Bloomberg News

Tata Motors India Chief’s Death Leaves Nano Fate in Doubt

January 27, 2014

Tata Motors Managing Director Karl Slym

Karl Slym, managing director of Tata Motors Ltd., attends the launch of the company’s Indigo Manza club class sedan in Mumbai, India, on Oct. 16, 2012. Photographer: Dhiraj Singh/Bloomberg

The sudden death of Tata Motors Ltd. (TTMT)’s head of Indian operations is another blow to a company grappling with falling market share in a shrinking domestic industry.

Managing Director Karl Slym headed Tata Motors, except for the Jaguar Land Rover business, before his Jan. 26 death -- Thai police say evidence points to suicide in a fall from the 22nd floor of the Shangri-La hotel in Bangkok. He led efforts to revive profitability at the Indian business that makes the $2,300 Nano and other Tata-branded vehicles.

Now, the company is facing a leadership vacuum at those operations, complicating Mumbai-based Tata’s ability to navigate through falling market share in India’s declining auto industry.

Tata Motors, which relies on its Jaguar Land Rover unit for the bulk of its profits, fell the most in a year in Mumbai trading yesterday as the shock of Slym’s death rippled across India’s car industry. While the company has yet to decide on who will lead the India business, Slym’s successor will face the choice of building on a 16-month effort that has yet to bear fruit or change course.

“This is terrible news for Tata Motors,” said Deepesh Rathore, director of New Delhi-based Emerging Markets Automotive Advisors. “The domestic business at Tata Motors is in bad shape, and Slym was just laying the groundwork for new models, new initiatives and those were yet to deliver any results.”

It will take at least six months to find a replacement for Slym, and his successor will probably then have to draw up a new strategy for Tata Motors, he said. The board of directors will probably meet in the coming week to discuss succession, said Minari Shah, a spokeswoman for Mumbai-based Tata Motors.

Profit Slump

In the nine months through December -- the company’s fiscal year ends on March 31 -- sales of Tata-branded passenger vehicles in India slumped 37 percent, which was the biggest decline among 17 automakers reporting sales to the Society of Indian Automobile Manufacturers. Nano deliveries plunged 72 percent.

More broadly, the association is forecasting Indian industry sales in the fiscal year to fall for the first time in more than a decade as India’s economy is reeling from the slowest expansion in a decade.

“The domestic business is in trouble because of the economy, and the company needs to focus on building new products to meet rising competition,” said Jigar A. Shah, an analyst at Maybank Kim Eng in Mumbai. “It is a big loss to fill, but I don’t expect it to be a problem for Tata to bring in a suitable replacement.”

GM Veteran

Still, analysts estimate total profit will rise 40 percent this fiscal year, based on the average estimate compiled by Bloomberg, because of earnings from the Jaguar Land Rover business that’s headed by Ralf Speth. Tata Motors bought JLR from Ford Motor Co. in 2008 for more than $2 billion.

Tata Motors hired Slym, a 17-year veteran at General Motors Co. (GM:US), in 2012 after his predecessor, Carl-Peter Forster, resigned in September 2011 after less than two years on the job, citing “unavoidable personal circumstances.”

Among Slym’s priorities was to reverse the sliding popularity of the Nano, once marketed as the world’s cheapest car, by adding features to the car and repositioning it as a motorist’s second vehicle.

In an interview last year, Slym said the Nano’s marketing “didn’t gel with anybody” and that scooter drivers weren’t attracted because consumers saw the vehicle as “something between a two-wheeler and a car.”

Bangkok Investigation

Slym also said at the time that Tata had overhauled its manufacturing process to ensure fewer problems after cars roll off the assembly line. To convince motorists, it offered to buy back its Manza sedan at 60 percent of the purchase price after three years. It also added peppier engines, touch screens and satellite navigation in more expensive models.

In the Bangkok investigation, Police Lieutenant Somyot Boonnakaew, who’s leading the team probing the case, said in an interview yesterday that preliminary findings indicated Slym, who was in Thailand on business and accompanied by his wife, committed suicide. A letter was found in his hotel room, though authorities haven’t concluded whether it’s a suicide note, according to Thai police.

News of Slym’s death hit Tata Motors shares, which fell 6 percent, the biggest drop since January 2013, to close at 348.25 rupees in Mumbai trading yesterday.

“In the short run, Tata Motors should continue with the groundwork that Karl laid out,” said Yaresh Kothari, an analyst at Angel Broking in Mumbai. “Over the longer term, Tata would have to analyze the present strategy and see what works and what doesn’t. There’s still a lot of uncertainty.”

To contact the reporter on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net; Sam Nagarajan at samnagarajan@bloomberg.net


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