“Can we build a car for $2000?” asked Tata’s Indian management and the reply came back “yes”. Now we know the right answer was “no”. The response also revealed the vehicle’s executives as devoid of ethical leadership.

code of ethicsThe Tata Nano is a disgrace and does a huge disservice to the larger, global organisation. From the start, the group’s ethical code says:

No Tata company shall undertake any project or activity to the detriment of the wider interests of the communities in which it operates.

The safety code is even more explicit:

A Tata company, in the process of production and sale of its products and services, shall strive for economic, social and environmental sustainability.”

The apparent vulnerability of users to this vehicle makes the car socially and environmentally unsustainable.

As for quality the organisation claims a commitment to: “Supply goods and services of world-class quality standards”

That the Nano even got past the mock up stage, with no airbag—at least on some models, and whose fragile structure “folded like a cardboard after hitting a wall at 40 mph” is reprehensible.

The Nano appears to trash Tata’s ethics code. Where were the compliance officers when the vehicle was on the drawing board?

There is a dreadful echo of the classic Pinto scandal of the last century. Ford’s then management was aware of the weakness of the fuel tank. A crash from the rear could cause the tank to explode and incinerate the occupants. To correct the fault required a few dollars.

A so-called cost-benefit analysis allowed Ford engineers to show “taking no action” would cost less” than paying the expected legal damages. This was a craven disregard for the lives of the company’s customers, people died in terrible circumstances due to such false accounting.Ford Pinto

The Tata Nano story looks all too similar. In the most recent safety test by the Global New Car Assessment Program (NCAP) this so-called budget car received a zero star score for child protection because infant seats could not be installed.

To meet UN crash standards requires less than 100 dollars more according to NCAP. Four other Indian small cars tested also failed the independent safety tests. Tata Motors reaction has been cautious, it sees

…safety as a priority, and is going to closely review the results of the Global NCAP test, before drawing any conclusions vis-a-vis its product strategy. However all its cars do meet all Indian safety regulations as mandated by the government, at this time.”

What will those few saved dollars mean in reputational damage, apart from the many law suits bound to follow in the wake of the latest safety revelations?

What will be the cost, and how long before Tata can re-instate ethical values to win back the loyalty of the employees, let alone the buyers?

Sales are much below expectations. Seems the public realise why this vehicle is not a bargain. Owning a machine likely to kill you at 40 miles an hour is hardly a strong recommendation.

If Tata car leaders still think behaving with disregard for business ethics is OK, so long as this leads to profits, perhaps they should review the price being paid by the service company Serco.

serious fraud office signSerco has been referred to the police for manipulating figures on a prison escort contract and to the Serious Fraud office for over charging on electronic tags. Millions were wiped from the company’s market value. Now the firm daily struggles to regain customer credibility.

Will anyone trust Serco again? How hard must Serco work to convince potential buyers this is not a rip off outfit?

All company decisions reflect ethical values and affect long term success. As a detailed study in 2013 pointed out

“The business case for business ethics has been well proven by the costs and impacts of the repeated high profile cases of corporate greed and misconduct.”[1]

The Tata directors were not been caught with their hands in the till. But their willingness to sanction a car of this quality reveals a damaging and short-term view of their company’s future.

Indian consumers have a right to know how safe their vehicles are and to expect the same basic level of safety as customers in other parts of the world” Max Mosley NCAP chairman

Neither consumers nor the media nor history will soon erase the memory of, or forgive a company blithely saving a few dollars on a product that

Kills its occupants in a basic crash test.”[2]

[1] J. Casson A Review of the Ethical Aspects of Corporate Governance Regulation and Guidance in the EU, Institute of Business Ethics, 2013

[2] P. Oltermann and P. McClanahan, 2000 Tata Nano ‘kills’ its occupants in basic crash test, Guardian 31 Jan 2014.

GUEST POSTS Means not Ends: Fifth Pillar of Ethical Leadership in Business Survey: What the C-Suite cares about right now Big business risks losing its social licence.—Part 2 of 2

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