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Nano: Caught in crossfire between Tata and Mistry

Tata has defended his stance on the Nano and strongly denied allegations by Mistry that his (Tata’s) “persistent resistance” prevented the Nano project from being shelved.

business Updated: Jan 18, 2017 11:14 IST
The Nano has become the bone of contention in the tussle between Ratan Tata and Cyrus Mistry, as the matter has now made it to the courtrooms.
The Nano has become the bone of contention in the tussle between Ratan Tata and Cyrus Mistry, as the matter has now made it to the courtrooms.(Reuters)

The Nano small car, a bone of contention in the tussle between Tata Sons Ltd’s interim chairman Ratan Tata and Cyrus Mistry, the ousted chairman, has now made it to the courtrooms.

Tata has defended his stance on the Nano and strongly denied allegations by Mistry that his (Tata’s) “persistent resistance” prevented the Nano project from being shelved.

In an affidavit filed at the National Company Law Tribunal (NCLT) on 6 January, Tata cited an email sent by Guenter Butschek, managing director and chief executive of Tata Motors Ltd, to Mistry, mentioning that Ratan Tata had not objected when the issue of scrapping the Nano was broached with him at a meeting.

The Nano was Tata’s pet project and Mistry has cited mounting losses from it—cumulatively valued at Rs6,400 crore—to be the key reason for the poor financial performance of Tata Motors’ domestic operations.

In an affidavit filed at the NCLT earlier this month, Mistry accused Tata of excessive interference in matters of Tata Motors and conducting reviews with company officials directly, undermining the position of the executive chairman of Tata Sons.

“Apart from aviation, his other personal passion was the automobile industry,” Mistry said. He alleged that despite being fully aware that the Nano lost money, Ratan Tata pushed for increasing production of the car and “pestered for a higher marketshare”. Mistry also said Tata suggested that Tata Motors chase large orders from cab aggregator Ola—in which Tata has a stake in his personal capacity—instead of Uber, with which the Tata group was pursuing an engagement.

Dismissing the allegations, Ratan Tata said in his affidavit that it was “unfortunate that my concern for Tata Motors would be coloured with a taint of ulterior motives on my part”. Tata said he suggested that Tata Motors should talk to Ola only because he was approached by Ola’s co-founder, who told him the response from Tata Motors to Ola Cabs’ proposal to buy several cars was very slow. Tata Motors should act swiftly and pursue such a proposal aggressively to improve sales volumes, Tata claims he told Mistry. He also added that his letter to Mistry clearly stated that the company should pursue a deal with Uber if that was more attractive.

Tata blamed Mistry for the drastic drop in the company’s passenger vehicle market share—from 13% when Tata was the chairman to 4-5% now. “It is very convenient for Mistry to allege that the losses and lack luster performance of Tata Motors is on account of the Nano, when even the present sales of the company largely comprise of the older models such as the Indica and the Indigo, with newer vehicles such as the Zest, Bolt and Tiago introduced during Misty’s tenure not contributing significantly to the sales or profit of Tata Motors,” he said.

Mistry first made a mention of the small car and the big losses in the five-page letter to Tata Sons board on 25 October, a day after he was removed as chairman following a boardroom coup. “The Nano product development concept called for car below Rs1 lakh but the costs were always above this,” wrote Mistry, pointing out that “there is no line of sight to profitability for the Nano and any turnaround strategy for the company requires to shut it down. Emotional reasons alone have kept us away from this crucial decision”.

The Nano hit Indian roads in July 2009. More than seven years since it went on sale, the jelly-bean shaped model has failed to woo the average two-wheeler owner and first-time car buyers, as envisaged by Tata, and sales continue to dwindle.

A Tata Sons spokesperson said he didn’t have anything more to add to what had been presented in the affidavit. Cyrus Mistry’s office declined to comment.

Tata Motors shares closed at Rs523.25 on Tuesday, down 0.63%, on a day the BSE’s benchmark Sensex fell 0.19% to 27,235.66 points.

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