Heavy industries minister Santosh Mohan Dev has sent letters to Suzuki Motor Corporation (SMC) and Maruti Udyog Ltd (MUL) saying that Suzuki’s recent decision to form a second joint venture separate from its Maruti JV (more details here) contravenes the 2002 joint venture agreement between the government and the Japanese car maker.

Contrary to its 2002 assurance to the government that it would make its Indian subsidiary a global hub, SMC recently announced its new investment would be through Suzuki Metals, a JV between SMC and MUL. The new investments are a 250,000-units-a-year car assembly factory and a diesel engine plant.

This came as a surprise because MUL had announced in May 2004 plans to set up the diesel engine unit without any hint of a new JV with SMC. Maruti had also held talks with the Haryana state government over acquiring a large chunk of land for the planned new plant.

Dev has asked SMC to explain why it plans to set up the two new ventures under the Suzuki Metal JV rather than strengthen MUL’s market position and its future product line-up.

He insists in the letter to SMC that the government should have been given the details before Suzuki’s announcement since it is a major stakeholder in the MUL JV. Following the minister’s strongly worded letter, an SMC representative is expected to meet with him shortly.

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MUL plans a board meeting on 23 September to discuss the issue. On the 12-member board, Suzuki has six members and the government one – the rest are independent.

Separately, meanwhile, the department of disinvestment has written to the heavy industries ministry urging the government to sell its remaining 18.28% stake in Maruti. Of the rest, Suzuki holds 54.21%, financial institutions hold about 16.3%, while private shareholders account for under 5%.

Deepesh Rathore / Tilak Swarup