Page 183 - DMGT519_Conflict Management and Negotiation Skills

Unit 8: Role of Attitude and Persuasion

A Bitter Fight Notes
In August 1997, the Government of India (GoI) appointed R.S.S.L.N. Bhaskarudu
(Bhaskarudu) as the managing director (MD) of India's passenger car market leader Maruti
Udyog Ltd. (MUL). The appointment was strongly opposed by Suzuki Motors Corporation
(SMC) of Japan, the GoI's 50% partner in MUL joint venture. In a press release following
the appointment, Osamu Suzuki (Osamu), President of SMC, claimed that the appointment
was illegal on the grounds five of the directors who comprised the majority of MUL's
board strength of nine, had objected to the appointment. Suzuki even alleged that
Bhaskarudu was incompetent and unsuitable for the MD post.
The GoI argued that as per the 1992 amendment in the GoI-SMC joint venture agreement,
both the partners were entitled to nominate the MD for five years in turns, and there was
no need for any consultation on it. Industry minister Murasoli Maran (Maran) alleged that
SMC was opposing the appointment of Bhaskarudu as it wanted Jagdish Khattar (Khattar),
Executive Director (ED), MUL (reportedly a SMC loyalist) to become the MD. Following
the disagreement over Bhaskurudu's appointment, a furious exchange of letters took
place between SMC and the Industry ministry. SMC asked for Bhaskurudu's resignation
claiming that the minutes of the meeting when Bhaskurudu was appointed, did not fully
record its objections to the same. However, the GoI refused to remove Bhaskurudu and
reportedly even started looking for a prospective partner in the event of SMC's exit.

Soon after, in the AGM held on September 22, 1997, SMC and the GoI representatives even
resorted to verbal violence. SMC nominees on the board attempted to prove Bhaskarudu's
unsuitability of the post by questioning him regarding MUL's functioning. When
Bhaskarudu's appointment was put to vote, there was a tie. Prabir Sengupta (Sengupta),
Chairman of the MUL board, used his casting vote to ratify the appointment. Following
this, SMC nominees passed a no confidence motion against Sengupta and proposed the
name of Yoshio Saito (Saito) for the chairmanship.
The GoI strongly backed Sengupta stating that he should be allowed to complete his
scheduled term of five years until 2000. SMC then lodged an arbitration petition against
Bhaskarudu's appointment in the International Court of Arbitration. In June 1998, the new
ruling Bharatiya Janata Party (BJP) government intervened into the issue and arranged for
an out-of-court settlement between the parties. As per the settlement deal, Bhaskarudu
was to step down in December 1999, two years ahead of schedule and Khattar was to
replace him in January 2000. Further, Saito was to replace Sengupta as the chairman.
Though the dispute between SMC and GoI seemed to have been put to rest for the time
being, the issue did not come as a major surprise to industry watchers. This was because
the company's history was marked with frequent conflicts between the two partners over
the years.
Background Note
Till the early 1980s, the Indian passenger car industry offered limited choice to the
customers, with only two popular models in the form of Hindustan Motors' (HM)
Ambassador and Premier Automobiles' (PAL) Padmini. The government not only
controlled the price mechanism in the industry, but the entry of foreign players was also
strictly regulated.
However, the scenario changed in 1981, when the GoI itself entered the car business by
establishing MUL by acquiring the assets of Maruti Ltd. In October 1982, the GoI signed a
licensing and joint venture agreement with SMC where in Suzuki acquired the 26% share
of the equity. Suzuki's history dates back to 1903, when Michio Suzuki founded Suzuki
Loom Works in Hamamatsu in Shizuoka, Japan. For the first 30 years, company focused
on the development and production of complex machines for Japan's silk industry. In
1937, the company diversified into building cars and in 1939 began manufacturing cars for
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