SMC pulling out of TVS Suzuki?

By K. T. Jagannathan

CHENNAI, SEPT. 26. The long-simmering discontent between the two partners of the two-wheeler maker TVS-Suzuki appears to be heading for a solution with the board of directors of the company meeting in Delhi tomorrow to discuss, among others, the ``possible disengagement of Suzuki Motor Corporation of Japan from the company''.

In a communication to the Bombay Stock Exchange, the company has said that the meeting will ``consider the developments regarding the possible amicable settlement of the differences between SMC and the company including the possibility of SMC's disengagement,'' both as a shareholder and a licensor.

When contacted, Mr. Venu Srinivasan, Managing Director of the joint venture, said, ``I have no comments. My lips are sealed at the moment. We have a clear understanding. You will get to know it tomorrow.'' He refused to be drawn any further into the issue. Highly placed sources, however, aver that the TVS group may buy out SMC's stake. They, nevertheless, are not willing to hazard any guess on the price.

The Indian parent of the company - the TVS group - at present holds 32.46 per cent of the Rs.23.10 crore paid-up capital. SMC has a stake of 25.97 per cent. Close to 15.31 per cent is in the hands of the public. The balance is held by institutions and others.

The two partners have kept their marriage intact despite hiccups in relations over the years. Perhaps, SMC's much-publicised proposal to team up with Kawasaki Heavy Industries for joint development of motorcycles and scooters may have provided it the right alibi to terminate the somewhat uneasy partnership.

It may be noted that the company's principal competitor Bajaj Auto has a tie-up with Kawasaki and, in fact, been making the Kawasaki range of bikes in India. Speculation is rife that in the changed context, SMC may not be averse to dumping TVS and join hands with the Bajaj. In fact, the company had even written to SMC seeking clarification on its reported parleys with Bajaj Auto.

Most products that had rolled out from its assembly lines of late had been the result of the indigenous R&D (research and development) efforts of the TVS group. From its latest launch Victor to the previous one Spectra and its foray into moped and scooty segments - all were the culminations of native R&D efforts sans SMC's help. Clearly, the Indian partner, it appears, has consciously ensured that the company depended less on SMC technical inputs.

That the TVS group has not been having an happy alliance with its Japanese partner is no secret. The venture - when it was through trying times in early 1990s- neither got the funds nor technical support from the foreign collaborator. In fact, sometime in mid 1990s when SMC had expressed its desire to hike its stake in the company, Mr. Srinivasan moved the PMO (Prime Minister's Office) and blocked the proposal. In fact, in that letter he elaborated how it was not in the interest of either the company or the country to let SMC hike its stake in TVS Suzuki. That was when the Indian promoters of tyre major MRF too were facing a takeover threat from their foreign collaborator Michellin. Not coincidentally, the moves of SMC and Michellin had come a cropper in the face of stiff resistance from local partners.

If Suzuki drops out of the joint venture with the Chennai-based group, it will surely bring the curtain down on the long uneasy relationship in the Indian corporate world. Yet, it is bound to trigger more acrimony in the marketplace if the Japanese company woos Bajaj Auto as is speculated in the wake of its alliance with Kawasaki.

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