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Investors ratchet up pressure to shelve Suzuki deal
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A group of investors in Maruti Suzuki Ltd ratcheted up pressure on India’s top carmaker to abandon a plan for its Japanese parent to build a new plant to make cars for the Indian firm.
Suzuki Motor Co, which owns 56 percent of Maruti, in January announced plans to invest US$488 million on a new plant in India and shelved an earlier plan for Maruti to set up the factory itself.
A group of 16 big fund managers said in a letter to Maruti management, dated March 5 and seen by Reuters, that the plan would shift manufacturing activity away from the Indian company and turn it into a “shell company” of its parent.
“The decision of the MSIL board is ill-conceived in its entirety and results in outsourcing of the core manufacturing activity that is fundamental and critical for MSIL,” the letter said, referring to Maruti Suzuki. “This clearly is not in the best interest of MSIL and its shareholders,” the investors said.
A smaller group of shareholders sent a previous letter last month, saying the contract for the plant meant the Japanese carmaker, rather than Maruti, would reap the benefits of rising domestic sales.
Under the plan, Maruti will buy vehicles produced by Suzuki at the new plant and sell them in the open market. Maruti currently produces and sells its own cars.
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