Tata Motors charts strategy to tackle downturns

By siliconindia staff writer   |   Friday, 18 June 2004, 07:00 Hrs
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KOLKATA: Tata Motors Ltd is working on a strategy to ensure viability even during downturns in the global automobile industry, its chairman Ratan Tata said.

"It is but natural to feel proud and euphoric in the wake of this year's excellent performance, but it must be recognised and accepted that the automobile sector's business cycles are volatile," he said.

"The company is addressing the challenge of cyclical nature in automobile industry by taking steps that will ensure viability even during downturns, through expansion in international markets and constant attention to holding fixed costs," Tata said in the company's annual report.

He said the commercial vehicle sector is one of the barometers of the economy of a country and it has been seen in the past that an unprecedented growth in commercial vehicles in India and other parts of the world was followed by a collapse in demand.

The passenger car sector is also cyclic and while this sector is showing growth today, it was only two years ago that growth was flat, he said.

Incidentally, another group company, Tata Steel, had evolved a strategy to keep itself aloof from the impact of cyclical nature of steel industry as far as possible, by becoming Economic Value Added (EVA) positive.

Though Tata Steel had cited a minimum profit of Rs 1000 crore annually to be EVA positive and had achieved it in 2002-03, no such indication was given by Tata for Tata Motors.

Tata said the increased profit was due to the efforts of the past few years to reduce cost, improve product quality and provide better customer support.

"Nevertheless, far more needs to be done to meet the standards achieved by the major global auto companies," Tata said.

He said apart from cyclical nature, another major concern was the significant price increase in the past year in major industrial materials like steel, aluminium and petroleum products.

"New materials, processes and manufacturing practices will be needed to keep user industries competitive in changing times. Tata Motors will need to make these investments now if it is to safeguard its market position in India and grow overseas," he said.



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