May
Ratan Tata – Too Fast Too Far
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Ratan Tata has been a great leader for the Tata Group. The group has grown a lot during his term and he must be commended for all his efforts. I myself have great respect for him as a business leader in India. Tata as a brand is respected world over and even in India it means responsibility to the core. However in the past week the interview he gave regarding his acquisitions and in this article we will try to discuss it.
“If one had known there was going to be a meltdown, then yes (Tata went too far), but nobody knew. Both the acquisitions (JLR & Corus) were made, I would say, at an inopportune time in the sense that they were near the top of the market in terms of price.” Quoting Ratan Tata from Times of India Report.
Great leaders are those who can lead the companies through adverse events, who predict the unpredictable. The explanation given ‘that nobody knew about the meltdown‘ does not seem fair to me. The leaders across the world including RBS Ex-CEO Sir Fred Goodwin, Late Lehman Brother’s CEO Richard Fuld and many others can give the same reason for their firms performance. One firm went into the arms of the Government and another into bankrupcy. Their leaders were given the blame for ‘not being able to predict the meltdown‘, having overleveraged firms and removed from their positions. Thus Mr Ratan Tata also should take the blame himself for these pricey acquisitions and apologize to the shareholders of Tata Group of Companies. These acquisitions were done at the peak of the market, and both the companies have seen demand destruction. The world steel prices have fallen tremendously and luxury car market has also dissappeared. In the present situation both the acquisitions seem wrong.
At the same time, Ratan Tata should also be given credit for many other things which he has done right. He is not afraid to accept the mistake, which takes a lot of courage and also helps in correcting the companies future direction. The first step to solving your problem is admiting that you have one, and Ratan Tata has openly admitted the mistake. Moreover Ratan Tata is a visionary and his vision will lead to further growth in Tata Group. Tata Nano is just one example of what he dreams for India.
Overall I believe his statements in London regarding the acquisitions might be related to getting the UK Government aid for these companies. Since now Tata Group is the owner of these companies there might be a reluctance to give full support and these statements might be a way to catch attention!
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6 Responses to “Ratan Tata – Too Fast Too Far”
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Insightful analysis. 2008 wasn’t an year where things went right for the Tatas, I guess. Also somewhere in this acquisition game, Tatas fell prey to the herd mentality and went on a buying spree. That is what is hurting them now.
Perhaps the statement has some hidden notions – Mr. Ratan Tata wants to warn the Western Govt. about job losses in Corus and JLR.
In my opinion the TATA Economic Cell might have failed in understanding the economics of Corus acquisition. Even in a per tonne basis it was over priced, adding to the Winners Curse in the open auction. TATA could have waited and been a lot more prudent. They could have pulled out of Corus and waited for better ooppurtunities.
@Srikrishna Swaminathan
Correct! One other fact if I remember correctly was that Tata Steel was probably scared of an acquisition by Mittals, since Mittals were on a buying spree at that time. Tata Steel wanted to acquire Corus to prevent that threat.
Well, given the TATA Steel Financial structure it is very difficult to acquire it. It is quiet safe behind the many TATA Trusts and Govt. stake. Further if Mittal wanted Indian presence, organic growth with govt. help would have been easy to enter India and cheaper. Maybe it was Mr. Ratan TATA’s ego to build a global Top 5 Steel and Auto company that drove him, as these would put him on par with other TATA business icons like Jamsetji and JRD.
@Srikrishna Swaminathan
IMO, the question to be asked is whether the “too fast, too far” comment has some deeper implications, perhaps concerning the shareholders…
I guess in post-ante analysis…we can always find fault with what happened ?? But during the time the deal actually took place…most of the Indians wer happy to have an Indian company among top 5.
Definitely if anyone would have seen what is to happen…they would not have got the deal. But remember, that was a booming market and optimism was the flavour…
I guess ther are lot of IIM grads in here..How many of you guys would have joined IIM if u would have known the recession…I doubt few would and rather wait for an opportune time..
I guess what Ratan Tata did at that time was apt and suited to that time as was u guys decision to join MBA at that time