IMI Magazine

News: Analysis

'Out of India' challenge for Tata boss

Anyone who thinks that Tata Motors' ambition to become a recognised and respected international player on the world automotive stage is simply pie-in-the-sky should think again following the appointment of Carl-Peter Forster  (pictured) as CEO with responsibility for global business development. With a successful career in the motor industry's upper echelons (most recently as head of GM's European operations), he brings experience and substance, along with a crucial international dimension, to the Indian group. The appointment demonstrates that Tata is prepared to trawl the world for talent and eschew parochialism with regard to its management team.

Down, but by no means out

Since seizing top spot from GM as the world's largest vehicle producer, Toyota has experienced the roughest patch in its history. It's bad enough that the company notched up losses of more than $4bn during the 2008/09 financial year (its first deficit since 1938) and is forecasting more red ink for the current year. These financial woes, though, are nothing compared with the damage to its fabled reputation for product excellence following a spate of recalls involving around 8.5m vehicles and rising. The progressive timing of these recalls, starting with accelerator pedals and floor mats, spreading to braking assemblies and then power steering systems, is surely indicative of a systemic meltdown in engineering and production procedures.  

It's probable that Toyota faces a torrid time for months to come. The financial cost of checking and carrying out modifications could be as high as $1.5bn, according to analysts Frost and Sullivan, and that doesn't take into account lost sales (50,000 in January alone). Government departments are conducting investigations, with the US National Highway Traffic Safety Administration to the fore and, as might be expected, the lawyers are preparing for a field day, not least in America. Meanwhile the public relations handling has been shambolic, not helped by president Akio Toyoda declining an invitation to testify before a US congressional committee which is investigating the issue.

On a more positive front - except, perhaps for competitors tempted by schadenfreude - the shock of recent events could provide the spur for the company to come back stronger than ever. In mid-February, Toyota implemented a series of initiatives, including the appointment of regional 'quality tsars', aimed at ensuring that nothing similar taints the company's standing ever again.

In any event, Toyota is too significant a force in the global economy on every count and in every region to stay down for long. The world is about to discover that it's not only in the banking sector that organisations are too big to fall.

Final fling for buyers?

Everyone with an interest in the success of point-of-sale motor finance will have taken encouragement from the Finance and Leasing Association's latest figures. These indicate that the number of new cars financed at dealerships advanced by 56% during last year's fourth quarter compared with the same period in 2008 and by a whopping 91% in December alone. Even so, this sparkling performance was insufficient to prevent a decline for the year as a whole, while point-of-sale financing in the used car sector was also weak and recorded a decline in 2009.

Moreover, there's scant expectation that conditions during 2010 will provide much cheer. The last quarter's figures were flattered by a comparison with a weak period the year before and by what may prove to be the final fling of private buyers in anticipation of VAT reverting to 17.5% at the beginning of 2010 and the scrappage scheme reaching its run-out phase. And despite a strong start to the year - with new car sales up by 30% in January - private buyers will be handicapped during the short to medium term by a progressive and vicious squeeze on personal disposable incomes.

Ferrari move is not entirely unwarranted

It's logical to suppose that anyone buying a Ferrari, whether new or used, will be using rather more of the heart than the head. Consequently, it might seem a little odd that the marque has introduced an enhancement to its Ferrari Approved programme by providing a 24-month warranty on used cars sold through its UK franchised network. After all, affairs of the heart go hand-in-hand with a careless disregard for the economic and financial consequences, so why should Ferrari run the risk of meeting a potentially costly repair bill in the second year when the car's owner is presumably prepared to pay whatever's necessary to keep the beauty on the road?

Ferrari's declared aim is to equip its dealers to compete more effectively against the band of independent specialists who account for a high proportion of the marque's used car sales. This is entirely plausible, but maybe there is a growing recognition also that the exotic sports car market is becoming increasingly crowded with volume producers like Audi now achieving motorsport success and offering models (like the R8) in direct competition.

The hole's now looking less deep for Ford and GM

Step-by-step, America's principal vehicle producers are climbing out of the deep hole they dug for themselves over many years as a result of bringing to market a range of increasingly unsuitable models of dubious quality produced by manufacturing networks with hopelessly uncompetitive cost structures.

Heartening evidence of recovery has been provided by Ford's latest financial figures which show that the company achieved a profit of $2.7bn in 2009, the first time its finances have been back in the black since 2005. This outcome suggests that the combination of new model development and cost cutting measures are having the desired impact. European operations were particularly buoyant and Ford anticipates a further profit during 2010. The hope now must be that this snowballs over the next few years in line with a worldwide recovery in market volumes.

GM, too, is moving steadily towards recovery following its emergence from bankruptcy protection last July. Although still reporting losses, the group is at least generating cash and the balance sheet is strengthening. There are even suggestions that it will soon start paying back some of the $50bn borrowed from the US government. And, after coming perilously close to selling European operations, a five-year $15bn plan has been prepared with the aim of achieving profits in the region by 2012.

Arthur Way