Ratan Tata has transformed India’s biggest company, and done it alone
CASTING about for someone to run a big family firm when a successful tyrant is due to retire is usually a troublesome business. When the firm is still controlled by the same family that founded it back when John D. Rockefeller was gobbling up refineries in Cleveland, it becomes still more daunting. Add the fact that the ruling family are Parsees, a small Zoroastrian sect who have been intermarrying in India for over a thousand years, and the odds of finding someone who is up to the job lengthen again.
Mr Tata does not like publicity and avoids the platforms and applause of conferences. He lives frugally, does not drink or smoke and seems baffled by the idea of time spent not working. Asked what he would do with it, he usually replies that he would walk his dog along the beach near Mumbai. He does not seem to be motivated by money, and talks constantly about fairness and doing the right thing. “I want to be able to go to bed at night and say that I haven’t hurt anybody,†Mr Tata says twice in the course of an interview at a hotel in New Delhi owned by the sprawling group.
Mr Tata became chairman in 1991, just as India’s economy was opening up. His uncle, who had run Tata for more than 50 years, had started Tata Airlines (which became Air India) and was to India what Gianni Agnelli of Fiat was to Italy. He was a good-looking philanthropist with a French wife and held the first pilot’s licence to be issued in India. His shy and unglamorous nephew, in contrast, trained as an architect at Cornell University, slipped quietly into the family firm and was not marked out for the succession even when his uncle was due to bow out.
Despite all the glory that surrounded J.R.D., when he retired in 1991, Tata was a group of companies ill-equipped to deal with the changes about to sweep through India. It earned most of its money in old-fashioned industries that had grown fat during the centrally planned “licence rajâ€, when the government set limits on how much firms were allowed to produce and protected them from foreign competitors. The stakes held by the family in many of the 300-odd companies in the group were tiny, and the main Tata businesses were run as independent fiefs by men much older than Mr Tata.
They might have expected Mr Tata, who had never held an executive position, to leave them alone. Instead, he retired them, improving their pensions to soften the blow. He sold stakes in some companies and used cash from the sales and revenue from Tata Consultancy Services, India’s largest IT firm, to shore up control of those that remained. There are now a mere 96 companies in the group, and Tata Sons now owns at least 26% of each of them. That has made the portfolio a little easier to manage, but it leaves Mr Tata more isolated at the top.
Shortly after he became group chairman, Mr Tata also decided that Tata Motors would make its own cars, even though a joint venture with a foreign firm would have been easier. Critics grumbled that a good truck business was about to be destroyed for the sake of an ill-conceived vanity project. But after a difficult start, Tata Motors is now India’s second-biggest carmaker by sales. “If he had listened to what everyone told him, he would never have done it,†notes one of Mr Tata’s friends.
First, do no harm
Although he has made Tata’s big businesses more competitive and more inclined to look beyond India’s borders—Corus would be just the latest in a series of foreign acquisitions—Mr Tata has also run it in keeping with Tata’s public-spirited tradition. Two-thirds of Tata Sons is owned by charitable trusts that do good works in India, and the firm is known for refusing to pay bribes and for treating workers well. (The children of Tata’s steelworkers were given free education back in 1917.) Foreign investors sometimes wonder if this is good for business. “At first I didn’t have an answer,†Mr Tata says. “But then I asked myself: am I competitive? Yes. And this is the way companies are moving.â€
Mr Tata’s latest car project—producing a vehicle that will sell for under $3,000—combines two of the things that keep him from those walks along the beach: securing the fortunes of the family group and pleasing a highly developed sense of fairness. The factory will be in communist-run West Bengal, a state chosen partly because it is in need of industrial development. West Bengal’s government is eager for the investment, but Tata Motors has faced protesting farmers, a politician on hunger strike and, Mr Tata thinks, commercial rivals trying to prevent the birth of a more affordable car. Tata Motors is sticking it out, and expects to secure the land to build its new plant at the end of the month.
Mr Tata, who has no children, is due to retire in December 2012, when he reaches 75. That will leave the group with a familiar succession problem. Meanwhile, he is heading the government’s investment commission, which works to increase foreign investment. And he may be about to create one of the largest steelmakers in the world. Not bad for a shy architect.
