Moneycontrol
Feb 14, 2018 08:25 AM IST | Source: Moneycontrol.com

Guenter Butschek's two-year report card: A much improved Tata Motors

Under the German, the company has got hits with Tiago and Nexon and even the unorthodox Hexa.

Swaraj Baggonkar @swarajsb

“We will identify the root cause of the inefficiencies. Tata Motors will undergo a major transformation to get future ready”.

That was what Guenter Butschek, managing director of Tata Motors, said in a no-holds barred media interaction in March 2016, just a month after joining the company.

It was understandable that Butschek was trying hard to convince. After all, the announcement of his appointment was welcomed by a tepid 2 percent increase in Tata Motors' stock in a bull market.

There was reason for the skepticism among investors, even though Tata Motors was now finally filling a position that was vacant for two years.

The answer to that perhaps lies in the commonality (even repetition) in the tone to Butschek’s predecessors.

Tata Motor's domestic operations, especially passenger vehicles, had been nearly written off by market watchers in the face of continuous onslaught from rivals. Commercial vehicles division bore the brunt of the aggression from new and old players leading to erosion in market share.

Tata Motors’ previous heads – Carl Peter Foster and Karl Slym – had voiced concerns over issues like brand in the car segment and servicing and product roll out in the truck and bus division. They devised like-wise plans, but before these could be put into action they exited the company.

But as Butschek, who is a former Daimler and Airbus employee, marks his second work anniversary at Tata Motors this week, there is a lot the market needs to commend him for.

Under the German's reign, Tata Motors has achieved a much better success rate with its new passenger vehicle launches such as the Tiago and Nexon, and the even the unorthodox Hexa. The Nexon became Tata Motor's first product after Nano to have a waiting period that stretched to two months, while the Tiago crashed into the coveted list of India’s top ten best-selling cars.

“The urgency is clearly visible in the way Tata Motors is moving forward. This is seen areas of products, sales, service and network. Butschek has led from the front and rallied his forces most efficiently despite the fact that he was previously alien to the manufacturing culture in India,” said an analyst based in Bengaluru.

Market shares

Tata Motors’ market share in the passenger vehicle (PV) segment has climbed to 6 percent after hitting an all-time low of 5.2 percent two years ago. The company even regained its historical number three position in the PV segment in December 2017, unseating Mahindra & Mahindra. Sales rose 15 percent to 1.45 lakh units by end of December compared to 1.26 lakh units in the same period last year.

In commercial vehicles, the story gets even sweeter. Tata Motors’ market share, by end of December, rose to 47 percent, better than 44.4 percent recorded at the end of the last financial year. In some heavy duty segments such as tippers and tractor trailers, the share went well past 50 percent. Sales grew 17 percent to 2.69 lakh units by end of December.

The growth has reflected in financials too. Tata Motors’ reported profits for the first time in five quarters, in the quarter ended December. A profit of Rs 184 crore was reported in the quarter as against a loss of Rs 1,052 crore posted in the same quarter last year.

HR initiative

Some of that success can be attributed to the massive changes the company made to its human resource (HR) division. Tata Motors has transformed from a casual fence sitter to target-hungry blood hound thanks to the performance-oriented HR drive led by Butschek.

The HR restructuring saw several key personnel move to new roles and in some cases to new companies within the group. The flat hierarchy system that Tata Motors adopted shrunk designations from a whopping 140 to just 5. From automatic promotion every 2-3 years, the appraisal process for its 12,000-13,000 employees now relies strictly on performance.

Its sales team is now rewarded handsomely with incentives coming every quarter, an industry first. Executives can earn 300 percent of the stated incentives for achieving 150 percent of the target sales. Besides there is an estimated savings of Rs 400 crore every year, thanks to the HR restructuring.

Working with dealers 

Another area where Butschek had put his weight behind was sales and service experience at Tata Motors’ dealerships, which is the first point of contact for a prospective vehicle buyer. The overhaul of its dealerships, which included revamp of showrooms to make them trendy, use of more technology for the tech-savvy young buyer (salespersons were given iPads), were some of the initiatives carried out by the company.

The constant focus on sales, services and spares business, helped place Tata Motors alongside Maruti Suzuki in the coveted JD Power study behind the new leader Hyundai last year.

Quality assumed one of the top most places on Butschek’s ‘to-do’ list, an area which has let Tata Motors down several times in the past. Being a manufacturing expert and having worked with German giant Daimler AG for 25 years, Butschek knows that quality cannot be compromised with. At Daimler he led production, industrialization and procurement, while at Airbus he was the chief operating officer.

Tata’s new generation cars such as Tiago, Hexa, Tigor and Nexon mark a generational leap on quality parameters, say several analysts and auto enthusiasts, when compared to older cars like Nano, Indica or Safari. Butschek tightened the screws on parts suppliers and chose only the top 250-300 from a pool of 1,300 Tata Motors did business with during earlier years.

“Forget quarterly reviews, meetings now happen every day to review the performance of the company. Immediate action is taken if the target seems difficult to achieve. Co-ordination with suppliers is much better now than earlier,” said a top Tata Motors executive speaking to Moneycontrol News.

Focus on profitability

Butschek is learnt to now have singularly put his focus on achieving profitability at the standalone level, something which has dodged the company for past several quarters. This is why project TaMo, a tech-heavy, ring-fenced start-up, was put on the backburner.

Under Butschek the company forged alliances with Microsoft and with Jayem Auto for future mobility solutions. The company even emerged as the lowest bidder to win the order to supply 10,000 electric cars to government-owned company EESL through a tender process although it is yet to launch its first all-electric car for the personal buyer.

“We started two year ago with our transformation journey. That was meant to be the overall transformation of the company over the period of 2-3 years. We needed to change gears. Closing product gaps, ramping up products much faster, cost reduction and focus on sales and marketing were the highlights of our journey. We are now much less vulnerable than before because we have become that much more agile. The profits in the third quarter after five quarters of losses is the reflection of our efforts”, said Butschek in an interview with Moneycontrol.
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