September 1, 2012: Ratan Tata, Chairman, Tata Motors
In a candid conversation with Hormazd Sorabjee, the chairman of Tata Motors reveals how much the company means to him, the highs and lows of his remarkable 20-year career as the head of the company, and what he plans to do after retirement.
You’ve just addressed your last AGM as the chairman of Tata Motors. What were your feelings?
I don’t feel any difference. I am going to retire at the end of December, which is three months away. I have known for a long time that it was going to be that day, so there is nothing sudden. I have a closeness and passion for Tata Motors and I’ve been involved with the company through the period it has grown from a truck manufacturer to a range of passenger cars that now includes Jaguar and Land Rover. Tata Motors is probably, out of all the Group companies, the one where I have spent the most time out of my interest and passion.I’ve told all concerned that I would be very happy, if called upon, to provide whatever inputs and offer whatever involvement if needed. However, one would want that to come from the company rather than for me to spell out what I could do. If this were the case, I think I can contribute in the area of product design and development. Also, the company has a need to strengthen its strategy in terms of where it should go and could use some inputs there.
Looking back, what would you say are the high and low points in your 20-year career as the chairman of Tata Motors?
One of the high points certainly is the success of India’s first indigenous car – the Indica. To design, develop and, more importantly, spec a car to be in tune with what the market needed and making it simple yet well packaged were all the things I found exceedingly satisfying. Then, of course, the Nano was another high point. It got much more visibility globally than any other product that the Group produced. This actually surprised me because I was just setting about doing what we had said we could do and the kind of coverage it got and the interest it evoked, stunned me. What I can see as a low point is that the company didn’t leverage this wave of interest and attention the Nano generated. As a result, the Nano has not realised its potential, largely because it’s just being marketed and sold like any other car. It’s a different car and it has to be dealt with differently. I have always said and looked very hard at how two-wheelers are sold and feel the Nano should have been marketed and sold the same way. That wasn’t done, dealerships were not prepared and even the advertising campaigns were not in place. So I think there has been a disservice to the potential that could have been and I am not sure that we can still realise it. But my own hopes are that the Nano can still achieve its true potential.
The problems in Singur greatly upset you as well. Would that be another low point for you?
Singur would certainly be a low. We went to Bengal as a leap of faith to initiate the industrialisation of the eastern part of India and I think we would have made a serious contribution to the prosperity in that state had the conflict not happened. In fact, it has often crossed my mind as to what the real issues were, because when Mamata Banerjee talked about the farmers, we had indicated that we would be willing to buy 400 acres across the road, and gift it to the concerned farmers. But that was not acceptable to her. She wanted the same piece of land to be returned, which meant there could be no solution. But does this serve the farmers’ interests? If the current land is returned it would have seven feet of fill on it, much of it concreted, it wouldn’t be fertile and not irrigated. So Singur was certainly another low point. Another disappointment I can’t get away from is the relative lack of passion I see in the company today in the passenger car area. I might be a little longwinded on this subject, but I’ve always felt that cars are emotive products that strike you with their design and their overall driving experience. They are enchanting things, which make you feel special. A car is not a coffee-making machine, it’s a total experience. The market does not take whatever you give them; so unless you have at least one or two people in the company who have that passion, the desire for perfection, and truly see what an ideal customer wants, you just have another car company. The automotive business won’t allow you to sustain yourself by being just another company. You have to be driven by passion to give a driving experience, you have to be attractive to your customer, it’s a bit of a romance.
Coming to JLR, a lot of products were already in the pipeline when Tata Motors bought the company but you have pushed for some models yourself like the F-Type. When you took over JLR, what was your immediate plan of action?
The F-Type, I would have to say, was not planned in the product portfolio when I took over. I felt we needed to re-establish the company with its heritage of fast and powerful roadsters, so it was something that I really fought for. Also, unlike Land Rover, Jaguar had very few products for dealers to sell and they could not have possibly grown looking at the eight-to-10-year-old products in the portfolio at the time. The XF and the XJ were in the pipeline and were just about to come out, so our first task was to strategically see what else could be done. Could we have an entry-level Jaguar? Could we widen the range of the existing models to give customers more choice? And then the meltdown happened.
Was it a challenge to protect the financial health of JLR during the tough times?
I would say that to keep funds flowing for product development and to ensure that they didn’t dry up was something we worked hard at. We cut operations, we had redundancies of people but we didn’t cut down on product development. It was a tough time because credit disappeared and the banking systems vaporised. This was also the time when in the US gasoline prices rose significantly and there was bad press about the bail-outs for the Big Three which were heading for bankruptcy.It was a bad rub-off for the automotive industry and we had nowhere to turn. We had just acquired JLR and had an ambitious plan of reviving the brands. My first concern when the meltdown hit us was that funding for R&D would be cut. So to let the product development continue unhindered, I was keen to get financial help but not a bailout. My vision for the company was to come out of the recession stronger in terms of products and not the same or a weaker one than when the recession hit us. Regrettably, we didn’t get much encouragement from government and I’ve always said the organisation that really stood by us was the State Bank of India, which guaranteed various loans and enabled us to go through the crisis. We are reaping the benefits now, arising from those actions. If you look at the aftermath, sceptics were saying that JLR will have to downsize from three plants to two and now you can see that all three plants are running at full capacity and we are looking at moving to double shifts. We are building an engine plant and we have hired a thousand more people, plus building a plant in China and looking at a possibility of doing something in Saudi Arabia.
What are the possibilities in Saudi Arabia?
Saudi Arabia is building a huge aluminium smelter, which could be the largest in the world. This could make the production of aluminium in Saudi Arabia very competitive. So taking a really long-term view, if we put an assembly plant there with a large press shop, given our commitment to aluminium in our products, we could have an interesting business case which we are examining today.
Will JLR have deeper operations in India, especially since the mother brand (Tata Motors) is Indian?
Everything will be based on a business case but we are exploring all sorts of possibilities. The old Defender may not be feasible to manufacture in Western Europe any longer and the possibility of making the new Defender in India for various markets and also manufacture assemblies for the UK as well, is something that is being examined. A new engine project too is being examined. We are also trying to align Tata Motors’ development to create a greater synergy with Jaguar. Finding commonality between the brands is what we should be working towards. The fact that India can produce something more cost-efficiently is something we will certainly avail of. The Freelander today is being produced in India and we are also looking at assembling the XF in India, if it makes sense. So everything is based on a business case and to some extent tariff structures will define that.
Looking at joint ventures, you’ve always been sceptical about them and after the JV with Mercedes in the mid-1990s you haven’t had one for cars?
Joint ventures ought to be joint ventures, so you bring something to the table and the partner brings something to the table. Unfortunately in many cases, you are expected to bring your local market knowledge or experience to the table, surrender your brand and what the international JV partner brings is product and technology. That’s a bit of a loaded dice because the product of the JV partner gets established in the country with the local partner playing an important role in doing that. Once the product and brand are established, the partner who controls the products doesn’t feel the need for a JV anymore and there’s always pressure to be bought out and even if it’s an attractive offer, you are eventually left with nothing. There are very few international companies today that really take a long-term view, for example a 20-year view, on joint ventures. Maybe, the Japanese companies are much more in sync with what I’m saying than say the Western companies.
Did the inherent product development capability in Tata Motors or TELCO at the time give you the confidence to go it alone?
The chairman of TELCO, SumantMoolgaonkar was a visionary who built a design and development capability in the company, which I enhanced quickly after joining. I went and got a few young people from NID and in particular from the Car Design group in the institute, which was not really known. It was a very young and enthusiastic group but in hindsight we made one mistake – we subordinated them to the engineers which we should not have done. Many of the things that they wanted to do were rejected because it was said that they could not be done or were too expensive to do, which was a mistake as some of the good people left and went abroad. However, the lesson was that I felt we had some design and capability where we could really do something that was different. Of course, we went out and got special help wherever we needed it from overseas, but eventually the design belonged to us. That’s how the Indica and Safari were born.
Your own indigenous products could never have come out of a JV?
No, this could never have happened in a JV. We would be joining hands to get our JV partner’s products. The only other option would be to get into a manufacturing collaboration for products.
What is the status on the Fiat collaboration? There’s been a parting of ways on the retail side but the manufacturing JV is still in place?
I’ve always said that with Fiat we had an open-ended collaboration wherever we could and should work together. We’ve looked at taking Fiat’s help in establishing us in other countries, we have this joint engine project with the company, we share manufacturing facilities and those things continue. It is only the marketing of the Fiat products, which Fiat believed they could do better on their own.
Cyrus Mistry, who succeeds you as head of the Tata Group, may not be as hands-on as you have been with Tata Motors. How do you think this will influence the company, especially since the Group chairman isn’t expected to be so deeply involved at a management level?
I don’t think you can generalise or see this as an issue. Every person has a passion and needs something that makes him feel alive. You know my love for aviation, so hypothetically if we had an aircraft company I may not have devoted so much time to Tata Motors and would love to test-fly planes which we would develop with great passion – perhaps to the annoyance of my colleagues as it would be deemed to be dangerous! But that is what I would have done because it is something I love. I don’t think it’s unusual to have a Group chairman who would have an interest in a particular field or company. I think Jeh (J R D Tata) gave a lot of his time to Tata Steel and gave up his passion for cars to SumantMoolgaonkar who built TELCO into India’s largest commercial vehicle company. Jeh also spent a lot of time on Indian Hotels because he was interested in the hospitality business. He got excited over new products and businesses like the electronic watch business. But it didn’t mean he didn’t have any interest in power or other areas in the Group. What one needs is a leader who is ‘alive’ and involved in the areas of business that interest him because he can’t be involved in everything. So what we really need are leaders who share the passion for the company they are running. I think, by and large, we have developed that in a lot of our companies.
After retirement, will we still see you jumping in and out of cars at motor shows?
Oh yes, that’s the only way to stay in touch. I will try to go to motor shows and will continue to keep involved with new technologies relating to cars and the kind that excite me. They may even turn out to be investment possibilities, either personal or for the Group. Rather than just cars, I have an interest in various frontier technologies.
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