Writing to employees this week with what he described as the “utmost sense of urgency,” the head of the country’s biggest manufacturer of commercial vehicles singled out the division’s lacklustre performance for immediate corrective action.
“The performance of the CV business, which is the backbone of our company in terms of profitability and revenue, is really worrisome, as we have lost market share in all segments,” Butschek said in the note, which ended with a reminder to his colleagues that “it is time to deliver.”
For the standalone entity, Mumbai-based Tata Motors closed FY17 with a loss of Rs 2,480 crore. The new fiscal year has also got off to an “extremely difficult start,” Butschek said, referring to the company’s muted truck sales performance offsetting the “early green shoots” visible in the car business.
In FY17, Tata Motors’ commercial vehicle volumes increased by only 0.8%.
Compared to this, the broader industry growth at 4%.
Butschek called this dismal growth of the company “not a hallmark of a leader.”
Part of the $100-billion-plus Tata Group, the automotive company also owns the Jaguar and Land Rover brands. Tata Motors’ domestic mainstay is the commercial vehicles business, the fortunes of which are generally linked to economic cycles. Ashok Leyland, part of the Hinduja Group, is the biggest rival of Tata Motors in India’s truck industry.
“Tata Motors is currently going through a turnaround phase, with a strong focus on improving the bottom line by rigorous cost reduction and sales enhancement, leveraging our superior range of new products,” a Tata Motors spokesperson told ET on the internal communication from the MD.
“Our future product plans are also being periodically reviewed, based on the dynamic business situation.” host of causes, both external and internal, for the company’s inability to match rivals toe to toe in the truck business.
‘SURVIVAL OF THE FITTEST’
“The fact of the matter is we failed when it came to reading the market properly, to responding flexibly to changes, and to providing new products (advanced and white space) on time. The further deterioration of our performance in the last few weeks and the challenges that lie ahead of us confirm that we are in a crisis situation, where it is about survival of fittest,” he said.
The company had made a provision of Rs 148 crore loss because of the BS III stock at the end of Q4, and the CV division’s dismal performance was also cited as a reason for the exit of Ravindra Pisharody, the unit’s executive director.
The focus will now be on a rigorous cost reduction drive across all cost categories, regaining market share and driving volumes in the domestic CV business, zero tolerance on product launch delays, and addressing all supply constraints to meet the prevalent demand.
He said the company is fully aligned with the board and is supported by the chairman, who has been closely working with the executive committee to mobilise the turnaround for our business.
The next 3-6 months are absolutely critical for the company and employees will have to demonstrate high speed in taking corrective actions — to enhance sales, and to streamline supply issues by eliminating bottlenecks. “Our business plan is going to be extremely demanding with stretched targets, in terms of sales/market share and financial performance,” said the MD.
Tata Motors has set an extremely aggressive and challenging task of improving the bottom line, firmly committed to our chairman and the board, he said.
“This means that it will not be business as usual; it needs disruption. It requires a single minded obsession to deliver excellence and win back our leadership in the market place,” Butschek said.