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Rediff.com  » Business » Tatas, Fiat close to mega global alliance

Tatas, Fiat close to mega global alliance

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September 20, 2005 09:40 IST

Tata Motors and Fiat are close to signing a worldwide agreement that will have the two automobile majors cooperating in a wide range of areas, including joint research and development for cars for overseas markets and the use of Fiat's retail presence abroad for marketing Tata cars.

Sources close to the development said a memorandum of understanding for the 'co-operation' would be announced shortly.

This will be the first instance of an Indian automobile company joining hands with a foreign peer in global markets. The sources added that a joint Tata-Fiat team, would be set up for the 'mega alliance.'

When contacted, a Tata Motors spokesperson said the company had no comments to make.

This type of co-operation, although new in the Indian context, is fast catching up among car makers in the overseas markets.

For example, Fiat has recently announced a partnership with Ford to share development and production cost on small cars. Fiat's car division, which accounts for 40 per cent of group revenues, has been in the red.

Commenting on the logic of such an alliance, the sources said globally the era of frantic mergers and acquisitions was over, as acquired brands might look attractive but could take years to click.

Also, carmakers like Toyota has spurned the M&A game so far after a huge surge in their profitability. "The name of the game now is: look for synergies and enter into such strategic alliances," the sources said.

They said such a co-operation in the global markets would be a win-win situation for both the companies. While the Italian car major, which is in the process of turning around, gets a strong Indian ally with global ambitions, Tata Motors will stand to gain from Fiat's retail network, especially in its efforts to accelerate growth by tapping new export markets.

Exports account for 17 per cent of the total consolidated sales of Tata Motors. The company has plans to raise exports to 20 per cent in this financial year.

The sources said the co-operation would not directly impact Fiat's operations in India. But they did not rule out the possibility of product outsourcing by Tata Motors from Fiat's Pune unit at a later stage.

This facility has a production capacity of 75,000 cars while its Kurla unit has a capacity for 60,000 units.

Tata Motors had recently picked up a 21 per cent stake in Hispano Carrocera SA, a Spanish bus company.

It has also launched its fleet of stylish and contemporary 'Globus' coaches and 'Starbus' range of buses. Tata Motors, the world's fifth largest medium and heavy commercial vehicle manufacturer, produces more than 150 commercial vehicle models with a range of light, medium to heavy-duty trucks, buses and tractor-trailers.

DRIVING TOGETHER
  • A joint team will be set up for the 'mega alliance.'
  • Alliance unlikely to impact Fiat's India operations.
  • Tata Motors may source products from Fiat's Pune unit.
  • Kausik Datta in Mumbai
    Source:
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