Tata-Fiat joint venture drives into profit zone

Tata-Fiat joint venture drives into profit zone
Manu P. Toms

Mumbai, Aug. 15

Fiat India, the 50:50 joint venture between Italian carmaker Fiat and Tata Motors, has reported Rs 22 crore profit for the first quarter against Rs 166 crore loss for the corresponding period a year ago. Revenues doubled to Rs 967 crore from Rs 473 crore. This signals a turnaround in the three-year-old joint venture, given the losses it had accumulated in the past many quarters.

From January 2008 to March 31, 2010, the joint venture had a cumulative loss of Rs 971 crore. The loss for the last fiscal was Rs 272 crore. The Fiat India Automotive Private Ltd (FIAPL) had invested Rs 4,000 crore in Ranjangaon to build a plant with a capacity to make 1.6 lakh units a year. Fiat accounts for 70,000 and Tata Motors, the balance. .

The increased capacity utilisation by both the partners and expanding joint dealerships are helping the venture stabilise production and marketing operations.

Fiat makes mid-size Linea and hatchback Grande Punto and Tata Motors makes Indica Vista and Indigo Manza at Ranjangaon. The capacity utilisation at the plant has been increasing over the years. In the last fiscal, Fiat produced 24,000 cars and this year it hopes to double production, according to Mr Rajeev Kapur, Chief Executive Officer (CEO), FIAPL.

Increasing Sales Network
Fiat's first quarter sales were up 15 per cent at 9,020 units, thanks to increasing sales network that is currently at 170 dealerships covering 130 cities/small towns.


“We are bringing out 90 hp Punto, which will be the most powerful hatchback in the market, during the festival season. The high power version of Linea will also be launched around the same time. This will help us improve volumes,” Mr Kapur told Business Line.

Asked when the company would break even, he said, “We hope to break even by financial year 2011-12.” The company has pinned its hopes on the upcoming small car besides variants of Linea and Grande Punto.

“Going by the performance for the last quarter, achieving breakeven by FY 12 looks quite possible,” said Mr Navin Matta, an analyst with Ambit Capital.

“The plant operation has now stabilised and the marketing expenditure has come down,” he said.

Fiat has another revenue stream in engine production. The company makes 1.3 multi-jet and 1.4 FIRE petrol engine at its powertrain facility at Ranjangaon.

The company exported 35,000 engine units to its parent company Fiat Italy last year.

The performance of Fiat India seems to have enthused the joint venture partner Tata Motors.

Mr Carl-Peter Forster, Managing Director and CEO, Tata Motors, said, “We are looking to strengthen the Fiat brand in India.” He said that the joint venture is looking at expanding Fiat's product range and marketing in the Indian market. Tata Motors' investment in FIAPL stood at Rs 999.54 crore as on March 31, 2010.

Source : http://www.thehindubusinessline.com/2010/08/16/stories/2010081650720200.htm

 

So good news finally starting to come, on Finance.

 

Yeah !! Locking the thread you mentioned above

 

So, what we discussed earlier was right. For a plant & Investment of such big size, it takes time to reach Break-even. Break-even reached now is a very good sign.

 

Oh yeah. But then they've reached atleast Quarterly break-even (without taking in the backlog of losses accumulated).

 

Off topic @VP : I see that the "banker" inside you is coming to the fore