Perfect Drive

Kenichi Ayukawas tenure has seen Maruti stem the slide in marketshare and further consolidate its hold on the Indian market.

By Sumant Banerji  
Wednesday, January 10, 2018

When Kenichi Ayukawa was appointed Managing Director and Chief Executive Officer of Maruti Suzuki India Ltd in April 2013, the company was not in the best of shape. Following two years of labour unrest at its Manesar factory, its market share had slid to less than 40 per cent. The morale within the company was low and rivals had their tails up. Not quite a sinking ship, but in 2012/13, Maruti was in a state of disarray.

Within four years, the 62-year-old Ayukawa has effected a complete reversal in the company's fortunes. Maruti Suzuki is sitting pretty with a market share of 50.4 per cent (April-November 2017), the highest since 2000/01. It accounts for four of the top five and seven of the top 10 best selling cars in the country. Revenues grew a staggering 36.7 per cent in 2016/17, and 20 per cent in 2017/18 (so far). Its share price has almost doubled in the last 12 months and recently breached the `10,000 mark. It is now the fifth most valuable company in the country.

This success is a result of team work, but Ayukawa's signature can be seen in each of the areas where Maruti has excelled of late - right from improved industrial relations, graduation from Budget to a semi-premium carmaker and reduction in recalls to improvement in quality and agility in managing crises. It is no surprise that Ayukawa has swept the Best CEO awards, achieving the rare feat of winning in three categories - best CEO for auto and ancillaries, for large companies (an award he had won in 2016) and champion of champions.

Growth Drivers

Bulk of the growth in market share has been driven by transformation from a value-for-money to a semi-premium carmaker with its Nexa outlets and products such as Dzire, Baleno and Vitara Brezza. It was Ayukawa who was instrumental in convincing the parent, Suzuki, about the need to invest in a separate distribution channel. He also gave Indian engineers freedom to design and develop cars in-house. This is something Suzuki had been resisting for long. "Even before I came in, there were discussions on setting up a premium network. The scale of Maruti, at over a million cars a year, is big, and customer preference is shifting towards premium products. We did not have any premium product. We communicated this to Suzuki Japan. They recognised the need. The timing matched," he says. "Our marketing people were also a bit frustrated. We had 15-16 models but only one channel. That put a lot of pressure on distribution. Also, people focussed on models that sold easily; others were forgotten. That is why, it was better to have a separate channel for some models. The Indian side had these ideas, but they needed to be integrated with Japan before going ahead."

The blockbuster success of Brezza, Maruti's belated entry into the compact SUV segment, is a source of immense personal satisfaction for Ayukawa. The project was led by Indian engineers and the confidence Brezza's success has given them is something Ayukawa believes will be important for the future. "Maruti has very good and capable people. The challenge is to create an atmosphere so that they can realise their potential. Our engineers had the capability to develop a world-class car but never got an opportunity. When we designed Brezza, we realised that potential. In future, we will have more opportunities to develop cars designed by Indian engineers. This is important for the morale of our engineers."

Cometh the Hour, Cometh the Man

Maruti's performance is particularly significant in the context of developments in the Indian economy in the last 12 months. From demonetisation in November 2016, which sucked out 86 per cent liquidity from the market, to implementation of the Goods and Services Tax in July last year, the economy has been in a flux. Given its scale of operations, Maruti should have been particularly vulnerable to these shocks. Yet, Ayukawa remained unfazed. "Ayukawa is composed and does not get hassled with anything. That is a big advantage in a market like India," says I.V. Rao, Executive Advisor, Engineering, Maruti. "He is an extremely good listener and a meticulous planner."

"I have seen a lot of surprising things, so I don't get that surprised anymore," he says. "Demonetisation was a big shock for us. Everybody froze for at least 10 days. After that things started moving gradually. It was very difficult to explain to Japan (Suzuki). I told them this thing has happened, but nobody knew how to manage this. So, we reacted day by day." Ayukawa gave full freedom to the marketing department and offered full support from Suzuki in Japan.

"He encouraged us to take whatever steps were necessary to tide over the crisis, not only for the company but also for our dealer associates, as they were facing the brunt," says K.S. Kalsi, Senior Executive Director, Marketing and Sales, Maruti Suzuki. "Our prime focus was to liquidate stocks at dealers. In a short span, we ensured that card swiping machines were installed at all our showrooms. We encouraged banks to offer 100 per cent financing. I do not think any other company in the industry worked as hard as we did during those two months."

The result - Maruti recorded its highest-ever retail sales of 1.82 lakh units in December 2016. A potential calamity was turned into a blessing.

The Worker's Hero

His biggest contribution to the company, however, is the marked improvement in labour relations. Following two consecutive years of unrest in 2011 (a 59-day strike) and 2012, when workers went on the rampage with iron rods and wooden sticks at the Manesar plant and killed a senior manager, the atmosphere within the company when Ayukawa took over was toxic. Ayukawa built a direct line of communication with the workers and union leaders, restoring their trust in the top management.

"During my career, before joined the marketing department, had experience of working in human resources and finance. Maybe that given me an idea about how to oversee operations," he says. "People are important and our workers are we actually own in business. How we make full use of their capability always the key." Ayukawa is from the old Japanese culture that treats its factory shop floor, or gemba, as a place of worship. He spends more time at the shop floor than any other Maruti CEO ever and maintains utmost discipline while there. When we wanted to get him photographed in a business suit at the floor of the factory, he refused saying it was a place where everybody had to wear the same uniform. The message - in the factory, there cannot be a distinction between a CEO and a worker. Workers are now informed more regularly about the company's targets and aspirations so that they feel more integral to the firm.

As a result, they also do their bit during exigencies. In May 2016, when a blast at one of the company's main suppliers, Subros, brought production to a standstill, the workers took their two-week annual earned leave straightaway to reduce the impact. "Even our worker associates knew that our target was to sell two million units by 2020. So, everybody has some responsibility on how we will achieve that," he says. "So, when we are able to achieve it, everybody has a sense of fulfilment. I tried to implement a culture where success or failure is not for the individual but for everybody."

Getting Ready for Electric

Despite being in an impregnable position, Maruti and Ayukawa are not taking things for granted. The advent of electric mobility is set to challenge industry norms. Maruti cannot remain insulated from the potential disruption. In fact, as a market leader, it may be more vulnerable than others. Ayukawa admits that Suzuki is relatively weak in this area than many other global manufacturers.

But he says the company will do all it takes to find a solution. Suzuki's tie-up with Toyota to develop electric cars and the lithium ion battery plant being set up in collaboration with Denso and Toshiba are examples of that. Maruti says its first electric car will be on roads by 2020. "We have to remain relevant and attractive to our consumers at all times. Otherwise we not survive," he says.

"So, sometimes, if consumer preference or rules or some policy changes, have to be ready with an answer. Competitors can be ahead with their products, in that case, we have to catch That's competition, but at the end day customers will decide. Even force some rule, if the customer not accept it, it will not work."

With focus squarely on the consumer and the calming presence of Ayukawa at the top, there is no stopping the Maruti juggernaut.

@sumantbanerji

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