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Business News/ Companies / News/  Cyrus Mistry in no hurry to appoint Tata Motors MD
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Cyrus Mistry in no hurry to appoint Tata Motors MD

Tata Motors is in search of the right candidate, who will most likely come from outside the group, says HR chief

Cyrus Mistry, chairman of the Tata Group, has been overseeing operations at Tata Motors since Karl Slym died in Bangkok on 26 January 2014. Photo: Indranil Bhoumik/MintPremium
Cyrus Mistry, chairman of the Tata Group, has been overseeing operations at Tata Motors since Karl Slym died in Bangkok on 26 January 2014. Photo: Indranil Bhoumik/Mint

Mumbai: The Tata Group is in no hurry to appoint a managing director for Tata Motors Ltd, the group’s flagship firm, even though the position has been vacant for more than a year and a half.

The company is in search of the right candidate who will most likely come from outside the group, said a top company executive in an interview last week.

The top post has been vacant since Karl Slym died in a Bangkok hotel on 26 January 2014.

“The chairman is no hurry to force-fit a candidate. Once he likes someone and the board approves, it will be done," said Gajendra Chandel, chief human resource officer, Tata Motors.

The new managing director, Chandel said, is most likely to be someone from outside Tata Motors.

Addressing the firm’s shareholders at the annual general meeting on 13 August, Mistry had expressed a similar view and said that the company needs to take the right decision as “Tata Motors is a complex business".

This is not the first time that the top position at India’s largest auto maker by sales revenue has been unoccupied. After Prakash M. Telang retired in June 2012, the post remained unoccupied till Slym joined in September 2013.

Analysts say that the absence of a chief executive is only adding to the company’s troubles.

An analyst at a consulting firm, who declined to be identified, said that not having one for such a long time can be challenging.

“The chairman is directly overseeing the operations, but he can only do so much," said the analyst. The challenges at the company are significant. “It’s a tough job, whoever gets it," this person added.

Tata Motors has to cope with operating in an increasingly competitive environment and with an uneven recovery. It also has to focus on cutting debt. The company ended 2014-15 with around 21,000 crore of debt on its books. Meanwhile, some of its new offerings that were expected to do well haven’t really set the streets on fire.

Tata Motors reported a 49% drop in first-quarter net profit as sales at its UK luxury car unit Jaguar Land Rover Ltd (JLR) declined with demand weakening in China, its largest market.

Net profit declined to 2,769 crore in the three months to June from 5,398 crore in the year-ago quarter. Net sales fell 6.2% to 61,020 crore from 64,683 crore in the same quarter last year.

The company’s Indian operations showed signs of recovery in terms of sales. Net sales jumped 20% to 9,197.62 crore in three months to June. Net profit, however, declined to 257.57 crore from 393.65 crore in the same quarter last year.

Tata Motors posted an Ebitda (earnings before interest, tax, depreciation and amortization) margin of 4.7% in the quarter on its Indian operations after languishing in negative terrain for several quarters.

While the search for a managing director continues, Tata Motors is focusing on building bench strength by ensuring that there is at least one “step-in" candidate for each position, in the event top executives choose to leave the organization.

Urs Bernhard, executive coach and consultant from the Insead Business School, has been brought in to help with this process. Bernhard, who joined last month, will help the firm to create a pipeline of candidates, Chandel said.

Tata Motors also hopes to increase the number of internal recruitments by strengthening its training processes.

In two years, the company targets to recruit two out of three candidates from within the company—the ratio is exactly the reverse now.

By that time, the company will have one “step-in" candidate for all leadership roles and critical positions, said Chandel. Critical functional areas, including sales and marketing, production, engineering, and research and development will be the focus of this exercise.

Chandel said that the group’s experience with external hires hasn’t been “too great". He also conceded that attracting and retaining talent hasn’t been easy.

“The company has seen its sales and marketing team changing almost entirely every year, over the last three years," said an employee, requesting not to be identified. The attrition rate is as high 25%-30% in the division, he added.

Chandel said attrition wasn’t that high but added that a high attrition rate is not out of the ordinary. “It’s below 20% here as against industry’s 13%," he said.

Meanwhile, Tata Motors is trying to train existing employees through partnerships with universities.

“If talent doesn’t get ahead of technologies, the product will not take shape. The idea is to support the company’s product strategy in 2020 and beyond," said Chandel.

Sudarshan K., managing partner for India and regional vice-president, Asia, at executive search firm EMA Partners International, said that an organization has to re-orient itself as it becomes global. “As companies expand their horizon and their outlook becomes global, even their people outlook has to become global," he said. This, he added, is more true to auto industry, which has become a global market place where companies are competing on scale and technology.

While focusing on training, Tata Motors has also been trying to prune headcount amid poor performance of its domestic business. Tata Motors had in February announced a voluntary retirement scheme for shopfloor workers. Close to 700 opted for it. In June, it rolled out a similar scheme for executives. Chandel declined to share details on how many people opted for that scheme. There’s another one currently under way for those in the senior management positions, which will come to an end in November, said Chandel.

In the year ended 31 March 2015, Tata Motors’ employee costs as a percentage to net sales rose to 9.76% from 9.28% from the year-ago period. It spent 25,641.965 crore in 2014-15 against 21,609 crore a year ago.

On Tuesday, shares of Tata Motors traded at 333.95, 3.69% below the previous close, while the benchmark Sensex ended the day 0.58% lower at 25,705.93 points.

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Published: 16 Sep 2015, 12:31 AM IST
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