Corus good buy, but hit by eco slump in Europe: Ratan Tata

Ratan Tata, Chairman Emeritus, Tata Sons won the Lifetime Achievement Award by CNBC this year. His work is legendry, having built the country’s biggest conglomerate, Tata Sons.

"India has at times been very exciting and at times it’s been very frustrating. For me India once freed up in the early 1990s became a very exciting country; it was a country that was trying to catch-up with the free market environment in the world around, which we had been denied off for so many years," says Tata. Also Read: Ratan Tata elected to board of US think tank
As India opened up, Tata grew the 145 year old company into a corporate behemoth with a tight grip on key sectors from IT consultancy to steel, to automobiles. He grew Tata Sons into USD 100 billion empire.
“We were headlong into forging joint venture, setting up in areas that are opened up to us now which had not been earlier rather than trying to fight and keep the openness of the market away,” he says.
Tata believes all the acquisitions made by the company – Corus, Jaguar Land Rover, among others – were all perfect fits. He says had the economic downturn not hit Europe, Tata Steel and Corus together would have been a bigger, viable company.
He feels that Nano can still succeed. He believes that the cheapest car garners a lot of attention outside India. Below is the verbatim transcript of Ratan Tata's interview on CNBC-TV18 Q: You like taking on new challenges?
A: Yes, I do. I enjoy that, in fact I am a bit of a stubborn person, if somebody stands in my way then that itself is motivation to get either around him or above him or under him. Q: Beneath a hardnosed businessman is a self-confessed car buff, with a compassionate side feel get to see. What he envisioned as the people’s car for families that could only afford scooters, called the Nano. It was sold as the world’s cheapest car at around USD 2,000.
A: I believed that we could make a difference. I also realized that we had to look at and cater to the lower end of the citizens’ base and think of how we could do things for the lower segment of the population. Q: Nano didn’t takeoff. You headed overseas. Cutting a slue of mega deals were over USD 20 billion, acquiring companies like Tetley Tea in 2000, Corus in 2007 and Jaguar Land Rover (JLR) in 2009.
A: In the case of Corus, there is a view that we could put Tata Steel and Corus together and make a viable, bigger company, which in my view would have happened had it not been for the economic downturn in Europe, which certainly disabled Tata Steel Europe, the erstwhile Corus to achieve its full potential.
On Jaguar Land Rover, we had a couple of secret meetings at Heathrow Airport and I didn't know what we could do with Jaguar. Land Rover was very interesting for me because it sat on top of our sports utility vehicle (SUV) activity and was a nice fit. Q: Many of these brands were British? You are fond of buying British companies?
A: It’s just by circumstances. Q: Your biggest deal was Corus, at USD 13billion. You actually bid for a company that was four times the size of Tata Steel. You normally like to take on such risks?
A: It was always USD 13 billion or USD 14 billion. It was initially at 5 or 6, which is the time I told the management team that we should buy it and the real reason it went up to that level was in the final last few months. It became a bidding context with the Brazilians and at that stage the stubbornness was an issue, we will see this through. Q: How did you know that it was a right decision to make?
A: We didn’t. You never know that you have made the right the decision. If the meltdown in Europe hadn’t happened, Corus was making money, we would have been in somewhat the same boat as Jaguar and Land Rover and I had many people telling me how stupid we have been to take Jaguar Land Rover, this is a company that has never made profit and then the market situation changed and fortunately Jaguar Land Rover came through beautifully. Q: At USD 13 billion, the amount you paid for Corus, you think you might have made a fair price for the company, was it too expensive in hindsight?
A: It was expensive and in a way it's like buying a house, it's the one you want. It have us a global position, put us in the European and US market which could not have been addressed and gave us the capacity which at that time was crucial. We were only 5 million tonne company in India and this gave us about 20 million tonne so it was a high price but not a price that would do what the economic situation did to us, which is unfortunate, maybe a few years from now, I hope we can put up our feet and say it was tough during that time, but it is still worthwhile. Q: I understand Corus is still losing about USD 1 billion a year. Are we approaching a situation where you might have to consider selling all or part of the company? Will it boil down to that?
A: I don't know. In fact, I have been away from the situation now for nine months. So I wouldn't like to comment. I understand that very slowly things are turning around. I think there are many things that Corus probably needs to do. Q: What does Corus need to do?
A: I do not want to comment on what the management should or should not do. Europe is still flat or down, and the company needs to look at different markets including the emerging markets as a market for its products. Q: Given the accolade you have received bringing Tata to where it is today; would you admit that Corus was the one deal that was a flop?
A: No. We need to be fair to Corus and make a judgement as to whether we can improve the market for the company. It seems like the world wants to say that Corus is a flop. I think that is a wrong signal to a company that is trying to claw its way up or otherwise in fairness one should say any investment in steel would be a flop. Q: Any valuable lessons from the Corus acquisition, you think can be applied to any future deals that Tata might make?
A: Yes, in hindsight we should have focused more on raw materials than finished steel because what did happen is as the economy went sour in Europe, ore prices continued to rise, it became a shortage issue, the strength of the business was in how much of raw material we had and so the other way round we would have been ahead of the game. So, I do not think it is fair to say that Corus is a flop. I think there are still things that can be done to Corus. Q: You are hopeful that you can revise Corus?
A: If the economy doesn’t revive, reviving Corus will be extremely difficult and if the economy does start to revive then Corus will come into its own. Q: Are you prepared to wait?
A: What do you do, you just clinically decide to send several thousand people home and does one have no responsibility for the people that work for you or the people who are still with you. I think those are the issues that any management needs to take in place. I think European assets of Corus are doing better than the English assets of Corus. The English assets have had no investment in terms of modernized process improvement for many years because the British Steel has been under pressure and at the same time the economy had changed or continued as it was when we bought it. We would have had a 20 million tonne steel company, sixth or seventh largest in the world, playing its role in a booming economy, which steel was at one time and I hope it will become again. Q: In your 21 years driving Tata Sons integrity has always been an important part in the way you conduct business. How do you do it in a country that is riddled with corruption and crony capitalism?
A: It is difficult, but if you take a view to not be corrupted and to be corrupted is separated by a thin thread and not a band, not an ocean you have only one choice that is not to cross that thread. If you do you are on the other side.
_PAGEBREAK_ Q: Have you ever been tempted?
A: I have never been tempted, but have I come close to being forced to do it, yes many times. Q: In what cases?
A: In the sense that either you understand that if you were to pay, something would be done or statement that if there was something that was done for you there would be something expected in return and in each of those cases one is declined. One is declined because one wants to go home at night and say I did not succumb. Q: And you want to sleep better?
A: Maybe people that succumb sleep better too, but you want to do more than that. You want to say that you did not succumb. You want to go to sleep feeling good, not dirty. Q: Corruption has been blamed for a lot of the policy paralysis in India. Are you hopeful that things will change soon?
A: As an Indian I would definitely hope that things would change. Whether I am hopeful that they will depends on the leadership we have. Q: How much you rate the current political leadership under Prime Minister Manmohan Singh in tackling this problem?
A: It is very difficult to say. I think the Prime Minister has many problems to tackle. He has an opposition which is opposing for the sake of opposing. He has a media which is very critical. It is very difficult for me to pass judgement on a very complex situation that he faces. I have a very high regard for him as a human being, as a professional and I am sorry to see that under his leadership the country is going through what it is. I think the government has not done enough to really send messages to the rest of the world that they are turning it around. Q: So you think improvements can be made.
A: Of course I do. It would be in same vein as what you asked about Corus. Corus can be improved if it did certain things. Inaction will not improve the company and inaction will not improve the country. It needs action. It needs an attitude of invigorating investment and invigorating the business climate which is not there today and those issues are issues that government should be sensitive to. Is the government capable of doing that; yes. Q: That stand against what you call vested interest.
A: Yes. Q: Has that meant at times that you had to walk away from certain projects, certain business opportunities?
A: Yes, we have definitely. Q: Like what?
A: I do not want to go into this. The airline is one good example. The project went through three Prime Ministers. The success of keeping our project off was the work of known vested interest and they succeeded and I hope this time around they do not succeed because what the country does not need just now is a situation where the world looks at them and says, well somebody was trying to invest in the country and they were thrown out. This is what used to happen in the 1970s and 1980s and it should not happen today. Q: Entering the airline business has always been a challenge for you, but now the conglomerate is pressing ahead with not one, but two ventures. Do you finally see realising your aviation dreams?
A: It is not realised as yet, as and when all the approvals are in place, yes. Q: A full service airline and a low-cost of carrier, all part of your ability to think big and small, something that you have been given a lot of credit for. A good example is your automobile business where you have the iconic Jaguar and Land Rover on one hand to the low-cost Nano on the other hand. Can you really be successful in both big and small at the same time?
A: I truly believe you can, not as necessarily as the same brand. Take Toyota for example. It has been very astute, the high-end cars. Hotel companies have different brands. Various product companies have different brand managed independently, the ownership being the same. Q: The Nano has been your pet project, but since its launch in 2009 it has lagged behind in terms of sales, because people have shunned the Nano because of its image as a poor men's car. Did you ever think consumers in India would react this way?
A: No, I did not. It is unfortunate that they did and they probably had some help in doing so. Nano was pitched as a family-car for the owner of a two wheeler - an all-weather safe  and affordable means of transportation. It was termed as the cheapest car by the public and by the company when it was marketing it and I think that was unfortunate. They are going to re-launch the car, not as the cheapest car, but in the image that it is. Q: As a smart city car?
A: And that smart car is an expensive car. Q: Is it working?
A: It is certainly more popular car than the Nano has proved to be, because it was marked as somewhat trendy car. Q: So you got the marketing aspect wrong?
A: Marketing went wrong, absolutely. Q: Do you think the Nano can finally takeoff in India?
A: Yes, I do. We have re-launched Nano with some differences which we are trying to incorporate. There maybe many ways to get it re-launched and re-established and maybe in some other country like Indonesia where it does not have this stigma and then its new image comes back to India or it could be as a change product that gets marketed in Europe. There is a lot of interest in Nano outside India. Q: So there are plans for taking Nano outside of India?
A: Yes. Q: When could that happen?
A: We need to crystallise what we want to do. At the present moment I do not know. Q: For 21 years you were the driving force behind Tata Sons. Were you emotional when you had to step down at the end of last year?
A: There was definitely sadness in leaving. At the same time there was a great relief that one was leaving, it is just the fact that you are free of the pressures of the group. The sadness I feel which sounds hypocritical but it is true was to leave when the economic conditions were as tight as they were and put it in the hands of a new person. Ideally one would have liked to stick that out, see it through this period and handover when the economic situation was better. Q: Cyrus Mistry has been picked as your successor. What is it about him that makes him standout from the crowd? Is he anything like you?
A: I don’t know Cyrus that well. He is different from me in some ways. He is measured; he has greater sense of financial knowledge than I do. I can't make a statement about his technological or his entrepreneurial skills. However, he has been doing a very solid job since he took over. There may be differences in his management style, there maybe differences in the decisions he takes compared to what I would have taken but that is not something I need to consider good or bad. It is his watch if you may and his responsibility for what he does. Q: What would Tata Sons look like without a Tata at the top? People are asking what would you tell them?
A: Whether there is Tata at the top or someone else at the top, it is the caliber of the person that counts not just the name. It is not a family company. The family owns about 2 percent of the shares of the company. It has always been professionally run, even if the members of the board or the chairman have been Tata's - they have a professional backing and they have operated. Q: With all your achievements you are a revered figure, an icon here in India, you have been described as humble, elegant, polite and extremely private. Who is Ratan Tata? What are you really like in person?
A: I am really like myself. Others have to answer that. I am a private person. I shun most of the efforts to put me in the public light. Q: Why is that?
A: Because that isn’t me. I am more a person who walks quietly on the beach or has enjoyed anonymity and I felt it was an intrusion in my privacy. What one had to do one did but it wasn’t necessarily something one enjoyed. I enjoy being at home. I am not much of a party person and I haven’t been in and continue not to be. Q: You have been given the lifetime achievement award by CNBC. What advice would you give others on how to create a lasting and successful business?
A: The only driving dictum that one can say is that managers or leaders should do the right thing, not what they think is the best thing visibly, but the right thing which might be unpleasant, which might be the hard thing to do but it is the right thing. Leaders need to lead from the front not from the rear. They need to live by example, not by exception and they need to do the right thing.