JAGDISH KHATTAR IS A VERY BUSY MAN. HE IS just back after the formal listing of his company Maruti Udyog Limited, in the Bombay Stock Exchange, where he has posed triumphantly for media persons, striking a ceremonial gong heralding the listing of his company.

It’s just 11 in the morning and already he is halfway through a pile of correspondence and meetings scheduled for him every day he is in the carmaker’s New Delhi, Connaught Place headquarters. Later he will meet up with his various division General Managers for their weekly brainstorming session, after which he will probably drive down to Maruti’s sprawling factory complex to meet the workers and see for himself, the sprawling production center that is responsible for 60% of the country’s four wheeler market.

And that is just the sort of person Jagdish Khattar is, Chief Executive Officer of the newly listed Maruti Udyog Limited. Hands on, all the time. It is a concept that has served Khattar well in his drive to shore up Maruti’s flagging marketshare in the face of a relentless onslaught by Korean chaebols Daewoo Motors and Hyundai Motors, other multinationals like Ford and lately Chevrolet and even homegrown Tata Engineering.

Unenviable Legacy
When Khattar took over the reins of India’s largest carmaker from previous CEO R S S L N Bhaskarudu in August 1999, he inherited an unenviable legacy. The company’s total income had nose-dived to Rs. 81.18 billion from Rs 84.74 billion, down by 4.20%. Faced with difficult market conditions and pressure on margins, the company’s internal generation went down to Rs 6.68 billion from Rs 7.93 billion. Despite a drastic cut in prices of most of its models, MUL’s total sales of vehicles during the year had declined to 309,094 units from 327,264 units. Production was down to 332,931 units from 354,336 units. Maruti had resorted to a production cut of 20% in November 1998. Exports too suffered and dropped to 24,410 units as against 25,994 units the previous year.

Moreover, during Bhaskarudu’s tenure, constant bickering between the two stakeholders undermined the company. Suzuki Motor Corporation, the equal partners in the joint venture had strongly opposed his appointment. On the other hand, the India government insisted on it. Finally, the BJP-led government worked out a compromise formula. Remove Bhaskarudu and elevate deputy managing director Jagdish Khattar to the top job. Fortunately, it proved to be a happy compromise.

Says Khattar of what he calls his biggest operational challenge in the early days of his tenure, “There was no absolutely no decision making for fresh investments. Expansion plans were disregarded, no new models were introduced, it was a state of stagnancy. And by then nearly a dozen competitors and sliced up the market and we were totally underprepared.”

Suddenly Maruti, which had been the country’s flagship brand, found itself out of favor with the consumers. People were being wooed by the novelty value as well as the powerful branding of major international carmakers such as Ford Motors who launched their Escort sedan, Daewoo’s Cielo and Opal’s Astra.

The carmaker’s huge dealership and service station network did not matter to the consumers. The multinationals’ lack of such a wide-ranging network were offset by their new models and surprisingly enough, their cheap prices. It was boom time for Indian consumers. At Maruti Udyog, though, the mood was somber.

Fortunately for Khattar, the stakeholders resolved their differences just as he took office. By then, ofcourse, Maruti had lost a lot of ground to its competitors. The major challenge was trying to stage a comeback, before Maruti could even think of regaining lost glory. That’s when Khattar decided to introduce four new models.

Running The Gauntlet
Introducing four new models with a high degree of localization typically takes between 18-24 months. Khattar, however, did not have 24 months. In a race to bring more models to market, he was faced with the classic catch-22 situation. Either he could invest in fully imported kits and bring in new models in 6 months, thereby increasing cost multifold, or he would have to wait till his team were done with a locally designed and assembled car. “If you want to be price competitive, you have to do more localization. And localization takes time giving competitors more time to firm up their service and distribution networks,” says Khattar. As it turned out Maruti managed to bring the four models to market in 20 months.

But this was the least of Khattar’s problems. Having introduced newer cars, the company was now facing a big loss because of huge investments in a comparatively short period. “Our balancesheets were a mess,” says Khattar. “We had to cut costs and improve productivity and we had to do it quickly.”

To Khattar, the choices were clear; one, cut costs, thereby increasing productivity; two, ramp up Maruti’s external network and increase its allied services offerings. “Our plan was to cut costs by 30%, thereby increasing productivity by almost 50%. We underwent a vendor rationalization program. We diversified into other businesses like Insurance.” Now Maruti’s relationships with financial service providers like GE Capital (with whom they have a joint venture) and SBI, as well as their Maruti Insurance services umbrella and Maruti leasing, separate the company from their closest competitors.

Second Revolution
Khattar also put in motion what he called Indian car history’s second revolution by announcing a series of price cuts in January 1999. The first revolution was when Maruti unveiled India’s first small car in the 80’s that soon dislodged the Hindustan Motors’ Ambassador as the preferred car of the Indian middle class.

The price cuts represented a successful strategy. Maruti immediately recorded a 15-year sales high of 35,528 units sold in July 1999. Though the company was still plagued by changing market dynamics that saw a 24.5% drop in sales in May 2000, Khattar believed the strategy would eventually work. For some time though, the situation looked dire. The company, which enjoyed a near-monopoly in the small car segment, saw its market share falling to a measly 56.3 per cent from a high of 74.6 per cent a year ago. In June 2000, Maruti’s share plummeted even further, dropping for the first time to an all-time low of 46 per cent with sales sharply dipping by 34% to 15,898 units. One thing that Khattar had easy was that the company’s marketing strategy was clearly spelt out. The company relied on its one model for every segment strategy and aggressive pricing to get customers. In pricing, the company was helped the Government of India’s excise duty cuts, that helped it shave thousands of its cars’ showroom prices.

Networking—Of Another Kind
One favorite anecdote about Khattar is how he decided, on the spur of the moment to drive down to Gurgaon (about 40 minutes from his office) along with GE Capital Asian Operations president Pramod Bhasin to meet the State Bank of India (SBI) chief A. K. Purwar, without prior appointment.

Twenty minutes later, Khattar received a call saying Purwar had 5 minutes to spare, but it would take him (Khattar) atleast 40 minutes to get there. As it turned out, Khattar was already at the man’s door when that particular call came through and he got his meeting with Purwar. Purwar was more than happy to meet Khattar—who twenty years ago had given the then young SBI General Manager his big break. The result—Khattar got a deal that would further enhance Maruti’s reputation in the marketplace.

SBI offered car loans in even second tier cities using its huge network of branches. No other company could match this sort of service. The result, Maruti’s marketshare further surged.

Khattar’s career is littered with anecdotes such as these. He has often relied on his personal relationships to drive deals for Maruti that would help cement the company’s lead in the four-wheeler market.

So, what was Khattar’s biggest operational challenge? “Running Maruti,” Khattar smiles. “Now that we are the leader, it is a great effort in keeping ourselves ahead of the competition. So the challenge is in seeing that others do not eat into our marketshare.”

Hyundai’s small car, Santro is already doing it. They have taken on the Maruti’s 800 successfully in India. Though Maruti still maintains an edge in this segment, Santro has shown that Maruti’s marketshare can be eroded.

The one thing that Khattar has ensured at Maruti is that the general managers of the various divisions are always in the know. They are not informed of the larger picture in the last minute; they are part of it. Khattar has regular interactions with the GMs where they meet once a week and chalk out strategies based on the markets changing dynamics.

This is the sort of attention that has seen Maruti change from a behemoth state-backed company with falling sales figures to an extremely successful public company whose issue was oversubscribed 10 times.

This is the sort of attention that helped Khattar successfully lead the largest book building exercise in India’s corporate history.