Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Abenomics seems to be working better overseas than at home. So keen is Osamu Suzuki to build a $2.8 billion car factory in India's Gujarat state that he attended all six board meetings of local unit Maruti Suzuki during the last financial year. Three years ago, the 85-year-old chairman of Suzuki Motor would have left the business, which is more valuable than the one he runs back in Japan, to its own devices.

And Suzuki is doing much more than just showing up. He has even offered to build the plant on the parent company's balance sheet. Maruti Suzuki, which is 56 percent-owned by the Japanese automaker, will buy cars -- at cost -- from a wholly owned subsidiary of the parent and sell them in a country where it has a 45 percent market share.  There is a glitch, though. A proxy adviser to Maruti Suzuki's minority shareholders is telling them to reject the plan. They would rather Maruti make the investment by itself. The result of the vote, in which Suzuki can't participate, will be known on Dec. 17.

Outgrowing the Parent
Maruti Suzuki's market value now exceeds that of Suzuki Motor
Source: Bloomberg

The proxy firm's argument that letting Suzuki make the cars would somehow rob Maruti of control over its ``destiny" doesn't hold water. First, consider the motivation behind the proposal. As part of his anti-deflation campaign, Prime Minister Shinzo Abe is coaxing institutional shareholders to demand a higher return on equity from Japanese companies. That means putting excess cash to work in new projects, or giving it back to shareholders.

Suzuki has already bumped up its dividends, and now the billionaire activist investor Daniel Loeb has showed up in the shareholders' register, demanding that the company eschew other partnerships and focus on its India operations. That gives Suzuki a valid use for a hefty chunk of its $4.5 billion liquid assets -- eight times Maruti's cash hoard. It can make a smart investment in what will be the world's third-biggest car market by 2022, according to IHS Automotive. The proposed factory will eventually make 1.5 million cars in India. The cheaper those cars are, the better for Maruti's competitive position and future profit, and by implication for the shareholders of the parent.

Suzuki Pays
Annual dividends are climbing steadily
Source: Bloomberg

Nor will Maruti investors be left high and dry just because their company won't be building the new factory. A part of the cash the company saves can be used to build showrooms and service centers. The latter are the company's true competitive advantage: People buy Marutis because of an unrivaled repair and maintenance network and reasonably priced parts.  Besides, the idea that as a sales and marketing company Maruti would be unable to climb the technology ladder is mere nationalist blabber.

Tata Motors bought Jaguar and Land Rover from Ford to acquire iconic brands and cutting-edge technology in one fell swoop -- too bad that the Indian truckmaker had to load up on debt to become a global auto company. Maruti currently reinvests half of its $1 billion cash from operations into the business annually. If it can scale down the ratio of capital expenditure, the savings could one day become the seed capital to buy something big.

If Abenomics reinvigorates Japan Inc., that target might even be Suzuki.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Andy Mukherjee in Singapore at

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Paul Sillitoe at