Tata Motors: Struggling for Leadership
Indian Automobile Industry at a Glance
India is the sixth largest automobile producer in the world and its automobile industry accounts for 22% of the country’s manufacturing gross domestic product (GDP). Over the years, the Indian automobile market has evolved from being a sellers’ market to a consumers’ market. The Indian auto industry is expected to grow at a CAGR of more than 10% over the period of next 7 years. The Indian automobile industry is well positioned both demographically and geographically as it can serve both domestic as well as the export markets. A growing economy, increase in the disposable income, easily available vehicle financing, better road infrastructure, increase in the working population and general prosperity of the Indian population are the driving forces behind the growth of the Indian automobile industry.
The Indian automobile industry can be divided into four categories – two-wheelers, three-wheelers, passenger cars and commercial vehicles. Globally, India is the second largest two-wheeler market, the fourth largest commercial vehicle market, and the eleventh largest passenger car market. India is also Asia’s fourth largest exporter of automobiles, after Japan, South Korea and Thailand. The industry produced a total of 23,366,246 vehicles including passenger vehicles, commercial vehicles, three wheelers and two wheelers in FY2014- 2015 as against 21,500,165 in FY 2013-2014, registering a growth of 8.68%. Automobile export volumes increased to 35, 73,806 vehicles in FY 2014-15 from 31, 10,584 vehicles in FY 2013-14, registering a growth rate of 14.89%. Exports of Passenger Vehicles, Commercial Vehicles, Three Wheelers and Two Wheelers grew by 4.42%, 11.33%, 15.44% and 17.93% respectively during FY2014- 15 over the last year. ............................
Tata Motors Ltd.: A Brief Profile
With over 8 million Tata vehicles running on Indian roads (since the first car rolled out in 1954), Tata Motors is the country’s market leader in commercial vehicles and among top five passenger vehicle manufacturers in India. It has become world’s fourth largest truck manufacturer, the second largest bus manufacturer and employs more than 66,000 workers. It is a part of the Tata Group industrial conglomerate, which engages in a diverse range of activities, such as finance, steel, information technology, communication, energy, consumer products, chemicals and hotels...........
Appointment of Carl Peter Forster as Tata Motors Group CEO
Although Tata Motors expanded globally through its dealerships in other countries, its customer base was mainly concentrated in the Indian subcontinent. In 2009-10, the export ratio of Tata Vehicles from India was quite low – only 3% of passenger cars and 7% of trucks were sold abroad which made the Tata brand’s presence in the International Markets inconsequential (Exhibit V)................
Tata Motors under Forster’s Reign
Global recession had a deep impact on JLR. It suffered heavy losses, the volumes were under pressure and there were non-production shifts in 3 UK Plants - Castle Bromwich, Halewood and Solihull. To recover from this impact, Tata Motors hired KPMG International and Roland Berger Strategy consultants. They suggested work force reduction and closure of one of its factories as the only way out but work unions firmly resisted such moves. The inability to strike a deal with the unions and failure to resolve sensitive labor and pension issues led to abrupt exit of David Smith (Smith), CEO of both the brands (JLR) in January, 2010.............
Forster’s Exit
On September 9, 2011, Forster resigned from his position due to unavoidable personal reasons. At the time of exit from the company, Forster said, ‘I deeply regret that my personal circumstances make it difficult for me to continue to perform the challenging duties of managing the thriving global activities of Tata Motors, with its main activities in India, UK and increasingly in additional overseas markets. I am glad to continue my association with Tata Motors’.............
New Appointment at Tata Motors: Karl Slym
On August 14, 2012 Ratan Tata announced the appointment of Karl Slym (Slym) as the Managing Director of Tata Motors to lead the operations in India and International markets, including South Korea, Thailand, Indonesia, Spain and South Africa, with effect from October 1, 2012. His appointment was aimed to revive flagging sales and market share domestically and internationally. However, JLR was kept aside from the scope of his responsibilities.............
Karl Slym’s Reign at Tata Motors
While at Tata Motors, Slym identified three problem areas of Tata vehicles – poor quality, lack of model upgrades and public perception that the company’s cars were only good for being used as taxis. He worked closely on reorganization of Tata’s automotive unit and formed an aggressive sales strategy called horizoNext- a plan to revive passenger vehicle unit by adding new colors and features to its existing models, an overhaul of its parts sourcing division and introduction of new products like ‘Revotron’ petrol engine. To make the company’s organization more efficient, Slym divided the back-end work, production and strategy into three divisions with their heads directly reporting to him..............
Tata Group’s ‘New’ Chairman: Cyrus Mistry
On December 28, 2012, Ratan Tata, retired from all executive responsibilities after turning 75. Ratan Tata, the adopted great-grandson of Tata group founder Jamshedji Tata, was appointed as the chairman of the Tata group in 1991. His supreme leadership for 21 years helped the Tata Group revenues grow 51 times more than the 1991 level. For all these years, he spent most of the time at Tata Motors, a unit of Tata Group. Even personally, he enjoyed driving cars and acquired a collection of cars that include Ferrari California, Maserati Quattroporte, Cadillac XLR, Chrysler Sebring, Land Rover Freelander, Mercedes 500 SL, Mercedes S-class and Indigo Marina..............
Assignment Questions
I Examine the role of a leader in the Tata Motors Ltd.’s business performance.
II ................
