Tata Motors continues to face leadership challenges
New Delhi: In the 1993 movie Groundhog Day, a man wakes up every morning to see the day unfolding just as the day before. It must be a similar feeling at Tata Motors Ltd.
The same market, same problems, same challengers. Only worse.
When India’s largest automaker hired Guenter Butschek as its chief executive and managing director in 2016 after a two-year hunt, hopes were high that this would stop the drift that began with the retirement of former managing director Ravi Kant in 2009. Yet, the problems that Kant’s successors—four, including Butschek—identified since then have remained.
The company’s finances and market share have suffered, and the two pillars that have held it up—Jaguar Land Rover and commercial vehicles—are facing challenges.
Butschek, hired by former Tata Sons chairman Cyrus Mistry, is now under the scanner over performance and the changes he has been trying to make.
The Economic Times on Thursday reported that new Tata Sons chairman N. Chandrasekaran has reversed many of Butschek’s turnaround initiatives, raising concerns the company’s fortunes will take longer to revive.
“Your questions seem to be highly influenced by the media report today which was speculative in nature. It is a myth that Mr Butschek and the chairman are not aligned,” said a Tata Motors spokesperson in response to an email sent by Mint on Thursday. “With the objective to instil a sense of purpose within the organization and make it lean and agile, Tata Motors embarked on a transformation journey, which helped facilitate a great change of momentum—all stakeholders in the company are aligned to this cause. The Executive Committee of Tata Motors discusses all key business developments and plans with the Chairman and the Board, as a practice.”
Butschek has, in fact, acknowledged some of the problems, taking the first step to fix them. In August 2016, he admitted Tata Motors is not on the top of potential customers’ consideration list in passenger vehicles, and pointed to problems such as a silo approach, lack of accountability and no clear definition for excellence.
Before Butschek, his predecessors too had also acknowledged the same. While Karl Peter-Forster, a famed executive of General Motors Co., stepped down as the global chief executive of Tata Motors in 2011 citing personal reasons, Karl Slym, another GM executive was brought in to turn around the company, committed suicide in 2014 in Bangkok. P.M. Telang, who acted as managing director for the company’s Indian operations under Peter-Forster and retired in 2012, was an old Tata hand. Every leader tried to deal with the cultural problems, be it Horizon Next Slym and now the new mission statement by Butschek or the new management structure under Slym and Butschek’s efforts to realign the organisation once again).
Like others before him, Butschek seems to be exactly where he had started, after 19 months in his job. “Issues being faced by Tata Motors require the CEO having a free hand for at least one complete cycle, which is of five-seven years to bring about the transformation needed,” said Vikas Sehgal, global partner and executive vice chairman at London-based consulting firm Rothschild. “Short-term CEO changes will further damage the company and lower the chances of revival.”
Once hailed for the Indica and Nano, Tata Motors has been steadily pushed to the margins of the car market, recording a standalone loss of Rs829 crore in the year ended 31 March. At the company’s cash cow—the commercial vehicles (CV) unit—sales have suffered due to a prolonged economic slowdown in the segment as well as stiff competition.
Any difference of opinion on strategy between Chandrasekaran and Butschek is the worst that could happen to Tata Motors, said Deepesh Rathore, co-founder and director at London-based consulting firm Emerging Markets Automotive Advisors.
“If the two leaders are not in sync, there is nothing worse that can happen to the company,” Rathore said. “If Tata Motors wants to progress as an automaker, they will have to let go of Tata culture, which is semi-PSU culture and that reflects in their products, their dealing with the vendors, etc.,” Rathore said. “I am surprised that Chandra is opposing his moves since he would know how global companies function.”
Tim Leverton, head of advanced engineering at Tata Motors, said in an interview on 27 July that Tata Motors is driven by the direction that Chandrasekaran has given it. “He is inevitably, from my perspective, doing what you would expect. He is taking time to understand the situation and then he has acted strongly to give very clear direction (in terms of) what needs to happen. That really is now driving us directly,” he said.
“Guenter (Butschek’s) is the only hope that they have. It is not a leadership problem but a cultural problem. The damage done to Tata Motors is irreversible,” said a former Tata Motors executive, requesting anonymity.
But for Butschek too, the task is enormous.
Reviving sales is indeed a mammoth task. What is tougher is to improve the fit, finish and the brand perception associated with Tata cars—which to an extent has started to change with the new products. Butschek’s predecessor Slym had admitted that firm’s cars were perceived as “taxi products”. Even more important was to re-establish and resurrect Ratan Tata’s ambitious project—Nano. To put all these in numbers, when Slym joined the firm, only 14% of Indian customers wanted to buy Tata cars with the firm still holding on to its position of third largest carmaker in the country. When Butschek came on board only 5% of Indian customers wanted to buy a Tata car.
Hence, the turnaround that one would be hoping is a distant reality. “The immediate turnaround looks difficult. After Tiago, products such as Tigor and Hexa have not really done well,” said a company executive, requesting anonymity.
“We have Nexon coming in, which will be the last hope for big volumes as after that we will have two high-end SUVs being readied on Freelander platform. So, after Nexon, one can say, there will be a dry patch when it comes to product launches to drive volumes,” this person said.
In sci-fi movies, it’s not easy to exit time loops. Tata Motors will need to do much more to break free.