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TATA-FIAT JV FACES MOUNTING LOSSES

Discussion in 'Fiat India News' started by amogh, Aug 4, 2010.

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  1. amogh

    amogh Staff Member Janitor

    Messages:
    1,377
    Pune
    Grande Punto 1.3
    SAD BUT TRUE
    ===================================================================================================

    The 50:50 JV posted a loss of Rs 970.7 crore for 2009-10, an increase of 39 per cent.

    Fiat India Automobiles Pvt Ltd (FIAPL), the three-year-old joint venture company formed through the association of Tata Motors and Fiat Auto SpA, is facing rough weather, as it posted record losses last year.

    The 50:50 JV company posted a loss of Rs 970.7 crore for 2009-10, an increase of 39 per cent over the Rs 698.4-crore loss in the year before.

    Tata Motors, India's largest automobile company, has published the financial details of its various subsidiaries and associate companies in the annual report for last year, released on Monday. The company publishes financial records pertaining to its own share in the entity.

    FIAPL, which owns the Rs 4,000-crore Ranjangaon facility near Pune, is the company responsible for manufacturing cars, engines and transmissions for both Fiat, one of Italy's largest carmakers, and Tata Motors’ brands.

    While neither company commented on the reason for the losses, analysts said it was primarily due to under-utilised plant and high material costs.

    Production of Fiat products such as the Grande Punto (a hatchback) and the Linea (a sedan) has been on a much lower level than earlier anticipated by the market. The company had discontinued the Palio model recently due to muted response and increased competition.

    At present, Fiat makes less than 2,300 units per month at the plant, whose capacity is 16,500 per month. The Italian company utilised less than 15 per cent of the installed capacity of the plant last year, producing just 26,180 units for both domestic and export markets.

    Tata Motors produces the Indica Vista and Indigo Manza at the plant, which has flexible production lines.

    The models of both Fiat and Tata produced at the plant share engines and transmission. Production of Tata branded products from Ranjangaon was not to be ascertained.

    Fiat sales have been sliding for two months, with a drop of 14 per cent seen in domestic sales last month, at 2,301 units.

    As a result of an agreement between Tata and Fiat in 2006, both companies sell their products through joint outlets, making use of a single distribution channel. This has resulted in increased instances of product cannibalization, according to some sales representatives employed at various showrooms.

    Further, according to the report, Tata Motors has cut on finance provided to FIAPL substantially to Rs 197.50 crore during the reporting year, against Rs 291.47 crore given in the previous one. Tata had an investment of Rs 999.54 crore as on March 31, representing 50 per cent of the holding.

    Tata Motors has also given a letter of comfort to certain banks and other lenders against credit facilities extended to FIAPL. This is, however, restricted to 50 per cent of the value of credit facilities extended, Rs 1,193.8 crore as of March 31.

    Source : http://www.business-standard.com/india/news/tata-fiat-jv-faces-mounting-losses/403459/
  2. Ravi

    Ravi Staff Member Janitor

    Messages:
    6,001
    Bangalore
    Grande Punto 1.3
    This is bad news.
    I read somewhere, they (FIAPL) were expected to break-even by 2011 or 2012.
  3. Sumit

    Sumit Superiore

    Messages:
    607
    Munger
    when does the JV end? what will be the fate of Fiat after that.?????????????????
  4. Vroom

    Vroom Amatore

    Messages:
    234
    Mumbai
    Sigh :cry:

    Edit: And I just hope we as consumers do not run into rough weather soon...

    Vroom
  5. Slightly OT : when the Mahindra-Renault marriage ended, what happened to the servicing of the cars that were sold. Is it being picked up by Mahindra ?
    Not that I foresee a similar situation here :A
  6. Ravi

    Ravi Staff Member Janitor

    Messages:
    6,001
    Bangalore
    Grande Punto 1.3
    In this case, Mahindra bought the full ownership so all the vehicles will be serviced by Mahindra.

    And guys the Fiat-Tata JV is not ending. Nothing alarming happening. The break-even supposed to happend in next couple of years. Its not that they had expected to have be in profit by this time. Please don't jump the conclusion that this JV will end.
  7. Sumit

    Sumit Superiore

    Messages:
    607
    Munger
    Fiat shud start its own exclusive showrooms. Fiat cant afford to run into rough weather again. tata showrooms shud be used only as supplement. c'mon Fiat do it , we love you. good to know that the JV is not ending.
  8. VahanPujari

    VahanPujari Staff Member Janitor

    Messages:
    2,303
    Mumbai
    That might be one of the reasons of increase in spare parts prices ??

    However, another fact is that such a huge project/ investment always take time break-even. Not much alrm there. Though Tata-Fiat have to start increasing the plant utilisation (means higher sales? or may be exports? )
  9. J Ravi

    J Ravi Esperto

    Messages:
    2,293
    Bangalore
  10. redtux

    redtux

    Messages:
    111
    Trivandrum
    Guys, one question. If the JV ends will Tata still be able to get FIAT engines - SDE & Safire?

    What i see in Kerala is that most FIAT cars are seen in urban areas only. FIAT is still an unknown or feared :A company in the rural areas. FIAT can utilize this situation to start their own service centers in urban areas only. That way they can provide better assistance to customer. Daydreaming ? ::O
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