Maruti Suzuki rejigs management structure in competitive drive

Written by fe Bureau | New Delhi | Updated: May 3 2014, 13:28pm hrs
MarutiMaruti Suzuki share ended Friday down 1.69% at Rs 1,885.50 on the BSE. Reuters
As it gears up to face a much more challenging market, the countrys largest carmaker Maruti Suzuki India has effected a major organisational restructuring by realigning its business verticals and creating a special advisory group for the first time.

The company has decided to cut down on the number of verticals from six to five. The non-core administration vertical has been removed, with its sub-divisions IT, HR and finance now reporting independently to managing director Kenichi Ayukawa and joint managing director Toshiaki Hasuike. The five operational verticals are production, marketing & sales, quality, supply chain and R&D.

Additionally, a new special group has also been formed with three chief mentors to drive new initiatives like overseas investments, supplier development or cost-cutting plans. These three officials are MM Singh, previously

the production vertical head, SY Siddiqui, the previous head of the now defunct administration vertical, and Sudam Moitra, the previous head of supply chain.

Explaining the rationale for the changes, a Maruti Suzuki official said that the company has to face challenges in the domestic market with newer players getting aggressive by broad-basing its bouquet. Additionally, new challenges have emerged on the global front and R&D. Maruti, which accounts for over 40% of parent Suzuki Motors global volumes, had last year been given charge of emerging markets in Africa, Southeast Asia and South America. From its new R&D base at Rohtak, Maruti can effectively develop new products for these markets, and even invest in overseas assembly operations and marketing, creating its own subsidiaries where necessary the company has considered Sri Lanka and South Africa for this.

There are several issues now that require cross-vertical collaboration. The three senior officials have thus been asked to form a special group by the MD to drive new initiatives that may require inputs across functions and also monitor performance, a Maruti official told FE. Mayank Pareek, head of marketing & sales for both domestic and overseas markets, has also been made a senior executive officer from an executive officer.

Meanwhile, a source close to the development also indicated that the shift of the previous production and HR heads to other roles may also be a result of an internal investigation by parent SMC into the violence at Marutis Manesar plant in July 2012. The two officials, who have been given new roles in the company, were in charge of the key production and HR verticals when the clash happened. The fact that they misread the situation could be a reason why the company decided to make the changes, the person said.

Maruti works on a shared leadership concept adopted in 2008, under which every vertical has both an Indian and a Japanese head. While investors and industry experts have often expressed fears that this change may be an indication of SMC asserting its authority over the publicly listed carmaker, the company insists that this model helps in better coordination and communication between the two companies.

The Japanese executive acts as a bridge between the parent and Maruti. For instance, when inputs come in from Japan in manufacturing and R&D, the Indian guy implements it after consulting with his Japanese counterpart as to what is best suited for the company, the Maruti official said.

In FY14 Maruti Suzuki's domestic sales were largely flat with a 0.25% rise to 10.53 lakh units. During the fiscal the company reported a 15.5% jump in its net profit to Rs 2,853 crore. Net sales were up 0.12% at Rs 43,272 crore.

The Maruti Suzuki share ended Friday down 1.69% at Rs 1,885.50 on the BSE Sensex.