Karl Slym drives Tata Motors' revival strategy

This Monday, Cyrus Mistry succeeded Ratan Tata in yet another tradition at Tata Motors - the chairman's annual employee address at the company's Lake House facility in Pune. As he stood up to face over 25,000 employees, including many watching via webcast, he had behind him the local passenger car industry's worst year in a decade.

Industry sales were likely to be down by about 5% in FY13 and Tata Motors is slipping towards its worst loss in a decade, according to analysts. It posted a Rs 458-crore loss in the quarter ended December.

Mistry was quick to identify one part of the challenge - fierce competition. Seven new global carmakers came to India in the past four years and the domestic industry saw 150 new launches.

The other part of the challenge, which the Tata Group chairman didn't refer to directly, perhaps lies within the company. Tata Motors' new car and truck launches since FY09 have failed to prevent market share erosion - down from 14.9% to 12% in passenger vehicles and from 60.1% to 56% in trucks, according to the Society of Indian Automobile Manufacturers.

Nano sales are down from about 75,000 units to a little over 52,000 in one year. The Sanand plant is idling at less than 10% capacity utilisation. Its immediate new product line-up isn't exciting: this year will just see model year changes, 2014 will see some new products, but a new platform will come only in 2015, according to a person in the know.

Undaunted, Mistry egged his employees on in his address. "It's time to meet them (global rivals) and beat them in their backyard," he said.

The man Mistry has chosen to lead the charge is Karl Slym, Tata Motors' new managing director, who took charge in mid-September 2012. Six months into his job, Slym is already scything his way into the organisation, making radical changes... starting at the very top.

He has pretty much disbanded the old management committee that was running the company and has replaced it with a leaner, more purposeful executive committee of just eight.

Apart from Slym, commercial vehicles head Ravindra Pisharody, passengers cars head Ranjit Yadav and engineering head Tim Leverton are on it. Heads of quality, purchasing, finance and HR, Satish Borwankar, Venkatram Mamillapalle, C Ramakrishnan and Prabir Jha, respectively, form the rest of the team. Yet to be identified heads of programme planning and project management, and corporate strategy will also join the committee.

The new structure is very different from the earlier one. For example, each factory had its own quality and purchase head. Decisions were dispersed and lacked consistency. Now, with just one head each for quality and sourcing, reporting directly to Slym, Tata Motors hopes to take and implement faster decisions, buy smart, leverage economies and maintain high and consistent quality, said a person aware of these decisions.

The new leadership team will also aim to avoid duplicity and bring in synergies between the passenger cars and commercial vehicles businesses. In the past, the two businesses were guided by individual missions, according to Tata Motors' external agency partner.

Four of these positions, all reporting directly to the MD, did not exist earlier and have been created by Slym. Some are designed to tackle challenges the company is struggling with. For example, the planning and project management function will take charge of timelines and cost schedules for all new launches. The company has struggled with timely launches in the past. Its SUV Safari Storme was intended to be an 18-month project, but took five years, said a person in the know.

Industry watchers said the company's problems can't be easily fixed. "Tata Motors' products have not kept pace with the changes in the marketplace. Cosmetic changes in the organisational structures can barely have any impact," said BVR Subbu, an industry veteran who has worked for many years at Tata Motors and Hyundai India, and is now an independent consultant.

"Tata Motors still fares poorly on quality and its product pipeline is empty," said Deepesh Rathore, India MD for IHS Automotive, a consultancy. "It will take at least 2-3 years for Tata Motors to launch new products and how Karl is able to induce customer demand in that time frame is going to be a challenge."

This is a problem, especially since the company is yet to identify the new product planning head who will sit on the new executive committee. In the interim, Girish Wagh, formerly VP (operations)-passenger vehicles, has been moved into the programme planning function (only for cars). He will handle the new 'X0' premium hatchback programme that will roll out in 2015.

In trucks, Tata Motors is now rolling out six heavy trucks and an intelligent vehicle and driver management solution - Tata FleetMan Telematics Services. The Ultra range of LCVs will also be introduced during the calendar year.

Tata Motors claims some of these steps are already delivering results. With Satish Borwankar bringing a sharp focus on quality, the company has found the confidence to introduce a four-year warranty on tractor trailers, multi-axle trucks & tippers of 25 tonnes GVW & above, covering the vehicle's driveline (engine, gearbox & rear axle).

Earlier, the warranty was for only for two years. Similarly, if Tata Motors is now able to offer 60% buyback value for its Manza Club Class after three years, it is because of the benefits flowing in from these changes, according to the company's external agency partner.

Analysts believe Slym took some tough calls towards the end of FY13, including aligning production to demand, putting workers on the bench, and diluting inventory levels at both company and dealer yards. Sources said he is keen to absorb the negative financial impact of such measures in the FY13 balance sheet to start the new financial year on a clean slate.

As a consequence, some analysts believe the company will report higher losses in the quarter ending March 2013. That's the price of a clean-up. But from there on, things can only get better.

Also read: Tata Motors appoints Karl Slym as Managing Director