Guenter Butschek to restructure Tata Motors as part of 3-year plan3 min read . Updated: 16 Jun 2016, 04:24 AM IST
Tata Motors' new CEO and MD Guenter Butschek aims to realign verticals such as R&D, production and supply in bid to remove bottlenecks
New Delhi: Four months after taking charge of Tata Motors Ltd, Guenter Butschek is preparing to introduce several changes at India’s largest auto maker that will realign verticals such as production, supply, research and development and human resources, in an attempt to remove operational bottlenecks. Currently, these verticals function independently and report directly to the managing director, resulting in a lack of coordination at Tata Motors. The company has often been found wanting at processing demand for its vehicles in the market.
For instance, when Tata Motors launched its sub-four-metre sedan Zest in 2014, the waiting period for its automated manual transmission (AMT) variant was as high as six months. Consequently, many potential customers wandered off to the only other available option with AMT technology—the Celerio hatchback from market leader Maruti Suzuki India Ltd.
“The idea is to break the silos..." said a person aware of the plans, who spoke on condition of anonymity. “... to get rid of habits such as not launching products on time and not having enought inventory in the market to meet demand."
Butschek, Tata Motors’ new chief executive officer and managing director, has also hired the services of Santosh Desai, managing director and chief executive officer, Future Brands for a transformation and articulation of the Tata Motors brand. Desai declined to comment.
These changes are part of a so-called three-year “2019 plan" that Butschek has framed to put the company’s business on track. The plan details Tata Motors’ targets for financial profitability, market share and rankings in both passenger and commercial vehicle business.
Tata Motors wants to get back to more than 50% market share in the commercial vehicle business and a double-digit share in the passenger vehicle industry, said a second person familiar with the matter, who also declined to be named.
In 2015-16, Tata Motors’ market share in the passenger vehicle segment declined to 5.35% from 6.22% a year earlier. In the commercial vehicle segment, its share declined to 44.37% from 47.22% in the same period.
During the year ended 31 March, the company’s consolidated net profit rose to ₹ 5,177 crore, up 201% from ₹ 1,716.5 crore a year ago. On a stand-alone basis, the company posted a net profit of ₹ 464.99 crore, an improvement over the ₹ 1,164.25 crore net loss a year earlier.
According to Deepesh Rathore, co-founder of Emerging Markets Automotive Advisors, the plan looks “motivating" to employees and the company does require a serious overhaul.
“What we have noticed is that you have a building on a crumbling foundation. Every year, you just whitewash your building. It needs a serious overhaul of production and supply. That does not start with the CEO but at the bottom level," Rathore said.
In 2013, then newly appointed Tata Motors managing director Karl Slym had also initiated a makeover plan, but his sudden death in 2014 left it in limbo.
Rathore said it will be easier for Tata Motors to gain market share in the passenger vehicle business, but to do so in the commercial vehicle segment will be difficult due to intense competition from Ashok Leyland Ltd and Eicher Motors Ltd.
On the HR front, Tata Motors has created a new appraisal system defining key performance indicators for every employee, in an attempt to bring more accountability in the system and align everyone’s target with company’s growth objectives.
Butschek will share some of these details with his employees in a town hall meeting on 20 June at its Pune plant, when he will also unveil the company’s new vision and mission statement.
“Since last year, we have followed the practice of a quarterly leadership town hall to update the employees on quarterly results as well as challenges and plans. The town hall on 20 June is a similar prescheduled one for this quarter. As mentioned in previous media interactions, we will look to clearly define the Tata Motors brand position but do not presently have any specific announcements. We interact with numerous agencies for various tactical and strategic projects across our business that remain internal to the company," a Tata Motors spokesperson said in response to a detailed questionnaire sent on Monday.