Carl-Peter Forster's Appointment Marks the Next Stage in the Tata Motors' Globalisation
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Image: Vikas Khot
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GOING GLOBAL: Tata Group chairman, Ratan Tata has entrusted Foster also with the task of taking Nano global
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The Hurdles
There are some practices that Tata Motors will need to incorporate to play the global game. Take for instance, the way Toyota, the world’s largest automobile manufacturer works. The hybrid-synergy drive technology that was developed for the Prius, by the time it reached a second generation stage, was made available in many other Toyota models like Camry right up to the company’s luxury brand Lexus. “Global companies take a holistic view of global markets in a way that they can see applicability across a range of products and across a range of markets. Take a look at Tata Motors’ product portfolio and you will see that it is not happening today,” adds an automotive expert.
Let’s take a closer look at Tata Motors’ passenger vehicles business, the third largest in the country after Maruti Suzuki and Hyundai. After being in the business for over a decade, Tata Motors has had to source the latest generation engines from Fiat. Its product portfolio doesn’t cater to the premium segment of the market and it has a limited offering in large sedans. On the lowest end, there is Nano catering to mass market, that needs to be scaled up locally and then, perhaps in the international market. In the premium end, there are the Jaguar and Land Rover brands that now operate as a separate entity to preserve their exclusivity. “In BMW, from the 9-series to the mini, you can see a common luxury strategy. What is it for Tata Motors?” says another automotive consultant.
To Start With…
So Forster is expected to bring in the desired seamless integration. His immediate step will be to draw up the long-term plans for the car business of Tata Motors that will include, apart from putting JLR on track, taking the Nano overseas before competition from the likes of Renault takes away the surprise from ultra low cost cars.
But among all the various pulls and pressures, Forster’s first task will be to break the deadlock inside JLR. When Tata Motors had acquired JLR in June 2008, it did not envision a big change in the existing set up as the company was returning back to profits. But, the economic downturn suddenly upset their plans last year, which left their calculations awry. For starters, Tata Motors had to borrow nearly $2 billion at higher rates as credit was not forthcoming in the market. It also had to cut down production as the demand for luxury vehicles fell sharply. Though sales have picked up recently and it is only 20 percent lower than last year, Tata Motors is using the opportunity to slash costs quickly.
“The agreement that it struck with the work force very much set the industry standard in the sense that they agreed for a real pay cut in return for eliminating redundancies. But during the downturn, they reduced the headcount by almost 2,000. Going forward, they want to shut down one of the plants in the West Midlands but I don’t think it is possible without a headcount reduction,” says David Bailey, professor of international business strategy and economics, Coventry University.
In September 2009, Tata Motors had informed workers that either the Solihull plant, which makes the Range Rover, or the Jaguar plant in Castle Bromwich is to shut down by 2014. The decision is expected in the first half of 2010 and JLR has maintained that no jobs will be lost in the process. The idea is to merge both the plants, located eight miles apart, into one to bring in cost efficiencies. Moreover, JLR has said that the merger would lead to the creation of almost 800 new jobs at its Halewood plant in Liverpool, which will be manufacturing the low-carbon and more fuel efficient car, the ‘baby Land Rover’.
At GM Europe, Forster was responsible for leading Project Olympia, a massive restructuring operation, mainly targeted at cutting losses at Opel’s European operations. During that time, the Der Spiegel magazine anointed the new German boss as a messiah for Opel. Inside Bombay House, Herr Forster may soon come to enjoy a similar status.
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