Will Llistosella’s sudden refusal to lead Tata Motors hurt the company?

Little over a month after he agreed to become the next managing director and CEO of Tata Motors, Marc Llistosella refused to relocate to India to take charge.

Tata Motors attributed Llistosella’s unprecedented move to ‘personal reasons’ in a statement on March 20. The current MD and CEO Guenter Butschek’s five-year contract with Tata Motors has already been extended until the end of June.

The abrupt exit of Llistosella even before taking charge is sure to create a leadership vacuum in the company, which has weathered setbacks and bounced back to make impressive gains in the stock market this year.

Last time Tata Motors faced such a situation was in 2014 when its former MD Karl Slym committed suicide, creating a void at the highest level for two years before head hunters at the Mumbai-based Tata Group zeroed in on Butschek. Coincidently, Llistosella spent as many years (25 years) with the truck and car giant Daimler as did Butschek who will be relocating to Germany.

Butschek’s five-year term at Tata Motors ended on February 15, 2021, but he agreed to stay on for a few months at the request of the company’s board. Llistosella was to take charge from July 1, 2021 although Tata Motors did not specify the duration of his term.

With Llistosella declining to take over the reins, it will be a tall task for head hunters to find a replacement in just three months.

Sunil Goel, MD, GlobalHunt, a recruitment firm, said that since it was a strategic job role, not merely a transactional one, it takes about 10 months to find the right candidate.

“Large firms prefer internal successors via succession planning since they already know the company vision and culture. If it is a short deadline then may be an interim head who is an internal candidate can be chosen”, Goel added.

With an idea of making the company compete with industry leaders the Tata Group has banked on non-Indians with international perspective to lead the company. After the retirement of Prakash Telang in June 2012 no Indian has led Tata Motors in the position of MD and CEO.

What happened the last time?

Tata Motors had formed an eight-member corporate steering committee under the then Tata Sons Chairman Cyrus Mistry following the sudden demise of Slym. This committee comprising heads of finance, commercial and passenger vehicle divisions, sales and marketing and research and development unit, was tasked to execute as well as evaluate decisions made by the office of the managing director.

But the vacuum at the top may have impacted operations. For instance, Tata Motors lost market share in both the segments of the business. From 54.1 percent in FY14 in the commercial vehicle (CV) business Tata Motors’ market share slipped to 49.2 percent in FY17. The fall wasn’t as steep in the passenger vehicle (PV) business where the company closed FY17 at 5.66 percent as compared to 5.8 percent clocked in FY14.

Maneesh Sharma, MD, PrimeHR Recruitment Solutions said, “Just three months may be a tough challenge to find a replacement from outside. Large companies like Tata Motors would also look at the cultural fit of the candidate before taking a hiring decision”.

After overhauling its car business unit over the past two years Tata Motors has been able to recoup lost ground. After slipping to the sixth position behind Toyota, Tata Motors climbed back to the third position in the PV segment with a market share of 9 percent as of February 2021 end.

The Society of Indian Automobile Manufacturers (SIAM) does not provide CV sales data anymore but Tata Motors has reported a steady improvement in CV volumes over the past few months and its market share is expected to be around 50 percent. With vast experience in the CV space Llistosella was expected to push up Tata Motors presence in the truck and bus category.

Llistosella who was the brainchild behind the birth of Daimler’s seventh global auto brand, BharatBenz, spent six years in India until 2014. He paved the way not only for the launch of highly localised trucks in the medium and heavy-duty categories but also for making Daimler India Commercial Vehicles the third biggest CV brand in India in the segment it operated in.