Mumbai/ Pune: For the past many years, Tata group chairman emeritus Ratan Naval Tata used to address employees of Tata Motors Ltd from Lake House, the plush guest accommodation in Pimpri, Pune, that is reserved for the group’s senior executives and prominent overseas visitors.
This year will be different. Tata quit as chairman of the group on 28 December.
Instead, Cyrus Mistry, chairman of the $100 billion Tata group, will keep the tradition started in 1988 alive by delivering his inaugural address to the 25,000-odd employees of Tata Motors, including overseas subsidiaries, at the very same venue on 1 April, according to three people familiar with the matter who requested anonymity.
Lake House has been seeing a steady stream of visitors over the past few days, including Mistry. Other top officials who have come here include Karl Slym, managing director and chief executive; C. Ramakrishnan, group chief financial officer; Ranjit Yadav, president, car business unit; and Ravi Pisharod, executive director, commercial vehicles business.
Lake House has always been Ratan Tata’s favourite location. Away from the din and bustle, Tata, along with his German Shepherds—Tito and Tango—often unwinds in the sylvan surroundings of Lake House. He would address employees on the first day of April almost every year through a webcast, said one of the three people cited above. Tata also celebrated his 75th birthday on 28 December here.
Lake House is also used for major company events. For instance, when India’s first homemade sports utility vehicle Tata Safari was launched, it was here that Ratan Tata briefed the press.
Analysts, however, say Mistry’s address to the employees will be more of a formal exercise since Ratan Tata continues to play an active role in Tata Motors.
“Ratan Tata may have retired but he continues to be very much involved with the strategy of the firm’s automobile business,” said Chandresh Ruparel, managing director at global financial advisory Rothschild (India) Pvt. Ltd.
Over the years, Tata’s annual address to employees from Lake House has entailed taking stock of the financial year and planning for the year ahead, assessing the challenges and the opportunities.
Mistry, in his maiden communication to the employees, is likely to toe the same line, said another person cited above. “It used to include an address by RNT (as Ratan Naval Tata is referred to), followed by a question and answer session with employees from Tata Motors’s plants in India, Korea, Thailand and South Africa. There was also an opportunity for people to share innovative ideas,” said a former Tata Motors official, requesting anonymity.
With multiple challenges staring the domestic business of India’s largest auto maker by sales revenue, this April may be different from the previous ones.
B.V.R. Subbu, an automotive entrepreneur and former president of Hyundai Motor India Ltd, said the big challenge that Cyrus Mistry faces is filling the “very large shoes of Ratan Tata”. The former Tata group head was among the very few chief executive officers who understood the entire automobile industry, said Subbu, who also worked at Tata Motors.
“Cyrus will benefit through very close interaction with Ratan Tata to lead the company,” said Subbu who remains a diehard Tata Motors man and refers to the company by its earlier name, Telco.
Mistry, who was inducted on the board of Tata Motors on 14 December, and the new team headed by Slym is faced with the task of putting the company back on track.
In the December quarter, Tata Motors’s domestic business incurred a loss of Rs.458 crore. In the 11 months to February, Tata Motors’s passenger car sales contracted 28% to 165,789 units, dragging down the market share to 9.67% from 12.67% a year ago, according to Society of Indian Automobile Manufacturers, or Siam.
Even the commercial vehicle business has suffered due to a slowdown in spending on infrastructure projects and the overall slowing economy. Shipments to overseas markets also shrunk 11% to 6,570 units in the same period.
Analysts say the task becomes more challenging for Mistry because of the bleak economic scenario.
“Rectifying the company in a situation when the economy is not doing good is all the more difficult. It cannot happen immediately. It would take the team at least two to four years to put things on track,” said a consultant, requesting anonymity.
In a bid to lift sagging sales, Tata Motors has introduced attractive schemes for the Nano and Indigo Manza models in the first week of March. While the Manza scheme guaranteed customers 60% of the purchase price after three years, the scheme on Nano allowed buyers to swipe their credit card to buy the car and pay the remaining amount in three, six, nine or 12 months.
The response, however, was tepid, according to dealers. “The schemes have hardly made any difference, said one of the Mumbai dealers requesting anonymity. Dealers in Kolkata, Delhi and Bangalore echoed similar sentiments.
Meanwhile, a Pune-based vendor to Tata Motors, said they are still awaiting clarity on the new policy. “In the supply base, there is still lack of clarity on how the new structure will work which Tata Motors has announced. We are still groping in the dark and think it could take at least another month before there is any clarity,” he said.
The supplier was referring to the new internal bifurcation wherein individual groups will be responsible for procurement across the organization. “We don’t know how this will work”’ he said, adding the supplier base was introduced to Tata Motors’s northern team only a few days ago. “There is very limited external communication from them at this moment,” he added.
A former Tata Motors official, who worked at the auto company for 38 years, said that there had been drastic changes even at the time Ratan Tata took over from his predecessor.
“Before Ratan Tata took over, the culture at Telco was paternalistic and people were encouraged to take risks. This allowed people to go out of their way to do things: mistakes were allowed but you were expected to learn from them.” he said, adding that there was also a sense of belonging, and great pride in being part of the Tata group.
“This picture changed slowly after Ratan Tata took over and the company became more professional. That was also necessary as the environment changed. But the company’s biggest capital, its human resource, has eroded. People no longer look at employment at Tata Motors as one for life,” said this former senior official who spent all his working life at Tata Motors.