MUMBAI - Didier De Le Ferriere, native of Casablanca and new manager of the
Sofitel San Francisco Bay in Redwood City, California, will help his hotel host
an unusual award ceremony this October 21, for India's Tata Motors, winner of
the Wall Street Journal 2008 Technology Innovation Award for the Nano car.
Yet Tata has just packed up the primary factory site that was to produce
250,000 Nano cars annually - and reports no substitute address to date.
"The Nano, a tiny, fuel-efficient, four-seat car priced at US$2,500," reads the
official award citation that little Nano won, beating 700 entries worldwide in
the "Transportation" category. "It's designed to appeal to millions of poor
families in India who otherwise rely on
motorbikes or other two-wheeled transportation."
As guests at the Dow Jones Alternative Energy Innovations Conference,
organizers of the awards night, applaud Tata, few will be aware of the tragedy
among those "millions of poor" in Singur, West Bengal, with one committing
suicide near the former factory site for the Nano.
Sushen Santra killed himself in September after hearing news of the Nano
factory stopping work. The US$6,300 compensation that the family received from
the West Bengal government for his land where the factory was built had been
spent rebuilding their house. They, like 11,000 other local families who sold
their land for the Nano factory, became dependent on jobs at the factory.
After seeing the Nano factory work-stoppage news flash on TV - the television
set bought with the land sale money, his family told reporters - Santra drank
pesticide and died, leaving behind his wife and three sons.
On October 3, India's Tata Group officially pulled out its $340 million
"world's least expensive car ever made" Nano project from West Bengal state in
eastern India, a troubled decision that industry body the Associated Chambers
of Commerce and Industry of India described as "as the most unfortunate
happening in the arena of industrial activity in the 21st century".
"A bit far-fetched, that," economic historians will no doubt snort, but the
Tata Motors pullout has painfully ended one of the sorrier sagas in recent
Indian political and business history, marring the remarkable story of the
140-year-old behemoth Tata Group, whose fortunes reflect the growth of modern
India.
One of the Tata Group stars, Tata Motors - the world's fifth-largest medium and
heavy commercial vehicle maker, India's largest automaker and employer of
22,000 people worldwide - has suffered a stunning setback to what it termed as
its "dream" project.
Dramatis personae were a curious mix of India's second-largest and most
respected corporate group being enthusiastically wooed by a communist-ruled
government, a 55-year-old firebrand female politician playing "villain" to
break up the marriage, and the product: a rear-wheel drive, all-aluminum,
two-cylinder engine, 623cc car expected to satisfy millions of first-time car
owners worldwide.
The 90-year agreement the West Bengal state government signed with Tata Motors
on March 9, 2007, for the Nano factory plant died in less than two years.
In a rare, emotional public condemnation, the usually polite, reserved and
measured Tata Group chairman, Ratan Tata (70), specifically blamed the
opposition Trinamool Congress party leader Mamata Bannerjee for the pullout,
declaring she had held a gun to his head and pulled the trigger.
But as trucks hauled Nano factory equipment to less exciting locales out of
West Bengal, Ratan Tata - who says he has no patience for shoddy, underprepared
work - had discovered the hard way that aiming for the "cheapest" can cause
expensive trouble: $230 million has been spent on factory facilities that now
lay waste, and local lives in ruins.
Ratan Tata, listed on the
Fortune 25 and Time 100 lists of the most
influential people in the world, revealed that his
peers two years ago had called him "mad" for
venturing to invest in West
Bengal, a state notorious for violent trade
unions, poor work culture and shaky infrastructure, yet the venue Tata chose
for a project as critically sensitive to cost-efficiency as the Nano.
Tata, on calm reflection, might realize that no one put a gun to his head, but
he had put his head to where the gun was.
Worse, the Tata Group went ahead with starting Nano work without the factory
land dispute being first settled, a bit like opening a restaurant while the
kitchen is on fire.
Tata Group is a unique global corporation since the majority shareholder is "Mr
Compassion", with Tata Trusts owning more than 68% of the equity in Tata Sons,
the holding company. Billions of dollars from the majority shareholder fund
hundreds of educational institutions, hospitals, environment-protecting and
community welfare projects.
But recent investment decisions such as the Nano in West Bengal, another dud $3
billion investment in Bangladesh, and a spate of debt-backed high-profile
global takeovers all seem to ask whether the Tata Group is losing its clarity
of decision-making in the dusty blur of fast growth.
In 1868, a 29-year old Jamsetji Nusserwanji Tata, fresh from setting up his
family's first overseas offices - in Hong Kong and Shanghai - laid the
foundation of what would grow to become Tata Group, now running 96 companies
across six continents, 140 countries and employing 350,000 people.
Tata Group says its working principles hinge on the Tata Business Excellence
Model (TBEM), adapted from the Malcolm Baldrige archetype, named after the late
Malcolm Baldrige, the US secretary of commerce in the early 1980s who was a
leading expert on managerial excellence and instrumental in helping technology
transfers to India and China during the Ronald Reagan presidency years.
The TBEM revolves around two factors: business excellence and business ethics.
While the Tata Group has steered clear of political and corruption scandals,
the business excellence aspect could be under threat with its phenomenal
eight-year, $18 billion run to increase its global profile: buying the British
tea giant Tetley (2000), South Korea's Daewoo Motors (2004), Singapore-based
NatSteel (2005), the Boston Ritz Carlton Hotel (2006), US brand Eight o' Clock
Coffee (2006) and its biggest buy, the Anglo-Dutch steel mammoth Corus (2007).
This year, Tata Motors bagged the iconic British brands Jaguar and Land Rover,
along with $15 billion in losses the previous owner Ford Motor Co had
accumulated in the past two years.
The frenzied acquisition of global trophies, with debt as baggage, is starting
to worry people in India. "Tatas had better slow down," came a friendly warning
on March 28 from the sober daily Business Line, which belongs to one of India's
oldest newspaper groups. "India cannot afford to let its star performer
stumble, unleashing a tsunami of demoralization all round ... We can only hope
that the Tatas know what they are doing and wish them all success."
With growing anxiety over whether the Tata Group is stretching itself
imprudently thin, the market is delivering its own verdict. Tata market
capitalization of nearly $60 billion on March 27, 2008, had shrunk to to $37.9
billion on October 1.
The Nano is the latest in a recent series of debatable decisions from the Tata
Group. Earlier, Tata chairmen such as Ratan Tata's predecessor Jehangir - JRD
as he was popularly known, and the founder of civil aviation in India - might
not have been impressed with the Nano as a solution to "help millions of poor
families in India" with their transport problems, particularly in the current
era of oil stress, high fuel prices, urban-gridlocked roads and spiraling car
support costs such as parking fees. "Ratan," they might have told him, "think
of what we can do to make public transport more efficient and comfortable."
Nano may be two decades too late in capturing the cheapest car market, already
firmly under the control of Maruti Suzuki, India's largest car maker, which
rolled out its first car in 1983. Bringing out a $2,500 "People's Car" in 2008,
Tata lays itself open to the charge of predatory marketing, unless the
"People's Car" can run on water for fuel, or fly.
Unlike other countries with smaller populations, India and China have to factor
in the logistics of a billion-plus people in taking every major step ahead.
With transport, the priority issue is not so much owning a car, many cars or a
helicopter, but on quickly, comfortably and affordably traveling from point A
to B.
India's larger cities are already debating restrictions on private car use -
such as curbing travel to odd and even numbered license plates on alternate
days - the prospect of the country's existing urban infrastructure suddenly
trying to support a million more car owners is daunting.
Ratan Tata has dismissed such issues, saying, "It's my business to make cars,
the government has to make roads." And where is the land within, say, Mumbai,
the country's already utterly congested financial capital, for new roads, Mr
Tata? It's hard to imagine his predecessor, the science-loving JRD Tata, being
mesmerized by technology and casually washing his hands of the bigger part of
the picture.
When we sometimes rush down a road angels fear to tread, protective forces
sound a warning. It's our choice whether to heed it and take a corrective
course, or continue speeding towards a crash. Tata Group and Tata Motors may
have had their warning in Singur.
As Tata looks at attractive bids from other states to host a new factory site,
protests have already been reported on Sunday, October 5, as a Tata team
inspected land in the south Indian state of Andhra Pradesh.
Post the Singur-pullout, mixed reactions are emerging from the auto industry.
Support is there from Tata Motors vendors such as managing director NK Minda of
Minda Industries, joint managing director Sulajja Firodia Motwani of Kinetic
Engineering and Arvind Kapur, managing director Rico Auto.
They are not writing off the Nano yet; no one is. But the Tata Group may yet
come to wish it had written off the Nano while the chance was there and the
trucks were still hauling away the machinery for its production out of West
Bengal.
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Bengal, a state notorious for violent trade
unions, poor work culture and shaky infrastructure, yet the venue Tata chose
for a project as critically sensitive to cost-efficiency as the Nano.
