No Ha, Ha At Tata – Negotiation Over Land & A Car Plant

by drjim on September 16, 2008

The Tata Nano Auto Plant Needed To Be Negotiated

The Tata Nano Auto Plant Needed To Be Negotiated

Negotiation is a skill that is used everyday, all around the world. There’s a great example of just how careful one must be when negotiating – remember, as Yogi Berra said “It’s not over until it’s over”. Tata Motors thought that they had successfully negotiated a deal until it started to come undone. Let’s take a look at what happened and see if there are any lessons to be learned here.

Tata Motors Ltd is part of the enormous Indian Tata Group company. The eyes of the world are on Tata Motors right now because they have announced that they are going to be building a car called the Nano which is expected to be the world’s most inexpensive car priced at $2,500. The car is scheduled to be launched in October.

Tata Motors had decided to build their car in India’s state of West Bengal which is located in eastern India. West Bengal is a economically poor part of India and the arrival of a large car manufacturing operation was viewed by many as a very good thing. Tata Motors negotiated with the West Bengal government in order to obtain the 1,000 acres of land that was needed to build the plant and the shops for their suppliers. The local government obtained the land, signed a deal with Tata Motors and construction was started. End of story right? Nope, not by a long shot.

It turns out that the land for the auto plant used to be farmland. The West Bengal government says that they paid the affected farmers in most cases and legally seized the land in a few cases. The issue is that the farmers don’t see it that way! In fact about 400 of the 1,000 acres are in dispute. So what did the farmers do? Simple, they demonstrated and got violent. Construction on the auto plant came to a halt. As though this wasn’t bad enough, Tata Motors said that if the issue was not resolved, then they would move their auto plant to a different Indian state.

What’s a local government to do? The West Bengal Governor sat down with the leader of the protests (who also happens to be the head of a local political rival to the current West Bengal government) and started to negotiate. After three days of negotiation, a compromise was reached. The exact deals of the compromise have not been released yet; however, the government has stated that they will try to return some of the land that had been forcibly taken from the farmers.

So what is to be learned from all of these international events? Ultimately, you need to do your homework and make sure that the parties that you are negotiation with have the power to deliver what they are promising. In this case Tata Motors relied on the West Bengal government to deliver land and it turns out that the land was not theirs to give. What could Tata Motors have done differently? They could have split the negotiations into two parts: various permissions and incentives from the local government and buying the land directly from the farmers. This would have been more time consuming; however, it would have prevented the turmoil and the delays that resulted from assuming that the local government had the power to provide the land.

What would you have done if you were the CEO of Tata Motors and no compromise had been reached? Would you have moved the plant and lost the $100M that you had already invested or would you have done something different? Leave a comment and let me know what you think.

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{ 3 comments… read them below or add one }

Kredit October 2, 2008 at 7:06 am

I have this great site bookmarked. Thanks Kredit

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admin October 2, 2008 at 2:44 pm

Kredit: it’s great to have you participating. Remember: everything that we discuss here will work just as well in Germany (maybe even better!).

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laws and liberty February 6, 2010 at 9:53 pm

Really? Don’t misunderstand what I’m saying, I’m in agreement with you partially, but when you make a statement like this you have to be prepared to back it up.

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