Can Guenter Butschek Do An Alan Mulally? The Mulally Turnaround…
Tata Motors is in a similar position as Ford Motors a decade ago — down and virtually out. Then came the CEO’s magic touch
When ET met Guenter Butschek in early February, the second meeting in less than 10 d ays, he was cruising towards his first-year anniversary at Tata Motors. He seemed ebullient.
Little did his demeanour betray the calamitous 96% drop in profits the company announced the following week for the quarter ended December 2016. While Butschek exuded confidence, investors panicked when the Tata Motors stock plunged 14%, in two days, reacting to the earnings meltdown. A few days later, ET met Butschek again. This time, Tata Motors was holding a joint press conference with Microsoft India to announce a strategic collaboration for technology for connected and personalised driving experiences.
This constant flow of announcements is unlikely to stop soon. In the coming days, Butschek will head to the Geneva International Motor Show. One of the highlights will be the TaMo Futuro, a concept model that may create ripples, not just back home but in the entire automobile world. Through the Futuro, Tata Motors — which hardly had any new road machines to show till last year — will unveil a new avatar. While the razzmatazz in Geneva is still under wraps, what is not is the major overhaul underway at Tata Motors.
In a two-hour-long interaction, Butschek, a former chief operating officer at Airbus Group SA, slipped into the parlance associated with the aviation industry to explain the ongoing transformation at Tata Motors. Tata Motors’ turnaround will revolve around the “six angles of attack. We cannot be a steamboat when the market has speedboats,” he said. such as China and Europe; needed to have experience in corporate transformation initiatives and a deep desire to take on challenges. “Butschek ticked most of the boxes,” the person revealed. To put it another way, Butschek has t o a c h i e v e wh a t A l a n Mulally did at Ford Motors between 2006 and 2014 (when he retired) — a miracle.
While similarities between the challenges for the two CEOs are many ( see graphic), there’s one major difference. Mulally had no experience in the automobile industry before he joined Ford – he joined Boeing as a young engineer in 1969 and went on to become CEO of Boeing Commercial Airplanes (the business jets division) by 2001. Butschek, on the other hand, is an automobile industry veteran. Before Airbus, he worked at Daimler AG for 25 years in international automotive management. Angle of attack is a phrase used in the aeronautical industry to describe the acute angle between the chord of an aircraft wing and the direction of the wind, which helps lift planes. At Tat a Motors, Butschek’s first angle of attack is to address top line growth — not just bring in more products but bring them faster to market.
The second angle is to bring about agile cost management, which essentially will entitle structural improvements and a modular bill of material that can shave costs by using common components across the two modular platforms.
The third angle is to bring in customer centricity, something that Tata Motors woefully lacks.
The fourth is to make sure that the processes and products are done right the very first time.
The fifth initiative is setting up of a core team that will look at discontinuity, disruption in the market place, new mobility solutions and new business models.
And the last angle of attack is organisational effectiveness, which would mean adding speed, simplicity and agility to the organisation.
Since Butschek took over as chief executive on February 15, 2016, he has been meeting colleagues and dealers, visiting factories and addressing town halls across India. “I invest a lot in communication. I enjoy being with people,” he tells ET. His inbox is flooded with emails as even employees from distant Jamshedpur respond to announcements and give suggestions. and operations specialist, Mulally joined Ford after 37 years at Boeing
in the red, stock price had hit rock bottom and debt was at junk status when Mulally took over in 2006
marquee brands such as Jaguar, Land Rover, Volvo and shed the stake held by Ford in Mazda. He went on to made Ford world-class again who tracks both companies very closely. For instance, Tata Motors has 1,200 suppliers, which Butschek reckons is “unprecedented” in the industry. “The most important part is to have a pyramid structure. Today, we will focus on the capability of the supplier. This is our journey.”
The structure currently is f lat. To change that, the company has to strategically choose its suppliers keeping the future product portfolio in mind. Tata Motors will thus completely change the way it does its product planning. It will involve engaging with suppliers from an early stage in the product cycle. It also involves committing that certain modules, systems, components will be purchased from suppliers instead of making it inhouse.
Tata Motors will do an integrated supplier capability audit which will probe and audit the technology capabilities that will lead it all the way to the sub-suppliers to its vendors. The company has already audited 100 suppliers.
“If they don’t meet the hurdle rate, they are certainly out of the game,” Butschek said. “We are going to develop jointly (with our first tier suppliers), stringently following detailed milestones to bring a product to life. It is going to be a completely different story. Many suppliers of Tata Motors will find themselves as sub-suppliers of our tier one suppliers.” Tata Motors currently has six product platforms in the passenger vehicle segment but in three years, this will come down to two. to bring in up to 300 suppliers in the older existing platforms. Another manufacturing process that the German is undertaking is to bring agility and f lexibility to the manufacturing line. This entails developing more top heads in one manufacturing line on one modular platform. Thus, a hatchback, a sedan and an SUV can be made on the same manufacturing line. “It is not the case today. Tata Motors works with dedicated lines for single products. We are chronically underutilised today when there is demand only for one product,” Butschek rues.
The organisational effectiveness structure will go live on April 1. It will involve some pain. Butschek weighs his words carefully. “One of the success factors (and lessons learnt from past) is the need to provide transparency in what one needs to accomplish. We have been extremely open. There is going to be a delayering exercise.”
Tata Motors will only have five management levels below the executive committee (as against 14 now). “A significant flat organisational structure that is lean, agile and accountable,” Butschek added.
“At the end of our exercise, Tata Motors will not just look different as far as structure of the management team is concerned. It is also going to look different as far as the content and the sizing of the organisation is concerned.” Will it mean some jobs will be redundant? “We have never made an announcement on the number of jobs because this is something we found inappropriate. This is a very dynamic process. But (it will be) a structured approach..” Butschek revealed. “We are going to announce the ‘to be” organisation on April 1 — the structure, team, the new layers and rightsizing of the organisation.”