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Business News/ Companies / People/  Slym frames makeover plans at Tata Motors
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Slym frames makeover plans at Tata Motors

Quality issues and cars being seen as taxis hurting it most; Tata Motors plans to invest `15,000 crore in 3-5 years for revamp

Tata Motors managing director Karl Slym says the auto maker needs to get the model right in the first go. Photo: Hemant Mishra/Mint (Hemant Mishra/Mint)Premium
Tata Motors managing director Karl Slym says the auto maker needs to get the model right in the first go. Photo: Hemant Mishra/Mint
(Hemant Mishra/Mint)

New Delhi/Mumbai: Three months after Tata Motors Ltd shuffled its top management, new managing director Karl Slym has charted a makeover plan for the company, earmarking 15,000 crore in capital expenditure over the next three-five years.

Slym, a former head of General Motors Co.’s India unit, has identified three problem areas and outlined plans for creating three divisions to centralize Tata Motors’ operations as part of the makeover, according to company executives, parts suppliers and brokerage firms.

Tata Motors conceded that its sales in India, the world’s second fastest growing car market, had dropped primarily because of quality issues and its cars being perceived as taxis, according to a report by IDBI Capital Market Services Ltd that was prepared after a meeting with Slym.

The firm needs to get the model right in the first go, Slym told auto parts suppliers at a 9 January meeting at a suburban Mumbai hotel.

“He was candid enough to admit that as a company we (Tata Motors) make lousy models and we need to change that," a supplier who attended the meeting said on condition of anonymity.

Tata Motors has been struggling with falling sales growth and market share in the face of intense competition and slowing economic expansion.

In December, the company reported a 28% drop in sales from the year-earlier period. In the nine months to December, it sold 248,068 units, an increase of just 0.46%. In that period, India’s passenger vehicle industry grew 8.37% to 1.9 million units. Market share fell from 14.16% in March to 12.66% in December.

Until recently, Tata Motors was the country’s third largest passenger vehicle company by sales, but in September, Mahindra and Mahindra Ltd surpassed its monthly sales, pushing it down to the fourth slot. The Indian passenger vehicle market is dominated by Maruti Suzuki India Ltd, followed by Hyundai Motor India Ltd, the Indian unit of the Korean car maker Hyundai Motor Co.

The lacklustre performance forced Tata Motors to revamp its top management. Slym was brought in place of P.M. Telang, who retired in June. The firm also hired Ranjit Yadav, former Samsung India country head, as president of its passenger car business unit. Neeraj Garg, director (member of the board) at Volkswagen AG’s passenger cars division, joined Tata Motors as vice-president (commercial) for the same unit.

“Over the past three months (from the time Slym joined Tata Motors), the company has identified problem areas in its car business, namely—product quality issues, perception as a taxi product, and Tata Motors’ cars not as frequently and effectively refreshed as those of peers," IDBI Capital said in its report dated 10 January. “Going ahead, the focus would be on new product development across platforms and engine sizes and improving brand equity of Tata Motors models."

To sharpen its focus on product development, Girish Wagh, who played a key role in the company’s development of the small pickup Ace and small car Nano, will now head programme planning and project management, said another person who attended the Mumbai meeting. He too declined to be identified. Wagh was till recently vice-president (operations) at the passenger car business unit.

As part of efforts to boost sales volumes, Tata Motors will launch six new vehicles and models this year, a top company executive said on condition of anonymity. Rapid integration with its overseas subsidiary JaguarLand Rover for both design and engine development is also on the agenda, the executive said.

“All of these are near-term products. The long-term product strategy is being put in place. The company will also venture into compact sports utility vehicle and a market study for the same is being done," said this official.

Tata Motors will invest up to 15,000 crore over the next three-five years and half the amount will be spent on passenger vehicles, with the primary focus being on new products, IDBI said in its report.

Shortly after taking charge, Slym said in an interview that Mint published on 16 October that Tata Motors wanted to be a strong number two in the market to challenge the number one company.

To make the company’s organization more efficient, Slym has divided the back-end work, production and strategy into three divisions; the heads of these divisions directly report to Slym. “The idea is to facilitate the sharpness in long- and medium-term strategy," a second Tata Motors executive said, requesting anonymity.

S.B. Borwankar, who was executive director for quality control, has been made the vertical head for quality control, sourcing and vendor development. The firm has brought in Venkatram Mamillapalle, who will head the central purchasing group," said the second official. “A head for the strategy vertical is yet to be decided."

Tata Motors has created a global sourcing function to reduce costs, improve quality and tap its global supply chain, Jinesh Gandhi and Chirag Jain of Motilal Oswal Securities Ltd said in their 11 January report, which is based on an interaction with Slym.

The auto maker also plans to further improve synergies between its four engineering centres in India, the UK, Italy and Korea, the report said. It has also created a strategy function within Tata Motors, as against strategic decision-making at the group-level earlier, the analysts said.

The central purchasing group is a newly created single window system for sourcing of components for both commercial and passenger vehicles.

“Tata Motors’ management direction is indeed towards lending customer centricity to its business plans, speed and excellence in their execution," a Tata Motors spokesperson said, declining further comment.

IDBI said the auto maker will also be increasing focus on exports and shifting focus from its key markets in South Asia to mature markets such as Africa, West Asia, Eastern Europe and Latin America for its commercial vehicles business.

In the domestic market, Tata Motors’ focus will be on sustaining its market share amid intense competition.

The company is also trying to reposition its small car Nano—pitching it as a second car for motorists in the metros and as the first car to own in smaller cities.

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Published: 14 Jan 2013, 06:49 PM IST
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