Assumptions were stretched but not unrealistic: Guenter Butschek
Mumbai: Guenter Butschek has completed two years as managing director and chief executive of Tata Motors Ltd, scotching rumours he was planning to quit and that Tata Sons chairman N. Chandrasekaran had been reversing his decisions. The former Airbus COO now seems to be more comfortable than ever in his role at Bombay House, and looks to complete Tata Motors’ turnaround—a task which many think is one of the toughest in the global auto industry. Under his leadership, the company has gained 160 basis points in market share in the passenger vehicle category and 130 basis points in the commercial vehicles segment. In an interview, Butschek spoke about the turnaround plan he has put in place. Edited excerpts:
You’ve completed two years as Tata Motors CEO. Clearly you are in a much comfortable position than before.
It’s been a very exciting journey ever since I joined Tata Motors on 15 February 2016. It’s been a rich learning experience because you never stop learning even after 30 years of experience in the industry and 35 years of a professional career because the Indian market is a very specific one. Tata Motors, as such, is very specific and I guess we are going to go deeper on the subject.
It was exciting because of the challenges, and some of them were even somewhat unexpected. Some others were to an extent, unprecedented. The other part of the excitement is linked to the accomplishment. That was a very intense period of time because some of my colleagues expected it would take me the famous 100 days to take a call as to the direction Tata Motors would take; I made a call in a much earlier stage.
What were some of those calls?
I took my team out on an offsite for two days; what came out of that was not only a team that started to be a team but more importantly, a rough outline of what was to be launched in June as the so-called transformation journey. This was a pretty fundamental change in direction because we decided that we needed to treat the whole thing (the transformation) in a very holistic and comprehensive way in order to give a new direction to the company. We started with the definition of the mission statement, values, the vision and a strategic game plan.
It was also exciting because of the unpredictability and disruption. When I presented the (roadmap for the) turnaround journey (in mid-2016), as part of the presentation of the budget proposal for the fiscal year 2016-17, I said this transformation journey is very critical to deliver this business plan but it’s equally critical that we are not hit by an unpredictable surprise as a deviation to our assumptions. Our assumptions were stretched but not unrealistic; they were aspirational but not a product of fantasy, so to speak. For this, we did not build a provision.
So you’re saying that the turnaround in the December quarter could have happened before?
We had various discussions regarding whether the same turnaround approach with the three angles of closing the product gaps and ramping up production much faster in order to align supply to the demand; vigorously reducing costs across all categories and products; and, going all out with the dealers and key account suppliers to increase volumes and gain market share would have worked earlier.
We concluded it wouldn’t have worked to the same extent because the sense of urgency would have been missed. At this point of time, the organization was feeling a sense of urgency. One of the key questions was how we could create this sense of urgency because if we had created a sense of urgency, all the financial indicators would have supported it but the organization was in a different mindset.
There was the assumption that we have two to three years to get ourselves future-ready and possibly regain as much space in the market as possible on the back of new programs in terms of market activation, improving some of our backbone processes which would make us a leaner and more accountable organization. We realized later that it was not reasonable and changed our mindset, taking it one level higher by infusing the organization with a sense of urgency to drive a much faster execution, or in general terms, shifting to execution as such; because execution was not necessarily one of the strengths of Tata Motors. Not a single product in the last couple of years had been launched on time.
A very dedicated and single-minded focus was brought about in the organisation because all of the functions received full alignment and encouragement from the top management, the chairman (N. Chandrasekaran) and the board all the way to the blue collars in the organization. In a nutshell, we implemented faster decision-making, a low degree of complexity and a much more agile set-up and in financial terms, a lower break-even point to more effectively manage volatility in the market.
The need of the hour is that we shift gears and focus on domestic CVs as the backbone of the company financially; in particular, as far as M&HCVs are concerned. We thought if we could get this part right, we actually deliver not only financial performance but more respect in the market by gaining market share. It also gives us the opportunity to play differently and bigger in the future.
What are some of the organizational changes you made?
There are initiatives across the organization which has started to change our culture. Decisions don’t have to travel anymore to the desk of the managing director or the head of the business unit. These decisions are now taken by the cross-functional teams in the plants on the spot, which was not the case in the past. Earlier, decision on a particular dealer had to travel from the dealer to the zonal manager, to the regional manager, to the headquarters and from the headquarters, all the way to the dealer. Meanwhile, the customer has walked out of the dealer’s showroom and bought from the competition.
What’s next for Tata Motors? It seems like you’re treading an upward curve.
The ultimate objective of the turnaround is to make it an approach in daily life. This is where we are right now because the turnaround was supposed to last only six to nine months.
Are you saying that the turnaround is ending soon?
No, it’s going to get into the DNA of the company. As far as the three angles of attack are concerned, they cannot disappear because that would be an assumption that the market, at a certain point of time, is going to freeze, that competition will freeze, that volatility isn’t going to exist anymore. We are in a consistently evolving and changing environment; that’s the reason why we need to have a sense of urgency. We would like to help the front-end employees take more decisions faster.
You cannot imagine how much energy the organization has taken from the third quarter results. Indians are extremely proud in their achievements. We have given our people very little reason to be proud of the accomplishment in the recent past. The third quarter brought an incredible momentum in the organization after lots of improvement, commitment and long working hours. After five quarters, we are back in the black. We received lots of compliments at the Expo, in particular, for the new launches. This is not limited to the H5X or the 45X but for products in the commercial vehicle range as well.
Arushi Kotecha in Mumbai contributed to this interview.