UPDATE 1-India's Maruti to hold 70 pct stake in new car JV


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NEW DELHI, Sept 23 (Reuters) - Maruti Udyog Ltd. said on Thursday it will own 70 percent of a new car joint venture with Suzuki, putting to rest fears that India's top car maker would lose out on new investment by its Japanese parent.

Suzuki Motor Corp. , Japan's fourth-largest car maker by value and one-fifth owned by General Motors Corp , will own the remaining stake in the facility due to open in early 2007 and have a capacity to make 250,000 vehicles a year.

The decision on ownership was announced after Maruti's board met on Thursday, following discussions between Indian Heavy Industries Minister Santosh Mohan Dev and Suzuki the previous day, which resulted in the decision that the new car venture would be under Maruti control.

Maruti said a separate joint venture for the new car plant had been created because Maruti's existing production facility in Gurgaon in north India was operating at nearly full capacity.

Suzuki owns a 54.2 percent stake in Maruti Udyog, while the Indian government holds 18.29 percent.

The two companies will also jointly build diesel engines in India through an existing joint venture, Suzuki Metal India Ltd., in which Maruti will retain its 49 percent for now.

Suzuki holds the balance 51 percent stake in Suzuki Metals, whose name is likely to be changed to Suzuki Engineering, Maruti Chief Executive and Managing Director Jagdish Khattar said.

The diesel engine plant would supply engines to European and Asian markets, he told a news conference.

The capacity of the plant was being raised to more than 300,000 units per year from 100,000 units proposed earlier, Maruti said in a statement to the Bombay Stock Exchange, adding that total investment in the new diesel engine plant would be 10 billion rupees, up from 3.5 billion earmarked earlier.

Maruti also said Suzuki was studying the possibility of setting up a gearbox unit in India.

"If and when this is done, it will also be part of Suzuki Engineering. The time frame will be worked out later," Khattar said.

Maruti Chairman Shinzo Nakanishi said a new two-wheeler joint venture to make 250,000 units per year would also be set up by the end of 2005, in which Suzuki will hold a 51 percent stake.

Shares in Maruti were down 0.3 percent at 368.05 rupees in late Bombay trade. The stock had slid last week after the joint venture plans were announced, which had led to fears of a diminished role for Maruti in Suzuki's future plans in India. Maruti shares have since recovered some of their losses.



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