Most of the tools used by the Japanese were given Indian names, with the small circular asbestos sheet used for controlling the spread of heat during repair named ‘chapatti’. This led to our workmen getting more involved and they quickly learnt the work and became experts.
As compared to the Premier Padmini and the Ambassador, Maruti had got its pricing right. After the roadshows, where it had played up the fuel-efficiency angle, the company was confident of getting a good response from the public.
That was borne out by the bookings, which opened on 9 April 1983. By 8 June, total bookings crossed 135,000 vehicles, giving Maruti an assured market for three years and raking in over Rs. 135 crore. For Maruti, it was a vindication of sorts. Suzuki had been highly sceptical of the idea, wondering why anyone would pay such a huge deposit for a car that had not been manufactured. Foreign car manufacturers could perhaps not understand the kind of car-starved market India was in those days, when people had to wait for years to buy a car or even a scooter. ‘This, more than anything else, has vindicated our judgement and decision to go in for the present product mix,’ Krishnamurthy exulted in the first annual report of the company, ‘we are now confident that the vehicles which we have selected for introduction in the Indian market best meet the requirements of the Indian consumer.’
When the booking scheme was devised it provided that the order of sale of cars would be determined using a computer-generated random number programme, designed by the information technology department of Maruti. Even well-educated Indians had no concept as to what this programme meant. Given the very high number of bookings, and the consequent premium that the cars were expected to command, senior mediapersons and others were certain that the delivery order would be manipulated. Transparency and objectivity in a public sector was not expected. However, the IT department had discussed the programme and convinced me that even they could not rig the programme. The order of delivery of cars to be generated was determined by the exact nanosecond when the key was pressed to start the programme. It was impossible for this to be controlled by anyone. Every time the key was depressed a totally different order of names would be generated.
A grand ceremony for the draw was organized on 17 September 1983 at the Hotel Maurya Sheraton. The vice-president, the late M. Hidayatullah, who was the chief guest, started the generation of numbers by pressing the ‘Enter’ key. When the lists appeared—a different one for each city—it was apparent that there was no rigging. No VIPs were at the top of the list in Delhi. An employee of Indian Airlines would get the first car. The credibility of Maruti—and of the allotment process—was established. Doubts were never expressed again when, in the future, new bookings were made and allotment lists prepared in the same manner.
The names of the allottees were sent to the dealers. Maruti prescribed a detailed sale process so that the allottees could be informed shortly before their cars were due for delivery and they could arrange funds and pay the dealer. Usually money was paid a couple of weeks before delivery took place. The benefit to dealers was that they did not need any working capital, and thus their costs were lowered. Maruti had to closely monitor the system to ensure that dealers followed the prescribed process and that no one jumped the queue. It had to be also ensured that dealers paid the interest due to the customer on his deposit money. Often some dealers neglected to do so and had to be pulled up.
Meanwhile, members of Parliament started demanding a separate quota for themselves, a demand that frequently surfaced in starred and unstarred questions as well as special mentions. The board rejected this demand when the heavy industries ministry wrote to it, but decided to keep a 5 per cent manufacturer’s quota for allotment to customers in the commercial interests of the company, or where payment had been made in foreign currency, or for export, or to government organizations. Such special allotments were being made by other automobile manufacturers also. However, soon after this system was introduced, a non-governmental organization working on consumer issues, Common Cause, objected to this quota, but the board decided not to change its policy. In 1984, a writ was filed in the Supreme Court and the Court stayed the operation of the quota. One consequence of the writ was that I had to cancel a planned long weekend trip to Shimla. This was to be my first holiday after joining Maruti almost four years earlier. Instead, I had to go to Chennai to brief the Attorney General, so that a reply could be filed in court.
After several hearings, the Supreme Court, in 1986, allowed the use of a manufacturer’s quota, but laid down detailed guidelines as to how cars were to be allotted from the quota. All the classes of persons who could be allotted cars from the quota were defined, as well as the number of cars for each category. The principle of first-come, first-served, in terms of eligible applications received for allotment of a car, was to be observed. The process became mechanical, and no discretion needed to be used. The benefit was that there was no pressure any more in the matter of allotting cars. The basic purpose of using the quota to promote the commercial interests of Maruti could, however, not be served. This was the first lesson in understanding that being a government company entailed court scrutiny of what private companies treat as normal commercial transactions. Later, Maruti was to realize that there were many areas where being a public sector undertaking created disadvantageous situations as compared to private companies.
The first car produced by Maruti was donated to Lord Venkateswara, the presiding deity at the Tirumala temple in Tirupati. The donation was not made by the company, as Maruti had already formulated a policy that it would not make donations to anyone. It was feared, not without reason, that if any donation was made, either in cash or in the form of a car, there would be endless demands and refusing them would create many enemies. It was easier to say that policy, framed at the instance of the Japanese, prohibited the company from making donations. The decision to donate a car to the deity at Tirupati was taken by vendors, dealers and employees, who paid for the car. The subsequent success of the company, and all those associated with it, showed that the humble offering pleased the gods!
The industry practice when Maruti started operations was that cars and other vehicles were driven from the factory to each dealership for being sold. Customers, therefore, never got a brand-new car but one that had seen some wear and tear after having been driven for varying distances, which could be as much as 2,000 km. Under the prescribed maintenance schedule, cars were required to undergo the first free service after 500-800 km and the lubricating oil had to be changed. This was important as in the initial running of the engine, the oil got contaminated rapidly. Technically, the warranty of a car could be cancelled if a customer did not get the vehicle serviced within the prescribed mileage. Yet, till Maruti changed the practice, the mileage for the first free service started after delivery! Cars were driven well beyond 800 km without any change of engine oil. The manufacturers just overlooked this. Clearly, this was technologically quite wrong and the engine would suffer some damage when cars ran for 2,000 km without an oil change. Additionally, the cars were often roughly handled by drivers and this also affected future performance of the cars. The icing on the cake was that the car manufacturers charged customers transportation costs which were more than what the companies were actually spending!
Among the first decisions the Maruti management took was to change this system and give customers brand-new cars. One of the options was to transport cars in railway wagons. This was quite common in the developed world. Special wagons were used for transporting cars, but such wagons did not exist in India. Maruti estimated that it would need around 200 special rail wagons to start with. It approached the Indian Railways, but the response was not very encouraging. The Railways took the stand that Maruti must pay for designing and building the special wagons and own them. The Railways would charge for the haulage of the wagons. The wagons would have to be designed by RITES, a public sector railways consultancy company. RITES indicated that it would take close to three years for the first lot of wagons to be made available, but the time could be shortened if Maruti compromised on the design. It was not considered feasible for RITES to buy the wagon design from a foreign country. The time schedule indicated was obviously unsuitable for Maruti’s requirement of selling cars from December 1983. In addition, Maruti was wary about making any investment, since the Railways had not indicated the tariffs for transporting the cars through the special wagons, and were not willing to give any guarantees about wagon utilization or turnaround time. The movement of cars could not thus be planned and the customers would have no idea about when they would get their car. The entire approach was not very commercial and showed little concern for meeting the needs of a customer. The fact that this could be large business for the Railways was not appreciated. Besides this major risk, there were several other issues including the construction of a siding in the Maruti factory. It was clear that the option of using the Railways would have to wait.
The only option that remained was to move cars using road transporters. The quickest and easiest way was to get long-bodied trucks and convert them to load up to five cars in each. The design was worked out by Maruti. Transportation contractors were selected who would own the trucks, get them modified to carry cars and vans, and undertake the job of transporting them to the dealers. Dealers were encouraged to undertake the transport of their own cars, as it was felt that they would be better motivated to move the vehicles safely and quickly. At the same time, workshops which could do the job of converting the trucks into car carriers were identified. The conversion job had to be done on a priority basis as a large number of trucks were required and the need grew as production volumes increased. Maruti engineers were constantly chasing the contractors and the workshops to increase their productivity and output.
Facilities had to be designed and built, both in Maruti and at the workshop of each dealer, for loading and unloading the vehicles. The unloading had to be done at the workshop because after receipt of the vehicles, they had to undergo a pre-delivery inspection before being sold. Initially moveable ramps were used, but these would get damaged and slow down the process of unloading vehicles. The answer was to build permanent ramps. It was important to reduce the time for loading and unloading, and avoid damage to vehicles in the process. The shorter the turnaround time of the trucks at each end, the lower would be the costs, and more importantly, the trucks could do more trips. One of the tasks of the concerned department in Maruti was to monitor the journey time of the trucks and if there were delays, find the cause and apply correctives.
Damage to cars during transit was a problem that had to be tackled. One reason was bad driving habits, including over-speeding. Drivers had to be educated and, in some cases, fines had to be imposed on the transporter. Overhanging branches of trees on the highways were also found to be damaging cars and a wire mesh had to be put on top of the trucks to protect the cars.
The consignments were initially insured with general insurance companies. A few years later, as the extent of damage came down while the volume of cars being transported increased, Maruti calculated that it might be cheaper for the company to bear the cost of damage. This reduced the total cost of transport and created a further incentive for the company to monitor and reduce damage costs even more. External insurance did not create any such incentive within the company.
In the beginning, the trucks were returning empty. Soon other car and two-wheeler companies started using these trucks, wherever possible. It was not unusual to see trucks which carried Maruti cars coming back loaded with Bajaj scooters or Premier cars. The transporters also started to carry steel or other commodities on the return journey. However, Maruti had to ensure that the attempt to get return cargo did not result in the trip time becoming longer than what could be accepted.
Maruti continued to look for better ways of transporting vehicles. One option was to use tractor-trailers, which are used to carry forty-foot containers. They needed to be modified, so that they could carry seven or eight cars. No design for such a vehicle was available in India. In any case, there was need to customize the car carrier to suit the dimensions of the vehicles Maruti was manufacturing. An Indian structural engineer, K. Rangaswami, who had been working in the United States for many years and had decided to come back to India, offered to design trailers to carry the cars. He worked on a contract basis, with a success fee. He did an excellent job, and Maruti started using trailers designed by him in 1984.
The option of using the railways came up again after a few years. By then the railways was facing the heat of competition from road transport, and was trying to become more commercial in its working. By sheer chance a college mate of mine was appointed as head of commercial operations in Northern Railway. He telephoned me to discuss the transport of cars by rail. During discussions it emerged that the railways had old passenger coaches that were no longer fit for their designated use. These could be modified and used for carrying cars. The book value of these coaches was zero and only a small amount of money was needed for carrying out the modifications. Maruti now had a benchmark of costs and insisted that the per car cost of transport should be competitive with road transport. It took some time for the bosses in the Railway Board to agree, but finally this mode of transport also became operational.
The problem of wagons sorted out, it was now time to press for a dedicated railway siding. Maruti had been loading its cars from the Delhi Cantonment railway station, 10 km away from its factory. The cars had to be driven there and this was complicated by the presence of a powerful driver’s union in Gurgaon. The union had strong political backing and charged very high rates because of its monopoly position. Drivers who were not members of the union were not allowed to operate. After considerable efforts Maruti could get a dedicated siding at Gurgaon itself, which saved cost and damage to cars.
As the start-up deadline neared, pressure increased on everyone. One October day in the factory, Krishnamurthy and I handed out promotion letters, one of them to Nandy. Half an hour later, feeling on top of the world, Nandy encountered Krishnamurthy in the corridor. Krishnamurthy took him to a corner and said, ‘Your project is delayed. If you feel you can’t do it, hand over your resignation letter and I will relieve you immediately.’ The assembly of cars was behind schedule because the testing line, on which cars are tested after they come off the conveyor belt, was getting delayed for want of a good electrician. Nandy knew that apart from the why of a problem, we also wanted to know how it could it solved. More than that, we just wanted it solved.
Nandy then went to Gurgaon town, found five electricians and tested them at the factory. He found one whose work was satisfactory and he was put on the job, with Anzen Electricals, the electrical contractor, helping him out. The man later became Maruti’s main electrical contractor. The assembly line was completed and on 19 November the first car to be assembled on the line rolled out. It was Indira Gandhi’s birthday, a fact Krishnamurthy made sure to mention when she came to launch the first cars on 14 December 1983.
Before the assembly of cars could start, Maruti’s employees understood what Japanese work culture really meant. A. Shinohara, who was the director production, would not allow the assembly line to start unless all the equipment and the shop floor were absolutely clean. A lot of dirt had accumulated during the process of erecting the equipment. Initially Maruti employees thought that sweepers would do the cleaning. But in Japan there are no sweepers and everyone does his own cleaning. Shinohara picked up a broom and a bucket of water and started cleaning the shop floor! Maruti employees could hardly refuse to do the same. For the next ten days the cleaning work continued, with Shinohara as the leader. Assembly operations started when he was fully satisfied. He explained to all that the first requirement for quality work is absolute cleanliness and each person must keep his work area clean. The same principle was extended to the offices. The lesson was well learnt and when Krishnamurthy or I saw a nut or a piece of paper on the shop floor, we would pick it up. With cleanliness in mind, designated areas were provided where tea and snacks were served. No food could be taken outside these areas. Of course, smoking was a big no-no inside the factory. Nobody was even allowed to bring in a matchbox because of the many highly inflammable materials inside a car factory.
With the message going out loud and clear that no delays or sloppiness would be tolerated, there was little evidence of slackness. The sacrosanct deadline was finally met. On 14 December 1983, Sanjay Gandhi’s birth anniversary, Mrs Gandhi formally inaugurated the factory. It was the first time she was stepping into the factory; she had seen it from outside just once. In a voice choked with emotion she said: ‘This small car has a very long story.’ She went on to describe Sanjay’s dream of building small cars and all the efforts he made and hardships he endured in trying to make his dream a reality.
She pressed the button that started the assembly line and the first car for sale rolled out. She personally gave the keys to the first ten allottees of cars from all over India, the first being Harpal Singh of Indian Airlines.