GM Veteran Slym Charting Course for Tata Turnaround

MUMBAI – Jaguar Land Rover has been a money-maker since its acquisition by Tata, to the point where it is propping up the Indian auto maker financially.

Now, a new management team is aiming for Tata to stand on its own with a refreshed product lineup.

Despite turning around debt-ridden JLR and enjoying continued success with its commercial- vehicles division, Tata car sales, market share and revenues have been falling steadily over the past four years.

India’s No.2 auto maker has resorted to deep discounts in an effort to remain competitive with market leader Maruti Suzuki and No.3 Mahindra & Mahindra. Global marques such as Ford, Honda, Nissan, Renault, Toyota and Volkswagen, meanwhile, have invested billions of dollars to transform their designs into Indian vehicles.

The market also is feeling a greater presence of luxury auto makers led by BMW, Audi and Mercedes-Benz. Those manufacturers, and 13 others, import into India or assemble 80 popular models. Sales this year are estimated at 30,000 units.

Tata’s CVs have more than held their own. After maintaining share at 52% to 54% during the global financial crisis and its aftermath stretching over four years, the division now holds 79%.

During that 4-year period, JLR emerged healthier and more prosperous under Tata’s ownership. When Tata bought the luxury auto maker from Ford for $2.3 billion at the height of Ford’s financial predicament, JLR was overloaded with debt, sales were meager and plant utilization was just 55%.

“Over the past four years, JLR (headquartered in the U.K.) has invested £700 million to £800 million ($1.2 billion to $1.3 billion) every year on product development,” says Tata’s Chief Financial Officer C.R. Ramakrishnan. “Going forward, we will double that investment annually in the next few years.”

The investment has paid off, with JLR consistently contributing to Tata revenues and profits. In the fiscal year ended in March 2012, the subsidiary accounted for 67% of Tata’s consolidated revenues and 90% of its profits.

Having created 750 new jobs in the past two years, JLR is adding 800 more jobs at its Solihull, U.K., factory as it responds to global demand. The auto maker has reached 97% plant utilization under Tata management.

Tata, itself, has not had a truly successful product launch since the Indica hatchback in 1998.  Discounts on the Vista hatchback have risen to 13% and exceed 15% on the Aria SUV. Capacity utilization at the auto maker’s car plant has slumped to half.

The pioneering Nano micro-car venture that started with great publicity and overflowing bookings is a disappointment. Part of its troubles include loss-making production delays following the last-minute shift of operations from a site at Singur in West Bengal to Tata’s Sanand facility in Gujarat in 2008.

As outgoing Chairman Ratan Tata has acknowledged, the marketing focus on the Nano’s low cost was a mistake; instead it should have been sold on its individual character like that of Volkswagen’s Beetle, BMW’s Mini or Daimler’s Smart.

Nano sales plummeted from 10,475 in March 2012 to 2,202 by December, according to Society of Indian Automobile Manufacturers data. Other vehicle launches have had only limited success in strengthening Tata’s car portfolio, a priority for new CEO Karl Slym.

Slym was with General Motors for 17 years, including five in India and one in China. He was able to shield GM India from its U.S. parent’s global financial troubles, including a year of bankruptcy in 2010-2011.

“Passenger-car focus is our priority, as new products are the source of growth and interest for Tata,” says Slym, whose Rs150 billion ($2.8 billion) development plan over the next three to five years includes new products and modernizing production lines companywide.

Slym’s strategy also calls for improving quality and performance. In a report commissioned by him, IDBI Capital Market Services said Tata cars “were being perceived as taxis.” Slym wants to wipe away that perception and reposition the Indica, Vista and Nano as personal vehicles fostering pride in ownership.

Slym’s management team includes research-and-development chief Tim Leverton, a veteran of BMW and Rolls-Royce who says: “We have something very innovative. You will see over the next 12-18 months onwards a fireworks of output.”

Leverton heads a 5,500-employee team at Tata R&D facilities in India, the U.K. and Italy. In the works is a diesel Nano, which Slym believes will create the excitement that stalled with the gasoline version. Leverton says some technical challenges still need to be addressed.

Girish Wagh, who led design and development of the Nano, Magic CV and its Ace people-hauler variant, heads program planning and project management, a crucial link between research and marketing.

Slym plans to launch six new models this year, including a sedan and a compact SUV. He wants to integrate the Indian and overseas R&D centers’ design and engine-development activities and to use common platforms.

JLR’s newly developed 2.0L engine may be modified for Tata’s small cars and SUVs. Work is under way on an entry in the newly emerging compact-SUV segment and on Tata’s environmentally friendly concept Pixel and Mega Pixel compact city cars.

Slym’s stint with GM India has given him a keen understanding of India’s car market, of which Tata’s share dwindled from 16.4% in 2006-2007 to 11.9% by the end of 2012. This decline took place under two previous chief executives who came from the auto maker’s CV division and might not have understood how the rules of the car-market game had changed.

Says Pankaj Jhunia, Tata general manager-design, “We had inherited these rules from the days when there was no competition.”