‘We have a good visibility of cost saving this year’

The loss-making domestic business of Tata Motors is attracting attention of top management including Chairman N Chandrasekaran. Commercial vehicles (CVs) account for about eighty per cent of this business and hold key to overall profitability. GIRISH WAGH, head of CV business, talks to Ajay Modi on various efforts being taken to cut down losses and move to profitability. Edited excerpts:

You have been heading the CV business for four months now. What is your assessment so far?

I have been spending time in meeting the customers and other stakeholders to understand what they think about the products, their requirements and what they think we should be doing. I have been also meeting dealers, financiers and other influencers to get their take on our business and things that we need to work on. This was also important to see how the market is panning out in medium and long term. This will go into our long-term product planning and the value-added services. We also met customers who wish to buy but have some concerns to convert them into sales. Dealers need to be engaged. It is critical to have highly energised dealers as they are our front face.

Cost reduction is going to be a key pillar in moving to profitability. Can you take us throughit?

We have started working in a very focused manner on reduction. We are looking at the cost structures of each product to shave costs. We started with a very aspirational target to reduce the product and the operational cost. Then we started looking at each and every product, part and aggregate cost. More than 2,500 employees are involved in this massive exercise. We are doing value engineering (reducing the cost of a part without reducing the value to customer) and value analysis (increasing value delivered at same cost).

Is there a visibility on cost saving?

We have a good visibility of cost saving this year. We are looking at a very high three-digit or low four-digit ~ crore kind of benefit accruing this year itself. Suppliers are also participating in this exercise. As far as manpower rationalisation goes, we have gone through an organisation-wide exercise to improve effectiveness of organisation.

The CV market is seeing steep discounting. Isthis sustainable and what is the company’ s approach?

Discounting is there in the market. We are certainly keeping a track of what is happening in the market but we are clear that we are not going to buy market share even though we offer discounts. Our approach has been to understand the needs of a customer as he may not only be looking at the initial price alone. We try to work out a return template for the customer and show how the vehicle makes sense over the entire life cycle. Our focus has been to reduce total cost of ownership and we use this as one of the levers to convince the customers.

The company had plans to do away with inefficient component suppliers. What is the progress?

We have a large number of suppliers, in excess of one thousand. We now have a strategy in place and we are trying to reduce the number. A plan has been shared with the supplier community. We will follow a grow, fix and exit strategy. If a supplier is doing very well, we will grow them. We will fix the suppliers that have a long-term potential but are not able to deliver. Thirdly, we will stop buying directly from suppliers that do not meet our expectations, though they may become suppliers to our tier-I suppliers.

The country will move to BS VI emission norms from 2020. How is the company prepared for this?

A significant part of our resources are being put to this. We have made good progress and so have our suppliers. Cost reduction exercise is being done on existing vehicles and it is going to help us. We are ensuring efficiencies so that when we launch these BS-VI vehicles we are sitting on a good cost structure.