Companies

Tata Motors puts the brakes on TaMo

Varun Aggarwal Mumbai | Updated on January 09, 2018 Published on August 22, 2017

Tata Motors CEO Guenter Butschek

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The priority is to cut down cost to boost sales, says CEO Guenter Butschek

Six months into launching its new subdivision to focus on performance cars, Tata Motors said it is putting brakes on the TaMo division, which showcased its sports car RaceMo at the Geneva Motor show in March.

“TaMo is one of the nice-to-have projects. We have reached a stage where we can easily launch it but at this time we have put it in the fridge. Whenever time, priorities and money allows, we are going to bring it back,” Tata Motors CEO Guenter Butschek said.

Butschek indicated that the company’s current cost structures in the passenger vehicle segment is quite high and the priority is to cut down cost to boost sales. This has come at a time where two weeks ago Tata Motors announced the end of its tie up with Skoda-led Volkswagen Group to jointly develop a small car platform.

Also read: Tata, VW split will mark a no-win end

The two companies were exploring using Tata Motors’ AMP (Advanced Modular Platform) with VW technology to build small cars. The joint effort would have helped Tata Motors’s AMP achieve economies of scale, while VW was expected to gain significant cost advantage.

Butschek said that the company will continue to work on AMP and will launch its first hatchback based on the platform in 2019. The company hopes the platform which would be used to build other models as well will help reduce cost and provide economies of scale.

However, a day before its annual general meeting, Butschek tried to highlight the company’s plans to reboot its commercial vehicle division, the bread and butter for Tata Motors.

“Year 16-17 was largely disappointing. Yes we have put the right actions in place but we need to accelerate because we don’t have 2-3 years. We need to stop bleeding in terms of market share loss. We need to stop bleeding financially,” Butschek said adding that the company hopes to grow its market share in the CV segment by 5 per cent by the end of the fiscal.

“We hope to get a lot more than Rs 1,500 crore of potential bottom line improvement with recurring benefits for future years. We expect benefits coming out of a number of internal actions focused on cost reduction, noteably aggressive material cost reduction, productivity improvement, headcount reduction etc. Hopefully, the total impact on bottom line will be much more,” Butschek said.

Butschek also acknowledged that some of its bold steps to restructure the organization have not gone too well. This includes the company’s plan to remove all designations.

“We underestimated the cultural readiness. People complained about the removal of their designation after working for more than a decade at the company. So we have decided to continue with designations at 5 levels instead of the previous 14,” Butschek said.

A day before its annual general meeting, Tata Motors has laid down a plan to return to profits by the end of the fiscal by focusing on cost reduction and productivity improvement and hopes to gain commercial vehicle market share by five per cent.

“Bottom line improvement of Rs 1,500 crore coming from these market actions. We also see benefits coming out of a number of internal actions focused on cost reduction, noteably aggressive material cost reduction, productivity improvement, headcount reduction etc. Hopefully, the total impact on bottom line will be much more.” However, the company did not give a timeline for the expected savings, saying that the expectation is to turn to black this fiscal.

Butschek said the company will be very aggressive this year in terms of launching new CV products and there will be zero tolerance for delays in launches, something that he said costed the company significant opportunity loss last year.

“On the commercial vehicle side also we have gaps. We have the widest portfolio but with low degree of commonality we have not been able to leverage the volume to the extend we require,” Butschek said.

Published on August 22, 2017
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