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Maruti closes defunct service arm, gears up for competition

Maruti Udyog Limited has decided to close down its now defunct subsidiary -- Maruti Sales and Service India Limited -- which was formed as a service unit and sales outlet for authorised spare parts and components.

All the functions of this venture have already been transferred to J J Impex, a company which was taken over by Maruti about a year ago, company sources said on Sunday in New Delhi.

''We are now going through the legal procedure of closing down the venture. As there was no workforce employed with MSSI, there would not be any problem for going ahead with the closing down,'' the sources pointed out.

MSSI was formed over two years back as a subsidiary to look into service of Maruti vehicles as well as sale of spare parts and even some accessories. The company expected to start the first workshop under the venture in Delhi and later spread its wings across the country.

''But even before we could start working towards this end, we got the offer to purchase J J Impex, which had an already established service infrastucture. It was much more feasible to buy a fully established unit rather than set up one on our own. So we decided to go for the deal,'' the sources said.

The venture, the sources added, has since been lying defunct. ''We have, therefore, now decided to go ahead and close down this subsidiary.''

However, Maruti intends to retain the J J Impex name for the service venture for the time being. ''We have not yet decided on changing the name. We have retained the name since we bought over the company a year back. At a later date, we might go ahead and change it, but not now.''

Meanwhile, Maruti has set up a tripartite joint venture with Maruti-Countrywide and Sumitomo Corporation of Japan for establishing an after-sales service workshop network across the country.

The first of the workshops, being set up in Delhi, would be operational by mid-1999, company sources said.

Both Sumitomo and MUL control 47.5 per cent stake each in the venture while the remaining equity is held by Maruti-Countrywide.

The Japanese giant and MUL would be infusing Rs 55 million each into the venture, the sources added.

''The joint venture would be managed by Maruti and would be exclusively for servicing Maruti cars. The venture is not for sales of Maruti vehicles.''

The company intends to set up similar workshops across the country in a phased manner. ''We are presently looking at other sites and are working with Sumitomo for the same,'' the sources pointed out.

The company has already received the Foreign Investment Promotion Board approval for the same.

This is as part of Maruti's efforts to beef up its service network in the wake of increased competition from new entrants in the small car arena.

Meanwhile, Maruti has temporarily cut back production since the first week of November in view of the recession induced slowdown in demand for vehicles.

The company will be recording a 20 per cent drop in sales during november over normal levels.

The impact was particularly felt in October and the first half of November. A combination of factors affected sales of automobiles, including recessionary trends and requirement of permanent account number for purchase of cars.

This has compounded the usual fall in sales in the months of November and December. The production cut was made in the first week of November to avoid build up of inventory.

In a desperate bid to counter the slowdown of sales, Maruti has also launched a major sales and marketing promotion and the company claims that the effort has paid off with an improvement in sales in the second half of November.

Consequently, the company has started increasing its production. At the same time, Maruti is keeping a close watch on the market situation and will gear its production as per the retail sales trends.

Prior to this, Maruti had launched a fresh salvo in the form of an improved service set-up under which the vehicles would be picked up for service and delivered back at the doorstep.

Besides, a lot of effort is being put into increasing productivity levels at the workshops and improving the front office operations at workshops.

The company is also working towards bringing down the complaints per 10,000 vehicles from 13 at present to ten. Moreover, the entire layout of workshops, the environment and the attitude of dealers are going in for a sea change.

The dealers have also been asked to work out an individual promotional activity to push forward sales. The company has also increased the warranty on its vehicles from one-year 20,000 km to one-year unlimited kilometre.

These incentives are in addition to the several financial sops which the company had recently announced to counter the impending competition in the small car segment pursuant to the launch of Hyundai's Santro and Daewoo's Matiz.

Jolted by the two back-to-back aggressive launches, Maruti had doubled the interest payment on bookings to 20 per cent per annum. Besides, cash sops are being offered to dealers to prop up sales.

UNI

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