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MUL, SMC to pump in Rs 6,000 cr in new plant
September 23, 2004 14:34 IST
Last Updated: September 23, 2004 15:55 IST
Maruti Udyog on Thursday announced a Rs 6,000 crore (Rs 60 billion) investment with its parent company Suzuki Motor Corp as part of which a new car plant would be established through a joint venture where MUL would have a 70 per cent equity, an outcome of a settlement reached between the government and the Japanese auto major.
Announcing the grand investment plans for the next five years, finalised at the meeting of the MUL board, Managing Director Jagdish Khattar said MUL's another joint venture with Suzuki -- Suzuki Metal India -- would produce diesel engines for domestic and international markets.
MUL has 49 per cent stake in Suzuki Metal and this would end the dependence of the domestic car giant on imported diesel engines from French company Peugeot for its popular brands, including 'Zen'.
"A new joint venture Suzuki Maruti India will be floated for a new car plant, where 70 per cent equity will be owned by Maruti and the rest with Suzuki," Maruti Udyog Chairman Shinzo Nakanishi said.
Today's crucial board meeting is a culmination of an agreement reached between the government and Suzuki on Wednesday after a shortlived spat between the two over Japanese firm's 'unilateral' announcement to invest Rs 1,000 crore (Rs 10 billion) in India.
The over Rs 6,000 crore investment, to be made in the next 4-5 years, would be for the new car plant, diesel facility and R&D, he said.
The new diesel engine manufacturing plant will be set up by Suzuki Metal India, a 49:51 joint venture of Suzuki and Maruti.
On May 18, 2004, Maruti had announced setting up of a diesel engineering plant with an investment of Rs 350 crore (Rs 3.50 billion) to make 100,000 units a year.
"We have decided the new diesel engine plant will cater to Suzuki's operations in Europe, Asia and even Japan. Resultantly the capacity of the plant is now likely to be 300,000 units with an investment of about Rs 1,000 crore," Khattar said.
Asked about the exact quantum of investment, Khattar said after the preparation of a detailed project report, modalities of financing would be considered.
He said the board also decided to study the feasibility of a gearbox plant in the country which would help Maruti indegenise fully.
Scotching fears that the new car company with production capacity of 250,000 units would hurt the interests of Maruti, Nakanishi said the new plant would make 'high-end' cars, while Maruti would keep producing small cars, and new small cars would keep rolling from Maruti.
At present, Maruti has a production capacity of 300,000 units at its three existing plants which would be stretched to 500,000 units this year.
The saturation at the Maruti plants led to a need for a greenfield project, Khattar said, adding "when there is a need of over Rs 6,000 crore investment and Maruti has Rs 2,000 crore (Rs 20 billion) cash reserve, it is a good idea to have another joint venture with Suzuki for a new plant".
He said Maruti is a Suzuki subsidiary and the Japanese partner would never ever rundown Maruti.