It was a position that was vacant for 11 years, but you would not know that from the ease with which Ravi Kant has slipped into the managing directorship of Tata Motors [in 2005]. That's partly because he knows the company better than most; feeding off that fact is his own confidence, built on a wealth of experience and truckloads of ability.
Kant's vision is focused on steering India's largest auto manufacturer on the fast track to success, at home and abroad. In the six years he has been with Tata Motors, he played a key role in helping pull the company out — in an amazingly short time — of difficult times.
As head of the commercial vehicles business unit (CVBU) at Tata Motors, Kant directed the effort that has enabled the company to successfully take on the challenge posed by global auto manufacturers in an open Indian market. CVBU winning the prestigious JRD QV Award for business excellence in 2005 and Tata Motors bagging the CII-Exim business excellence award are testimony to Kant's leadership skills, as is the Qimpro Gold Standard for Business awarded to him recently.
Kant, who, prior to his current innings, was involved with turning around scooter manufacturer LML and in the launch of Titan, sees a clear road ahead for Tata Motors in an India where the 'urbanisation' of mindsets and rapidly improving infrastructure is creating new opportunities. He spoke about these and other subjects in an interview with Sujata Agrawal.
It is a historic moment for Tata Motors — the company has an MD after 11 years! How do you feel about taking over?
Actually, nothing much has changed. I am sitting in the same office and dealing with the same people, though they may not all have been reporting directly to me. It's not unfamiliar or uncharted territory.
On the other hand, it does mean a much greater responsibility. Earlier, I was handling one business, commercial vehicles. Now I am responsible for the entire company, an extended area that includes new businesses, corporate affairs and finance.
You are assuming charge at an important stage of the company's history. How does the journey unfold from here?
We have been in existence for the last 60 years. The key thing in my view is looking at how things will be in the next 60 years. The company has needed to reinvent itself every now and again, as the business environment changed, as competitiveness changed and as new opportunities unfolded.
Look at the company's history. It started off as Telco, assembling locomotives, which today isn't part of its business or even its name. It successively moved into manufacturing trucks, light commercial vehicles, multi-utility vehicles and finally passenger cars, a bold step. That's how much things change in 60 years. The first time we went into cars, we received brickbats, especially our Chairman, Mr Tata. But we resolutely kept at it and succeeded.
Going forward, the company must keep reinventing itself if it is to survive. It must keep growing, and making profits — and profits must grow, year after year. In biological terms, what does not grow, dies. So growth is not an end in itself; it is a strategy for survival. There are more specific issues about how we can grow and where we can grow, but the base is profitable, sustainable growth.
How do you ensure that?
The problem with commercial vehicles is that it's a cyclical industry across the world. Till the early 1990s it was less cyclical in India, because of import barriers and the controlled economy. But this changed as the economy was liberalised.
In anything that is cyclical, the question to confront when the downturn comes is: how do I survive? My revenues have gone down, but my fixed costs remain the same. So I have to look at costs. A huge asset base becomes a drag when the downturn comes. Therefore, the organisation needs to be leaner.
As you know, we incurred this great loss some years ago, and then we went in for a massive cost reduction. We tried to reduce the breakeven point. In commercial vehicles, I remember, the breakeven point was two-thirds of capacity utilisation. We brought that figure down to one-third. It means that even if the market goes down by 60 or 65 per cent, we will still not make a loss. The same kind of thinking has been applied in case of passenger cars, though it is a relatively new unit.
That, I believe, was the key reason we were able to turn around very fast, in two years, from a Rs 500-crore loss to a Rs 500-crore profit.
What about the company's product mix, has that changed in any way?
We did a study five years ago, which showed that medium and heavy trucks had the greatest amplitude of cyclicity. This is not just in India. I have seen the medium and heavy trucks market shrink by 50 per cent in Korea, and not too long ago in the US and Europe. So we tried to boost products that were less cyclical, like light commercial vehicles (LCVs). Buses, we found, were even less cyclical, because they are still partly controlled, and the defense business is steadier.
While we continued to have a big market share in medium and heavy trucks, we looked at newer opportunities in segments like LCVs and buses so that the impact of a downturn would be less severe.
The other thing we decided was to go into markets that, though cyclical, don't follow the same phase. While the cycle in India is going down, in some other country it may be going up. That way, we can reduce the impact of downturns. So we said, let's go for international business.
It's like portfolio management. If I can build a portfolio in a way that I have a less negative variation on a year-to-year basis, it is a good thing. That way, I de-risk the business model. I can then have greater certainty, as I move forward, of achieving high growth in the company's top line and bottom line. In fact, going into the car business itself is a big step in the direction of overriding the overall impact of the cyclicity of the truck business.
So we can expect much better things in the future?
For the first time in India's independent history, three major road development projects are underway. First, the super-highways — the golden quadrilateral to link the metropolitan cities and the north-south and east-west corridor roads. The secondary road network will connect state capitals with important towns. Third, the Pradhan Mantri Sadak Yojana, where villages are being connected to existing roads.
We hope that by 2012, give or take a couple of years, India should be networked with roads, connectivity that it has never seen in its history. This will change the entire paradigm of transportation, for both goods and people.
In India, there is already what I would call an 'urbanisation of mind' taking place. The explosive growth in communications through cell phones and TV channels is leading to a desire within people, even in remote areas, to upgrade their quality of life. The definition of 'urban' now needs to be redefined in terms of psychographics or mindset, rather than demographics or geography.
My gut feeling is that we have just touched the fringes of what's going to happen. It is going to be explosive; and it will create such a momentum that even if somebody wants to decelerate, it won't be possible. This will give us a much larger and wider canvas of customers.
I feel that the road network will be the enabler to make that happen. As villages and towns are connected by good roads, travel times will reduce drastically and people will travel more. Initially, this will require good and efficient public transportation, followed by individual transportation.
Then, initially, buses will get a boost?
Today, rural transportation is through tractor-trailers or taxis, which are nothing more than jalopies. People are packed like sardines, up to 40 to a vehicle. If we provide a good, economical and safe means of transportation — say buses built on LCV chassises — they could, in time, sell in lakhs. It is only a matter of time.
In the last three or four years, we've seen a lot of growth in the bus sector. That's the reason we went into the fully built bus segment. It is doing so well that we are unable to cope with demand.
So far, it has been a very disorganised and fragmented industry, with no quality systems and no big units in bus body building activity. That is why we decided to upgrade the quality by creating franchise manufacturers. Because we were new in the business, we ourselves participated in upgrading quality and setting up systems. But it is still not to our satisfaction. We need to take some very drastic action, and we are looking into it.
The Daewoo acquisition was a historic event for Tata Motors. How did it come about?
It was a huge opportunity to get into a fairly advanced market like Korea. Besides, there were tremendous synergies between the two companies in terms of product strategy, international marketing and R&D. Daewoo's products dovetailed perfectly with our existing portfolio.
Tata Motors has been working on a world truck for India and international markets. We now have the base to build it, rather than starting from ground zero. The merger has made it possible to enter the market 2-3 years early. The risks are reduced, as we have access to their experience. We should come out with our world truck by around 2008. Before that, by end-2005 or early 2006, we should come out with a large truck for the Indian market. It will be a collaborative effort between India and Korea.
What were the challenges in clinching the deal?
Tata Motors was one of 10 bidders, including Chinese and European companies. Initially, we faced some difficulty in being accepted as a serious bidder. I think the one thing that helped us win the deal was our philosophy. Mr Ratan Tata suggested that we should see ourselves as a Korean company, not as an Indian company in Korea. That made all the difference.
We connected ourselves to everything Korean — the society, the environment and the government. We became Korean in our thought and outlook. The philosophy also meant we would retain the Korean management, and assist them by sending some of our people to Korea. The operation would be run basically by Koreans. That would give them a sense of pride.
When you bid with this kind of attitude, you put out a signal that you are not just buying assets, but a running company which you want to grow. It has worked beautifully so far.
How will the company brand products from Korea, as Tata vehicles or will they be sold under the Daewoo brand?
In Korea, we will continue to brand them as Daewoo, because it is a strong brand. But in India, they will be branded as Tata.
Has the acquisition changed the image of Tata Motors?
The deal has dramatically changed the perception of Tata Motors worldwide. People see us differently now, with greater respect. Doors that were closed earlier are now opening. People are coming on their own from all corners of the world and making so many offers. Since it was our first international acquisition, it created a huge impact.
Our second venture, Hispano Carrocera, did not create the same high. Also, we were treading more cautiously with Hispano, so we have bought only a 21-per cent share, with an option to buy the full 100 per cent later.
I think Hispano will also turn out to be a big jewel in the crown. It has two factories, one in Spain and the other at Casablanca, Morocco. We are expanding the capacity in Casablanca substantially.
Korea is said to be a sensitive market in terms of dealing with people and unions. What are the HR issues you face?
I think the employees at Daewoo are productive, educated, extremely knowledgeable, and want to ensure the growth of the company. They engage you at a fairly high level of discussion, which is very positive. However, the challenge is to ensure this engagement is continued.
Let us come to another success story — South Africa. Not much is known about what Tata Motors has achieved there.
Our South Africa operation is a case study for our foray into international markets. Till a few years ago, we had an ad hoc and fragmented approach towards exports — we were selling all products in any numbers to anyone, anywhere.
About three years ago, we developed a strategy to sell in a few markets that are more aligned with our type of business. We did market studies in terms of consumer behaviour, distribution networks, supply chain, customer satisfaction requirements, as well as products that would be most appropriate for the customer. Within the chosen countries we identified segments in which we could compete and build a respectable market position as a long-term player.
South Africa was one of the first countries where we implemented this strategy. Our first product, an LCV, was launched in March 2004. In just over a year, it became the largest-selling LCV in South Africa. Then we modified and introduced a medium commercial vehicle with a high-powered engine, which is doing well. We also introduced pick-ups, passenger cars and our Korean trucks, which are in great demand.
Today, I think we should be at an annualised level of about 14,000 to 15,000 in sales, or maybe slightly more. If you were to see this in context — just three years ago Tata Motors' total exports used to be 8,000 to 9,000. In just one country we have nearly doubled our business. That itself tells us something.
Which other countries are you looking at?
I don't know if I should really talk about this. But surely, Russia, China and some of the eastern European countries.
What is the nature of the memorandum of understanding with Fiat? Will this be in sync with your other international operations like Daewoo and Hispano?
The MoU with Fiat is an umbrella deal; there are no specifics. The idea is to have an open mind on both sides and say that anything is possible in the true spirit of partnership. A joint team is looking at various areas of co-operation that will be beneficial for both parties. Proposals vary from using each other's platforms or aggregates to jointly working in geographies. Ultimately, it will turn out to be a commercial arrangement. It has started with passenger cars, so that is the present focus, but we are not excluding anything.
About Tata Finance, now that the restructuring phase is over, how soon would you be able to achieve global benchmarks?
I think things have moved quite fast there. Only a year ago, we started on joint working arrangements. Now the amalgamation has happened. We have set a fairly ambitious target of about 35 per cent of our business. This would result in a substantial increase in its asset base.
As you know, financing is an integral part of the vehicle business and, therefore, we are giving this activity its due importance. We hope that we can leverage this to further our business.
Finally, what are your interests, apart from work?Also read in Interviews
Since I joined Tata Motors, we have had several challenges. I haven't had much time to indulge in many activities.
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