KINETIC HONDA THE BREAK-UP :BREAK UP-BLUES It was in August 1998 that the first chinks in the kinetic honda motor ltd.(kinetic Honda) armar were reported by business India. Both Honda and the Firodias of kinetic were quick to deny rumors of split through reports of Firodias quietly raising resources buy out Hondas stake kept surfacing . The Firodias were even reported to have securitised the assets of their two-wheeler finance company -20th century kinetic Finance (TCKF) to raise the money. Trouble had been brewing since the company recorded a loss of Rs. 6 crore in the first quarter of 1998. Eventually Honda decided to put the matter to rest and called Arun Firodia (Firodia) to Japan I December 1998. Honda made Firodia an offer either he buy their 51% stake or Honda would buy out his 19% stake. Analysis remarked that it was difficult for Firodia to let go of the company that he had nurtured for the best part of life. Eventually, Firodia negotiated a deal with Honda, to acquire to its stake at Rs 45 per share, (when the market price was almost double),at a total cost of Rs 35 crore. He also signed an agreement with them for continuing to manufacture and sell the existing Kinetic Honda models, Honda also agreed to continue providing technical know-how support in return for royalty and technical fees from Kinetic. Considering the fact that Honda was the worlds biggest and most successful scooter manufacture, pullout came as a surprise to industry observers, as it was quite unicharacteristic of Honda Motor to give up a segment, More so, as just a couple of months earlier, Honda had been reported to be planning to make further investments in Kinetic Honda. This was seen as a major setback for the company. It was also perhaps the only instance of a Honda failure anywhere in the world. In 2001, the Kinetic group had two automobiles companies-Kinetic engineering Ltd. and Kinetic motor company Ltd. After the December 1998 deal Kinetic Honda motor Ltd. was renamed as Kinetic motor company Ltd. Kinetics story began in 1972 with the founder H.K.Firodia buying the Luna mopeds designed from a foreign company. The moped ,which aimed at capturing the bicycle market , went on to become such a huge success ,that Luna became a generic name for mopeds. Q: Why was Luna considered a miracle to indian automobile industry ? Ans: In the mid-1980s, the Luna moped from the Kinetic Group was a popular two wheeler in India. It was sleek, stylish, sported a chrome body and had both a regular as well as a pedal kick start. Luna tasted success right after its launch and was a hit among the college going girls. Chal Meri Luna was proved when it could be pedalled if out of petrol! By the beginning of the 21st century, the Luna was outclassed by the improved versions of the two wheelers. What would you have done, had you been in the place of Mr. Firodia?

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