Companies

Tata Motors board approves VRS proposal to prune middle management

Varun Aggarwal Mumbai | Updated on January 27, 2018

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Within weeks of finalising its management restructuring, the Tata Motors board has approved a VRS proposal to significantly prune its middle management.

The company is in the process of bringing down the management layers down to five from the existing 14 to cut costs.

The move to bring in a voluntary retirement scheme is the second step towards achieving the goal of creating a leaner organisation. “Tata Motors confirms that as part of the ongoing Organisation Effectiveness project, where we have already finalised the top 2 levels of our management structure, a proposal on VRS package has been presented and approved by the board. Since the exercise for selecting L3-L5 is still under way, it is premature for us to comment on any other specifics at this point of time,” a Tata Motors spokesperson told BusinessLine.

As a part of the restructuring, 120 executives have been finalised for L1 and L2 roles. For the remaining tiers, there would be roles that would become redundant and, therefore, the company is offering a severance package to such employees, the spokesperson said.

The management restructuring at Tata Motors comes at a time when the company has been constantly losing market share in the passenger vehicle segment while also seeing competitive pressure in commercial vehicles, where it has enjoyed a lion’s share for decades.

The company reported a 96 per cent decline in profit in the third quarter. Net profit fell to Rs 111.57 crore from Rs 2,952.67 crore in the year-ago period.

On a standalone basis, Tata Motors’ losses after tax widened to Rs 1,046 crore in the quarter from Rs 137 crore a year ago.

New strategy

Tata Motors, last month, was on the front foot with Managing Director and CEO Guenter Butschek emphasising on the need to have a leaner team with a focus on profitable growth, while announcing its strategy to test out new platforms and high-end cars under a sub-brand TAMO.

The company also signed an MoU with Volkswagen Group and Skoda for exploring joint development projects as the company strives hard to regain market-share.

The VRS scheme will cut down several regional roles and integrate several roles into a central unit. “As part of the restructuring, we have also identified roles, which are best located in a central, common service structure, providing service across the company through optimised and efficient processes.

“To facilitate this, a number of roles distributed currently across the company are being relocated in the Global Development Centre (Pune). We expect significant benefits in cost, service quality and process efficiencies,” the company said.

Tata Motors, however, did not provide more details such as the specific functions that will be eligible for VRS and the kind of package they’ll receive under the scheme. It remains to be seen how this move goes down with worker unions across the company’s many plants.

Published on March 14, 2017

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