Did personality issues split Hero and Honda?

The Hero Group came into existence when Brijmohan Lall Munjal started as a bicycle maker with his three brothers in the 1940s.

The group, now worth over $4 billion, officially came into existence in 1956 and today has over 20 firms related to the two-wheeler industry.

But it is Hero Honda Motors, started by BM Munjal’s eldest son Raman Kant Munjal (who is no more) as an equal partnership with Japan’s Honda Motor Company, which has remained the group’s cash cow. Since Raman’s death, Hero Honda Motors Ltd (HHML) has been managed by the patriarch himself along with his third son Pawan Munjal.

BM Munjal has earned widespread respect in the two-wheeler industry in the last two decades, not just for his ability to hold on to a difficult partnership with the inscrutable Japanese, but also because of his dexterity in untangling complex issues which routinely arose in the course of the joint venture. His reputation has always preceded him so no one was surprised to see him mediate between Bajaj Auto’s Rajiv Bajaj and TVS Motor Company’s Venu Srinivasan when the two were entangled in a bitter war of words over a patent issue two years back.

So why did B M, known for his patience and affability, allow such a successful venture — which was also feeding several group companies — to break up with its long standing partner?

An industry veteran who worked with HHML for a long time, points out that B M was the person the Japanese were most comfortable dealing with even though Pawan was running the day-to-day operations. “B M and Pawan are extremely different personalities. Pawan is more of an introvert, not much of a relationships person, whereas B M brought comfort and familiarity to the joint venture.”

So, did personality differences between Pawan and the Japanese lead to the breakup of the world’s most successful and longest running joint venture?

The same person quoted earlier said personality differences alone would not have led to the breakup. “Of course there were core issues such as differences over royalty payments to Honda. Then, when Honda decided to consolidate its spare parts’ operations among all its Indian companies under one roof, this became a major irritant for the Munjals. Please don’t forget that Hero Honda sources almost 75% of its two-wheeler parts from within the family! When core issues become unresolvable, personality issues also assume larger proportions.”

Another two-wheeler industry veteran pointed out that though he does not know BM Munjal at a very personal level, it is clear that the JV could operate for over two decades largely because of the old man’s personality and his ability to take people along with almost every decision.

But some believe that with the Indian market growing at such a rapid pace, a breakup was inevitable. “A point comes when my company has achieved scale and perhaps does not need a partner as much as earlier. Why be stuck with a partner then?” asked an old two-wheeler industry hand.