Tata Tragedy and India's Economic Tumble
The sudden death of Managing Director Karl Slym is a tragic and untimely loss for Tata Motors, one of the names India has long seen as projecting the core competencies and global ambitions of the world's second-most populous nation.
The Briton's fall from 22nd floor of the Shangri-La hotel in Bangkok (so far ruled a suicide) leaves the flagship of the empire built by Ratan Tata in a worrisome state of limbo. Slym, 51, had been leading an effort to revive the Indian business that makes the $2,300 Nano and other Tata-branded vehicles. The groundwork was just being laid for new models, new initiatives and savvier marketing campaigns.
Now, Tata Motors faces a fresh leadership crisis at a time when it must navigate a minefield of problems: Its Nano continues to flop, a slowing national economy means fewer truck sales, too, and Ford, Honda, Hyundai, Suzuki and Toyota are increasingly going in for the kill. At next week's Indian auto show, "the foreigners," as they're known in the industry, will all launch new cars and buzzy reboots of current models. Tata will show up with no leader, no plan and little in the way of splashy new models.
What I find most striking about Tata's dilemma is how it jibes with the headwinds India's economy faces. In at least three ways, its travails track India's biggest problems in 2014:
First, a leadership crisis. For a celebrated corporate guru, Ratan Tata sure has had a rough time either settling on talent to run his operations, or retaining it. A Slym predecessor, Carl-Peter Forster, abruptly resigned in September 2011 after less than two years on the job. Slym had held his position for less than a year and a half at the time of his death on Jan. 25. Neither stint provided much time to get under the proverbial hood, recognize the problems and plan and execute turnarounds. Now Tata Motors is back in neutral gear, at best.
The same could be said of India's government, which is in the parked position ahead of elections due in May. Prime Minister Manmohan Singh is a spent force after 10 unsteady years at the wheel, and his Congress party's poll numbers reflect the malaise. The party is resorting to nostalgia and serving up yet another Gandhi -- Rahul, this time -- to head a campaign being drowned out by opposition leader Narendra Modi and his Bharatiya Janata Party. The surging popularity of the Aam Aadmi ("Common Man") Party is making for unpredictable electioneering.
With 1.2 billion people (29 percent of which are under 15), proven successes in sectors like technology, pharmaceuticals and outsourcing operations, India clearly has the stuff to compete against China. It just lacks a strong, focused and forward-looking leader to drive the nation ahead. Devoid of one, India, like Tata Motors, is sitting on the side of globalization's road with its hood opened and its passengers looking on uneasily.
Second, not faring well in a competitive world. The only thing Tata Motors makes well these days is what it really doesn't: Jaguars and Land Rovers. Tata Motors bought its Jaguar Land Rover unit in 2008 and it now provides the bulk of the profits. Those spoils made the broader operation complacent in a rapidly-changing marketplace that even saw left-for-dead Detroit return with new urgency. Tata Motors didn't invest in the local unit and quality grew even shoddier, allowing customers to be swept away to showrooms bearing American, German, Japanese and Korean names. Now, the only long-term option is to pull in a foreign partner to gain access to new technology.
India's economy can be like that, too. The 10 percent growth reached in recent years made India smug. Officials in New Delhi thought being a BRIC -- Brazil, Russia, India and China -- nation bestowed on it a birthright to greater and greater riches. The country was slow to improve its brand with better infrastructure and sexy features -- like cutting red tape and curbing corruption -- and it's losing out to fresher, sleeker economies. Now, as long-protected industries from retail to aviation to manufacturing are opening up and being subjected to real competition, they can't keep up.
Third, too much hype, not enough substance. Tata Motors oversold the Nano in a flurry of splashy advertisements. Just as budget carrier AirAsia's motto was now everyone can fly, the Nano's was now you too can own a car. There was a certain quaintness about what Indians called the "People's Car" and commentators affectionately called it a feat of "Gandhian engineering," meaning unpretentious and stripped down. Tata Motors forgot that slogans sell cars, but don't keep them out of the repair shop. The Nano fared better in the popular imagination than on India's rough roads.
Indian politics, too, often veers too far in the direction of sloganeering over substance. Among the most notorious in recent memory, of course, was the 2004 election mantra wielded by the then-ruling BJP: "India Shining." Millions of who didn't feel part of the magic, and who 10 years later can't afford a Nano, retorted with their own: "We're not buying what you're selling." That's as true of Tata Motors's vehicles as it is of the nation's voters.
(William Pesek is a Bloomberg View columnist. Follow him on Twitter at @williampesek.)
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
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