Clashing with India’s government over Maruti’s presidency (1997)

What a fifty-fifty venture forced into the open: the design of control

The core of this conflict was that a fifty-fifty capital structure exposed, at the single point of the presidency, where control really lay — something invisible in normal times. In a half-and-half Maruti, neither side could impose its will alone. Even though Suzuki carried the substance of technology and production, at the symbolic seat of the presidency the government, still bearing the marks of the former state enterprise, forced through its own candidate. Suzuki reached for a weapon as strong as international arbitration against the government of a sovereign state because it judged that to yield this one point was to lose the initiative in a growing Indian business.

In the settlement Suzuki won the right to approve the appointment of the president, and with the 2002 move to make Maruti a subsidiary it fixed control as a matter of institutional design. Left ambiguous at fifty-fifty, the heavy investment decisions of the Indian business would have swung with every change of government. This experience of pressing its case by the logic of capital and contract — even against a government — became the precedent for Suzuki’s way of defending its independence by legal means, the line that runs on to the arbitration with Volkswagen in 2015. Leadership of a joint venture is decided not by contribution or goodwill but by the design of capital and contract; the Maruti crisis is the demonstration of that principle.