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Suzuki in favour of sharing Maruti stake with GM - Views on News from Equitymaster
 
 
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  • Oct 27, 1999

    Suzuki in favour of sharing Maruti stake with GM

    In case the Indian government decides to divest its stake in Maruti Udyog, Suzuki is not averse to bringing in General Motors (GM) as a strategic partner. This was disclosed by a leading financial newspaper.

    Maruti is joint venture between the Indian government and Suzuki Motors of Japan. The company has a presence in small cars (800, Zen), mid-sized cars (1000, Esteem) and utility vehicles (Gypsy).

    Suzuki and GM already have a worldwide partnership for small cars. (GM does not have a small car of its own). Suzuki is keen on extending this alliance to India should the government choose to exit the joint venture with Suzuki. There is a strong opinion in the finance ministry that the government should exit the auto and other unrelated businesses.

    Should GM acquire the Indian government's stake in Maruti Udyog, the Suzuki-GM will be a tough nut to crack for any company. Both are global auto giants, for whom funding and technology will not be a problem. If these companies launch their overseas models in the mid-sized and utility vehicle (UV) segments, competitors will find it a struggle to sustain market share, let alone increase it. Besides, Maruti has a distribution network in place, which will be very difficult for its competitors to match, with the exception of TELCO.

    Currently GM is negotiating for a stake in Daewoo, Korea, which has gone bankrupt. There is some speculation on whether GM will buy a stake in Daewoo's Indian operations. However, indications are that if the proposed partnership comes about, it will be confined to Korea, and will not extend to any of Daewoo's overseas subsidiaries. Besides, Daewoo and Suzuki are rivals in the Indian market, and GM will not want to jeopardise that equation by acquiring a stake in Daewoo India.

     

     

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