Turnaround will continue in fiscal 2019: Tata Motors
Pune: Despite an improvement in market share in fiscal 2017-18, nine months after implementing a turnaround strategy, Guenter Butschek, the 57-year-old managing director of Tata Motors Ltd, is “uncomfortable” about admitting progress.
The turnaround strategy refers to Butschek’s mid-2016 plan to enhance the company’s top and bottom line performance by overhauling the domestic supply chain, product portfolio and organizational structure.
The initiative showed results when Tata Motors’ Indian unit reported a net profit of Rs184 crore in the three months ended 31 December. That helped the owner of British luxury car firm Jaguar Land Rover Plc post an 11-fold jump in its consolidated profit for the quarter.
India’s largest automaker by revenue has continued the programme, terming it Turnaround 2.0, with a special focus on its passenger vehicles division, which has languished over the past few years.
“What we have learned is that a single focused mindset is the benefit of a turnaround; it is the proper answer for the ...highly competitive and volatile India market. The turnaround mindset needs to get into the DNA of the company to deal with the volatility in the market,” Butschek said on Wednesday, on the sidelines of the launch of the Ultra range of commercial vehicles (CVs).
“We will continue our (turnaround) journey into fiscal 2018-19. Success creates hunger for further success and we are hungry. As we further ramp up our capacity, we will certainly further enhance our sales to the extent that we would like to outpace the market across all segments. This means we are bound to gain further market share,” he added.
Having clawed back market share losses in the commercial vehicles segment, Tata aims to break into the top three passenger carmakers by the end of the year.
“For us as an organization, it was critical to get the revenue and profitability right, which was in terms of CVs. The logical consequence was that because it (the turnaround) worked for CVs, it should work for PVs as well,” Butschek said.
However, the turnaround is not yet complete for CVs. Despite investing in additional capacities, de-bottlenecking its own machine operations and supply chain to increase overall output by 70%, Butschek “certainly regrets a good number of restrictions in MHCV (medium and heavy commercial vehicles)”, demand for which significantly rose due to an overloading ban imposed in some states during the year.
Butschek describes the failure to de-bottleneck the supply chain and ramp up capacity in line with demand as “the strongest admission of failure in the past”.
The restrictions were not in terms of volumes, but the mix the flagship of the Tata group could manufacture, Butschek said. “The restrictions we had were lesser on our side but on the suppliers’ side. These are constraining our movement in market share,” he said.
“We expect to be almost unconstrained by the second quarter except as we move forward, something else will pop up which we don’t have on our radar,” Butschek added.
Speaking of how sustainable the turnaround has been after showing initial results in the December quarter, Butschek said that the company witnessed “higher sales volumes, multiplied with products with better contribution margins and profitability in the fourth quarter. It would be a surprise if it hadn’t led to a positive operating profit before tax (PBT)”, without disclosing details since the company will announce its March quarter earnings after mid-May.
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