[shortbread]

Originally Posted by Samurai

For us what really matters is whether Cyrus Mistry was good for Tata Motors or not. Has there been improvements in Tata Motor products since Mistry. What will happen now since Ratan Tata is back?

If Tata Motors is taken as an example then there is very little to compare between Ratan Tata and Cyrus Mistry.

Firstly since age has been bandied about a lot on this thread, Ratan Tata was much older than Mr.Mistry when he took over from JRD.

He turned TELCO which was essentially a commercial vehicle maker into what Tata Motors is today. He initiated Tata to move into the passenger automotive space which started with two duds and then followed up with the successful Sumo. In 1998 launched India's first indigenous passenger car and to date is the only Indian passenger car maker!

After the sales decline of the Indica his head was on the line and he offered to resign as well. It was his hands on approach that helped improve the car and made the V2 variant into a success.

The JLR takeover was panned by almost every analyst at home and abroad. A company that never found success under multiple ownerships including giants BMW and Ford, today under Tata ownership has become the envy of the automotive world. Ian Callum himself admitted the F type would not have happened had it not been for Ratan Tata's insistence. They are reaping the rewards today of the heavy R&D expenditure they put in during the down time.

Tata's commercial division saw growth with its first major international acquisition, Daewoo commercial - which was then turned into a success story. Even their portfolio was expanded rather than relying on antiquated models and moving into medium and light segments.

No doubt there has been pitfalls. Model execution and marketing have always been Tata's pitfalls. Plenty of models that were great initiatives and launched at the right time but never really became the success they could have been. Safari, new Indica, Indigo, Aria etc That phase which has weighed heavily on the Tata brand saw the decline in sales and the company lose a lot of momentum. That said the company never gave up, the latest range of much improved models are based on the foundation laid by them and the lessons learnt from their failures. Even the positive outweigh the negatives by far.

What Ratan Tata always showed was initiative and this was exactly what turned a loss-maker into a USD 40 billion dollar organisation, one that makes more money than Suzuki's entire global operations and M&M combined!

I cannot claim to know what Cyrus Mistry has been planning for 4 years for Tata Motors going forward, but rest assured having Ratan Tata back even if temporary is not a bad thing for the company!

[Sawyer]

More reasons coming to light, and there isn't a whiff of any integrity issues.

One alleged reason - one of many that led to this state of affairs, but one that TBHP can debate:

"For example, Mistry signaled that the Nano -- developed by Ratan Tata after he saw a family of four on a scooter on a rainy evening -- should be scrapped as the project was consistently unprofitable and at its peak lost 10 billion rupees.

"As there is no line of sight to profitability for the Nano, any turnaround strategy for the company requires to shut it down," Mistry wrote. "Emotional reasons alone have kept us away from this crucial decision.”

Most of the differences in other areas/businesses run on similar lines. On this specific one, let the debates begin!

[rrsteer]

Here is the link to Mr Mistry's actual email: http://im.rediff.com/money/2016/oct/...y-emailnew.pdf

Hindsight is 6 by 6. In hindsight, I do think many of Mr. Ratan Tata's strategies or plans were faulty and over grandiose. I liked how the organization was moving under Mr. Mistry. Of the two Tata businesses I am tracking - coffee and chemicals - I think he did a good move by dis investing from fertilizers.

Just connecting some dots backwards - and this may mean nothing actually.
I found it rather curious when certain tweets were made from Mr. Tata's twitter account and later attributed to hacking. Then, only just some weeks back Economist - the stupid, but hallowed British fortnightly- published a critical article on the performance of Tata group. I do realize that Tata by way of its British acquisitions can be quite important to British, but still the timing seems uncanny.

I for one am left thinking that somebody was stopped from doing good work.

[condor]

Too much speculation - if not Only speculation about the reasons for this. People shouting around and making comments are possibly upset about the happenings -- but for what ?

Originally Posted by autobahnjpr

There is no doubt that sudden and abrupt removal of Cyrus has been a nasty surprise to everyone. .. Each leader has his or her personal leadership style and way of functioning and I am quite sure that people are not removed because they have a different style. Ratan Tata has been the Chairman of Tata Sons for long and is seasoned enough to understand the consequences of any step that is being taken. Also I am quite sure that he is not the one to hold any personal grudges against anyone and act in a selfish way. In fact, Ratan was the one who brought Cyrus.

Even if Cyrus Mistry came in through the selection committee - and not exactly brought in by Ratan Tata himself -

1) What would a 80 year old bachelor gain by bringing down the CEO ?
2) SOmething as big as this most likely has the concurrence of the biggest share holders - i.e., the SP family. If the SP family is not involved With the change, then it can only mean a split in the Tata Sons group.

[Mad Max]

I don't even think this has anything to do with Tata motors. They are a global conglomerate. They don't focus on just one profit / loss making business and take a call. This is more to do with perception and succession planning. I am sure Ratan would've wondered what happens to Tata group once he's gone. It's always best to have some direct heritage into such companies as sooner or later, the founding family can find itself marginalized.

I, for one, don't have a doubt that Ratan will do what needs to be done. When it's such a large group, one has also to think a bit more compassionately in terms of employees and grievances. Just running after profit with no social responsibility doesn't do a whole lot to the image of the conglomerate. He can bring this and Cyrus, in my personal opinion, didn't showcase himself as that.

Remember our thread about values and why they are needed? This is one area where large companies have to follow values, even at a dent of profits, just to make sure they are respected in the global forum.

[poloman]

I am quite perplexed whe some are saying we should not speculate. But who is really forcing people to speculate? Why is no clarity coming from the board or the interim chairman?
I am also quite surprised how people are blindly adoring Ratan Tata. He is just a businessman not a saint. Public memory is too short. We all heard him doing wheeling and dealing in Nira Radia tapes. He has done this board coups many times in the past if you examine history of this company. So why should one always whitewash TATA group citing their ethics and principles. I am tired of hearing Ratan Tata can't do anything wrong. We are talking here about a company of accumulated debt of around $26B, most of which happened during Mr Tata's tenure.I have not seen a single instance in the recent past where they showed their compassionate side be it Singur logjam or TCS headcount reduction. They are just like any other Indian business house with a great family overhang.

One may soon see murky politics being played full force in this whole drama. Mistry meeting PM, all legal advisors of Tata group, ex Congress ministers. Lot of mystery in all this.

[Sawyer]

Originally Posted by Mad Max

I am sure Ratan would've wondered what happens to Tata group once he's gone. It's always best to have some direct heritage into such companies as sooner or later, the founding family can find itself marginalized.

A bit late for RNT to do anything about this now, other than adopting someone into the family! But who???
The other Tata - Noel - isn't someone with much credibility which is why he wasn't considered earlier.
On a different subject, the full text of the Mistry email - assuming it is genuine -raises many legitimate concerns that the new leadership is going to have their hands full explaining away, AND, more importantly, doing something to fix the issues raised.
Brand TATA has taken a big hit in three days.

[djay99]

Highlights
•In an email, Cyrus Mistry has blamed Ratan Tata for constant interference.

•Mistry said Tata Group companies face potential writedowns to the tune of close to $18 billion.

•Tata is said to have become increasingly frustrated by Mistry's focus on divestments.

"I cannot believe that I was removed on grounds of non-performance," Cyrus said going on to point to two directors, who voted for his removal, only recently lauding and commending his performance.

Detailing out the problems he inherited in several Tata group firms, Mistry in his letter said the foreign acquisition strategy with the exceptions of JLR and Tetley, had left a large debt overhang.

Cyrus alleged that it was Tata who forced the Group to foray into the aviation sector by making him a 'fait accompli' to joining hands with Air Asia and Singapore Airlines and making capital infusion higher than initial commitment.

Also, "ethical concerns" had been raised over certain transactions and a "recent forensic investigation revealed fraudulent transactions of Rs 22 crore involving non-existent parties in India and Singapore.

More Details

[Karthik Chandra]

Amul's ad today

[Sawyer]

Originally Posted by poloman

I am tired of hearing Ratan Tata can't do anything wrong. We are talking here about a company of accumulated debt of around $26B, most of which happened during Mr Tata's tenure.

I quite agree. I think that what now needs to be done is that he should be told that he cannot retire until he restores the group to a sound financial footing - which will take years. Or until he dies trying to do so. And all of this under better shareholder oversight than in his past - oversight of the kind that Mistry was subjected to.

And on the lighter side, but not in jest:
Mistry was sacked for telling the group companies what my three year old granddaughter sometimes hears from her mother: Your eyes are bigger than your stomach.

[coldice4u]

I for one believe that business cant always be about balance sheets. I think Mr Mistry was too focussed on balance sheets which I think is not the way the TATA group goes about doing things.
Purely my opinion !

[Sawyer]

I don't know all the truth of things - obviously - but perhaps he was forced to be so focussed because of how the balance sheet for the group looked like when it was handed over to him?

Fundamentally, business is about profits, like it or not. And the Tata group cannot say we will not make profits because we are so good at all other things we claim to do better than others; profits pay for these activities after all.

There is a very strange interview given to NDTV by a trustee of one of the Tata Trusts, a very strange person named VR Mehta. Supposedly given to justify the decision, he does exactly the opposite, when you read the Mistry email and combine it with what is said in the interview. In fact his biggest criticism of Mistry is that he was not delivering enough profits and dividends to the Trusts!

More and more, the thing looks like Alice in Wonderland. Off with his head, said the Queen of hearts, when she did not like what someone said.

[the_skyliner]

Originally Posted by coldice4u

I for one believe that business cant always be about balance sheets. I think Mr Mistry was too focussed on balance sheets which I think is not the way the TATA group goes about doing things.
Purely my opinion !

All businesses are about balance sheets. Tatas are no exception.
True, Tatas believe in giving back to the society but how can they do that if they fail to acquire it (through profits) in the first place?

Mr. Mistry's point about Nano's losses is very crucial. A company can not carry on with a huge burden of a loss making product (with no foreseeable future) to protect "pride". Moving on at the right time is a key to success nowadays.

I am not sure if it is true but I heard this quote of RNT: "I do not believe in taking right decision, I take decision and make it right". Well, sorry Mr. Tata, that is just proving your decision to be correct at any cost. That's not good business.

[ashis89]

Tatas have always tried to give back to the society in some way or the other. Airlines, educational institutions, hospitals, telecom, chemicals and what not. Almost all the sectors in which they operate, they always have the cheapest/VFM but good quality offering along with premium products. I can give several examples such as:

- Ginger vs. Taj
- Nano/Indica vs. Aria
- Tata Agni vs. Tata Tea Gold
- Voltas low end AC vs. high end ones
- Sonata vs. Edge/Raga and the likes
- Tata Docomo, Tata Swacch, Amalgamated Plantations, Tata Salt, etc

No doubt about it that many of these would be burning money while some others will be earning it. For a typical businessman, the businesses burning/not earning much, would be wastage of time and resources. I completely agree that it wouldn't make business sense. Profitability and eventual shareholder value creation are the prime metrics.

For Tatas, they have always done business while taking care of all the stakeholders (not only shareholders) and from the profits reaped, they have tried to invest a portion of it for the society. It has been their commitment since ages and their metrics probably has been something like "impact on the society for each of their action".

These difference in vision in the first and the second approach of doing business will always lead to conflicts. And that is what has happened.

PS: I, for one, buy a product blindly if it has "A Tata Enterprise" written on it. I feel assured that this product won't harm me. I have never been disappointed. I have been an ex-TCS employee and have several relatives/acquaintances at various levels in Tata group of companies. I haven't heard any complaints from any of them except for being a bit slow and laid-back in certain cases.

PPS: If anyone has seen the Dark Knight movie series, I can somehow relate the very last dialogue of DK to the Tatas. And also, the initial part of DKR where Bruce Wayne (Ratan Tata) asks Alfred as to why the donations dried up and Alfred (Cyrus) replies there is no profit generated to fund those activities. Also the part in Batman Begins, where Bruce buys all the company shares in open market to take back the rein of his company.

Sorry for such a lengthy post which is so off topic.

[catchjyoti]

The explosive letter from Mistry to Tata Sons board in full.

To
Directors of Tata Sons Ltd.

CONFIDENTIAL
I was shocked beyond words at the happenings at the board meeting of October 24, 2016. Apart from the invalidity and illegality of the business that was conducted, I have to say that the Board of Directors has not covered itself with glory. To “replace” your Chairman without so much as a word of explanation and without affording him an opportunity of defending himself, in a summary manner must be unique in the annals of corporate history. The suddenness of the action, and the lack of explanation has led to all manner of speculation and has done my reputation and the reputation of the Tata Group immeasurable harm.

At the outset, I have to say that I have great respect for the Tata Group and the thousands of employees who are working hard despite the challenges. I am writing this letter to the Board to emphasise the total lack of corporate governance and to point out the failure on the part of the directors to discharge the fiduciary duty owed to stakeholders of Tata Sons and of the group companies. All of this does not augur well for the future of the Group. All that is said here is well known to many among you, but I would like to put in one place my journey as Chairman of Tata Sons. It is important to emphasise the enormity of what has transpired in the Group and what corrective action is to be taken. Each of you is already in receipt of and familiar with the Strategy 2025 document that I presented to you, and in which I had articulated a growth strategy for the future.

In 2011, after some exploration by a search committee, I was approached by both Ratan Tata and Lord Bhattacharya individually to be a candidate for the position. I politely declined. I had myself built a business which I would continue to run. However, as the search process progressed and the committee was unable to find a suitable candidate, I was asked to reconsider. After consulting my family and in the broader interests of the Tata Group, I took courage to overcome my initial reluctance and agreed to consider the position.

Prior to my appointment, I was assured I would be given a free hand. The previous Chairman was to step back and be available for advice and guidance as and when needed. After my appointment the Articles of Association were modified, changing the rules of engagement between the Trusts, the Board of Tata Sons, the Chairman, and the operating companies. Inappropriate interpretation indeed followed, and as elaborated below, it severely constrained the ability of the group to engineer the necessary turnaround.

I am not sure if the individual board members and the trustees truly appreciated the extent of the problems I had inherited. I cannot blame them, for I myself, as a non-executive director, did not have a clear grasp of the gravity of the issues involved. Without meaning to air a laundry list, let me outline some of the major challenges faced at the time of my entry.

As is public knowledge, the foreign acquisition strategy, with the exceptions of JLR and Tetley, had left a large debt overhang. The European steel business faced potential impairments in excess of USD 10 billion, only some of which has been taken as of date. Many foreign properties of IHCL and holdings in Orient Hotels have been sold at a loss. The onerous terms of the lease of Pierre in New York are such that it would make it a challenge to exit. Tata Chemicals still needs tough decisions about its UK and Kenya operations.

IHCL, beyond flawed international strategy, had acquired the Searock property at a highly inflated price and housed in an off balance sheet structure. In the process of unravelling this legacy, IHCL has had to write down nearly its entire networth over the past three years. This impairs its ability to pay dividends.

Tata Capital had a book that required significant clean up on account of bad loans to the infrastructure sector. The loan to Siva was under the strong advice of Executive Trustee Venkataraman, which has since turned into a non-performing asset. All of this resulted in Tata Capital having to recognize an abnormal size of NPAs.

Of all the companies in the portfolio, the telecom business has been continuously haemorrhaging. If we were to exit this business via fire sale or shut down, the cost would be USD 4-5 billion. This is in addition to any payout to DoCoMo of at least a billion plus dollars. The original structure of the DoCoMo transaction raises several questions about its appropriateness from a commercial or prudential perspective within the then prevailing Indian legal framework. In the light of all of this, our strategy over the past three years has been to increase the EBITDA from Rs. 400 crores to Rs. 2,500 crores, in the hope of being a potential player in consolidation of the industry.

Tata Power aggressively bid for the Mundra project based on low-priced Indonesian coal. As regulations changed, the losses in 2013-14 alone amounted to Rs. 1,500 crores. Given that Mundra constitutes Rs. 18,000 crores of capital employed (40% of the overall company's capital employed), this substantially depresses the return on capital for Tata Power as well as carries the risk of considerable future impairment.

An even more challenging situation arose in Tata Motors, both on the commercial and passenger vehicles. Before 2013, in order to shore up sales and market share, Tata Motors Finance extended credit with lax risk assessment. As a result, the NPAs mounted to being in excess of Rs. 4,000 crores. Historically, the company had employed aggressive accounting to capitalize substantial proportion of the product development expenses, creating a future liability. Beyond this, the Nano product development concept called for a car below Rs. 1 lakh, but the costs were always above this. This product has consistently lost money, peaking at Rs. 1,000 crores. As there is no line of sight to profitability for the Nano, any turnaround strategy for the company requires to shut it down. Emotional reasons alone have kept us away from this crucial decision. Another challenge in shutting down Nano is that it would stop the supply of the Nano gliders to an entity that makes electric cars and in which Mr. Tata has a stake.

On the performance of the portfolio, as you are aware from my presentations to you in the recent past, if we look at the aggregate data between 2011 and 2015 and limit the analysis largely to the legacy hotspots (IHCL, Tata Motors PV, Tata Steel Europe, Tata Power Mundra and Teleservices), it will show that the capital employed in those companies had risen from Rs. 132,000 crores to Rs. 196,000 crores (due to operational losses, interest and capex). This figure is close to the networth of the group, which is at Rs. 174,000 crores. A realistic assessment of the fair value these businesses could potentially result in a write down over time of about Rs. 118,000 crores.

In the face of the work challenges, I had to take many tough decisions with sensitive care to the group’s reputation as well as containing panic amidst internal and external stakeholders. Despite bad press, impairments were taken to clean the books but substantial exposure remains. Dividends were reduced (e.g., Tata Motors, IHCL) to conserve cash for needed investments in the teeth of shareholder fury. Apart from hotels, the group made several exits in the fertilizer business, UK steel operations and of course in smaller companies such as the logistics company, DIESL. I had to ease out hangers-on who are prone to flaunt their proximity to power. On the more positive side, Kalinganagar, the largest domestic capital investment of the group was completed overcoming significant obstacles that had left the project in doubt previously.

Early in my tenure, our foray into the aviation sector began when Mr Tata ushered me into his office and handed me a report on Air Asia by Bain & Co. He had concluded negotiations to partner with Air Asia and wanted the proposal tabled at the forthcoming Tata Sons board meeting. My pushback was hard but futile. However, I was able to extract a promise of no debt to be raised at the level of the JV as well as limiting Tata Sons investment to 30% of the USD 30 million equity. A few months later, I was surprised to be confronted with a similar situation requiring me to execute a fait accompli JV with Singapore Airlines. Without the benefit of time and experience to fully evaluate the proposal, I had to accept that Tata Sons would take a 51% stake in a USD 100 million joint venture. The passion for the airlines sector has led Mr Tata to continue his involvement with the strategy of the two airlines. It is on his advice that the Tata Sons board has increased the capital infusion in the sector at multiple levels of the initial commitment.

Board members and trustees are also aware that in the case of Air Asia, ethical concerns have been raised with respect to certain transactions as well as the overall prevailing culture within the organization. A recent forensic investigation revealed fraudulent transaction of Rs. 22 crores involving non-existent parties in India and Singapore. Executive Trustee, Mr Venkatraman, who is on the board of Air Asia and also a shareholder in the company, considered these transactions as non-material and did not encourage further study. It was only at the insistence of the independent directors, one of whom immediately submitted his resignation, that the board decided to belatedly file a first information report.

Despite all of the above, during my term, the operating cash flows of the group have grown at 31% compounded per annum. The Tata Group valuation from 2013 to 2016 increased by 14.9% per annum in rupee terms as against the BSE Sensex annual increase of 10.4% over the same period. The Tata Sons networth has increased from approximately Rs. 26,000 crores to Rs. 42,000 crores, after considering the impairments. This has significantly strengthened our balance sheet, enhancing our ability to absorb further shocks from restructuring in the company.

To come back to the amendments in the Articles of Association, as feared, the inappropriate implementation created a flux in the decision-making process. I have often presented to the trustees, before and after Tata Sons board meetings. This created alternative power centres without any accountability or formal responsibility, invalidating the very governance role of the Tata Sons board and the Chairman, resulting in dysfunctional governance. The trust-nominated directors, who I would assume would use their own independent judgment and discharge their fiduciary duties, were reduced to mere postmen. As an example, once, the trust directors (Nitin Nohria and Vijay Singh) had to leave a Tata Sons board meeting in progress for almost an hour, keeping the rest of the Board waiting, in order to obtain instructions from Mr Tata. Such a work pattern has also created the added risk of contravening insider trading regulations and exposed the Trust, apart from exposing the trustees to potential tax liabilities. These circumstances forced me to circulate a note on corporate governance in order to clarify the distinct roles of Tata Trusts, Tata Sons Board, and the Boards of the operating companies.

I cannot believe that I was removed on grounds of non-performance. As you are aware the Nomination and Remuneration Committee comprising Vijay Singh, Farida Khambata and Ronnen Sen, independent directors (two of whom have voted for my removal now), had only recently lauded and commended my performance.

In keeping with Tata Group values, to engage employees and have a favourable impact on the communities we operate in we launched a volunteering programme, challenging group employees to volunteer a million hours in 2015 and the result was volunteering of 1.2 million hours, making it one of the top ten global volunteering programmes.

I hope you do realize the predicament that I found myself in. Being pushed into the position of a “lame duck” Chairman, my desire was to create an institutional framework for effective future governance of the group. I believe I had to be true to myself and the best interests of the organization. While I would be lying if I said I am not disappointed, I have a sense of pride and dignity intact in the efforts I have taken to professionalise and institutionalise, regardless of the outcome of effort, I now witness.

Since the developments at the Board Meeting were purported to have been initiated at the instance of the Trusts, I am copying the Trustees.

Sincerely,

Cyrus
(Cyrus P Mistry)
C.C. Trustees of Tata Trusts

source: http://www.telegraphindia.com/116102...ory_115900.jsp