Corporate Dec 16, 2012
Fighting economic downturn in Europe, Tata companies are working to lower costs at its Jaguar Land Rover and steel operations there, including looking into the possible sale of any "piece of business" but will try not to cut any jobs, says outgoing group Chairman Ratan Tata.
Tata also took on those who criticised the group's prized acquisitions of JLR and Corus as "stupid moves" due to the huge cash outflow involved and said they seem to forget that an economic downturn happened soon after these takeovers.
".... The steel company is really suffering because of the downturn in Europe and the UK. All we are trying to do now is to reduce our cost base so that when we come out of that recession we will have a leaner company," Tata told PTI in an interview.
"In the case of JLR, we are also told the same thing, it was a stupid thing you did because after we bought the company we infused more working capital into the company than the cost of the company," he said.
Things have changed since then and "Jaguar and Land Rover are today doing very well", he said.
Talking about the need to cut costs in its operations in Europe, Tata said, "We are trying not to have a (job) reduction, we are trying to reduce cost by rationalising units and if we can reduce cost by selling off any piece of business as we did last year."
"We sold off the slab making activity to a Thai company where the jobs get saved. We have been trying to do that, which is why job losses have been somewhat small," he added.
Tata Steel had acquired Europe's largest steelmaker Corus in early 2007 for about $12 billion, while another group company Tata Motors purchased luxury carmaker JLR about a year later for close to USD 2.3 billion.
Talking in detail about the two acquisitions and the impact of subsequent economic downturn, Tata said, "Corus came first and almost on the back of that, JLR. Although in both cases we were in discussions for over a year."
He said that in both cases the group was criticised as to why it did these acquisitions and it was said that "it is a stupid move etc, including (for) JLR."
"In case of Corus and JLR, one very important aspect that everybody seems to forget is that after we got the companies the economic downturn happened. No one could have on one even in the government of all those countries ever visualised that there would be that much an economic pressure on the world, the European situation and including in the United States.
"So there is nothing wrong with steel. The thing is with the economic level of activity in those countries. Steel, unlike JLR, is not sold in 150 countries where Europe does not matter that much," he said.
About JLR, Tata said that things have changed for better for JLR as the demand of SUVs has gone up in the US and China has come into the picture.
"Today, China is JLR's largest market, bigger than the US, bigger than the Europe and the UK. So, Jaguar and Land Rover are today doing very well and we are having new products that we have been instrumental in making the company do which will come out.
"So JLR is in reasonably good shape. Corus or Tata Steel Europe will continue to be in pressure so long as the European situation remain as what they are.
"There is tremendous overcapacity, those countries have become very high cost and rather difficult to compete with Eastern Europe, with Asia as such and steel does not find it way all over the world as a car might or electronics equipment might," he said.
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