The prime reason for people’s trust towards the government of India is the accountability which is always found to be missing in private sector firms. This perception changes when people look towards TATA Group. The largest conglomerate of India, TATA Sons has a total revenue of 12,800 crores. But the revenue or business growth is not the talk of the day. Instead, the discussion is around TATA’s corporate philanthropy. This time it is Ford that is getting favoured.
TATA worried about Ford employees
According to the recent reports, TATA Motors’ subsidiary TATA Passenger Electric Mobility Limited (TPEML) has closed a deal with US based company Ford Motors. The deal will be officially done till January 10, 2023. According to the unit transfer agreement signed in August this year, Ford will transfer its manufacturing plant in Sanand, Gujarat to TATA Motors Limited. The deal is finalised at an amount of Rs 725.7 crores.
Accordingly, TPEML has extended an employment offer too. The offer provides continued employment opportunity to all competent Ford employees on the same terms and conditions they were working before. Seeing almost no profitability in near future, company has stated that it will face a hit of about $2 billion.
In its stock exchange filing, TATA Motors informed that “This acquisition will unlock an additional state-of-the-art manufacturing capacity of 300,000 units per annum which is scalable to 420,000 units per annum as the company’s existing capacities near saturation.”
Also read: Not just India, Ford’s fortunes are sinking in the US, Europe, and China too
Fall of Ford India Pvt. Ltd
Ford started its business in India in 1995. But it continued to suffer by trying to mould itself according to the Indian market. For almost two decades the company strived for a profitable year.
For the first time in 2015, Ford reported a profit in India. The company saw a piecemeal profit growth till 2018. But it started to fall again in 2019. Ford Motors reported a 60% reduction in profit remaining to Rs 211 crores, which was Rs 526 crore in FY2018.
The prime reason for that was low exports. In FY20-21, Ford India posted a loss of Rs 188 crores. According to Ford India Pvt. Ltd., the company incurred a loss of $2 billion in 10 years. Indicating towards weak demand and competitor’s low-cost vehicles, Ford announced its exit from the Indian market. Now TATA has taken the responsibility to make it profitable.
There was a time in 1999, when TATA was failing in the passenger cars segment. Ratan Tata decided to sell Indica to Ford Motors. Bill Ford jeered at Ratan Tata, questioning his expertise of passenger cars. Bill Ford even said that he was doing a favour on Ratan Tata by buying the company. Later, when Ratan Tata bought Land Rover and Jaguar, Bill Ford realised his expertise and said that Ratan Tata was doing him a favour by doing a deal.
TATA looks forward to make Air India ‘maharaja’
But it is not only Ford that has been a beneficiary to TATA’s corporate philanthropy. Air India is another company on this list. Air India’s majority stakes were taken over by the Government of India in 1953 from TATA Sons. Air India never made a profit instead its losses always grew. The condition of Air India worsened even more after the entry of other low-cost aviation players like SpiceJet, Indigo and GoAir. They grew at a rate of 20% in a decade.
Even after a bailout package of Rs 30,000 crore, Air India failed to cope up the crisis. The bureaucratic incompetence and lack of full fledge reform policy became the cause of failure. The Indian Government incurred a loss of almost $200 million a day to continue the operations of Air India. The company’s losses in FY2019 alone were Rs 7,600 crore. The total debt on company rose to Rs 70,000 crores.
The Government planned to sell the company and TATA Group placed a winning bid to take over the ‘maharaja’. Now, Air India under TATA Group has aspired to expand to 30% domestic market against its 8% hold. Vihaan.AI is the plan under which Air India is taking such initiatives. It is also working for an expansion in international market with increased flights.
Also read: An Air India – Vistara merger is on the cards
TATA Group corresponds to the essence of India. India as a nation holds the values of high moral, helping nature and a tolerant society. TATA, reflecting these spirits, has taken several steps in that direction in social as well as corporate arena. Along with Air India, Ford will prove to be an example of TATA’s corporate philanthropy.
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