Case Analysis Tata Motors & Fiat Auto

( Joining Forces )Strategic Alliance & Joint Venture

By :

Mangesh Joshi (11BSP0417)

Piyoosh Bajoria (11BSP0688)

Ankita Arora (11BSP0120)

Kanika Tyagi (11BSP0435)

Ankur Sharan (11BSP0133)

Eeti Gupta (11BSP0309)

Ajay Raja (11BSP0052)

Introduction

In July 2006, FIAT and TATA motors signed a MOU.

Earlier 2006, both had signed a marketing and distribution agreements.

Earlier 1990’s TM was mostly a manufacturer of commercial vehicles.

It entered to CAR segment through INDICA.

By, 2003 company also targeted the global market.

Continue…….After World War 2, FIAT became a major manufacturer of

small cars in ITALY, and later on in Europe.

In the 1950’s, the FIAT group entered into a license agreement with India-based Premier Automobiles Ltd.(PAL) to manufacture its car.

JV would benefit both parties: TM would gain in terms accessibility, technology, design,, and global presence.

FIAT will get larger presence in Indian market.

TATA MOTORSTM was acquired by TATA sons Ltd. On June 1945 from

GoI.

It was renamed to TELCO.

Initially TELCO was in commercial vehicle market.

In 1991, after liberalization, the first utility vehicle under the TATA marquee called Sierra was launched.

In this period company had JV with various groups.

TATA’s turnaround strategy:

Become a cost effective Organization.

Improving on internal efficiencies and restructuring its debts.

Measures to increase its productivity.

To make a Global presence.

Increase Marketing Activity by launching various models.

The Growth strategies by Tata motors:

Entering International Markets (Going Global) :Manufacturing and Supply Agreement with UK based MG

Rover Group.

Renaming TELCO as Tata Motors (TM) In Sept. 2003.

Set up operations in UAE to boost commercial Vehicles business in West Asia.

Acquisition Of Korea Based Daewoo’s Commercial Vehicle Business.

Continue……Additional Investment and Market Expansion Strategies

Implemented In South Africa.

New York Stock Exchange (NYSE) Listing in Sept. 2004.

Strategic Alliance with Hispano Carrocera SA of Spain.

Agreement with Thai Rung Union Car Plc. Of Thailand to target South Asian Markets.

Launching New Product initiatives :

Created new segment by

launching Indigo Marina.

Improved Versions Like

Indica V2 and Sumo Victa.

Started Prototype of

Xover (SUV) in 2005.

Highly Successful Ace :

(Mini Truck )

Introduced New Models like Safari Dicor and Indigo SX Series .

Dream Project Of Nano –

(People’s Car)

New Approach in Commercial Vehicle Market.

FIAT Auto Fiat came into existence on July 11, 1899 which was

established by Giovanni Agnelli.

1st Fiat car manufacturing facility was opened in 1900 in Corso Dante, Italy.

By 1911 Fiat group diversified in the production and marketing.

By 1925, it had entered the steel, railways, power.

Fiat group’s auto division used mass production.

Product Profile Fiat group expanded its operations into Aerospace &

Telecommunications.

Fiat group purchased Autobianchi & Ferrari in 1967 & 1969 respectively.

Fiat Auto took over Alfa Romeo & Maserati in 1986 & 1993 respectively.

By 1980, Fiat Auto was facing severe competition from Japanese auto manufacturers.

Fiat group accounted for 5% of Italy’s GDP & was Italy’s biggest employer.

FIAT India Fiat group appointed Bombay Motor Cars Agency as the sales

agent for its cars in 1905.

Fiat group entered into a license & service agreement with PAL to manufacture cars.

Premier Padmini launched in 1968.

FIAL, a wholly-owned subsidiary of Fiat auto was established in 1995.

Fiat India launched Siena & Palio in 1999 & 2001 respectively.

Financial Problems at Fiat Auto

In late 1990’s Fiat Auto was in deep trouble.

Reasons of Fiat Auto trouble:-

• Failed to move from small segment cars to larger segment cars.

• Italian’s Government decision to withdraw the concessions and

subsidies given to the company.

• Give foreign auto companies free access to the Italian market.

• Demand for cars started falling in Italy and European countries.

• By 2002 Fiat had a loss of US$ 2.5 billion and market share

was down to 28 % in Italy and 7% in Europe.

• Fiat announced its intention to trim its workforce to cut cost.

• Sold some of its industrial assets to pay off loans.

• Fiat group sold its insurance and aviation business.

• Through the early 2000s Fiat auto saw the entry and exit of 4

CEOs.

• Fiat Auto look towards developing countries like India and

China where small and cheap cars were in great demand.

• Palio was initially very successful but other products like

Siena were failed.

• In the second half of 2005 there were reports that Fiat Auto

was considering teaming up with Tata motors.

Tata Motors & Fiat Auto: Joining Forces:

On Sept.22, 2005, TM announced that it was signing a MOU with Fiat Auto to explore the possibility of cooperation across different areas in the passenger car market.

They were examining the possibility of joint product development, manufacturing, sourcing & distribution of products, aggregates & components.

A 15-member joint team consisting both org was set up to study the visibility and the specifics of the nature of cooperation.

Both companies appeared optimistic about the possibilities from the alliance.

In Jan 2006 the TM-Fiat Auto alliance moved another step

forward shared dealer network in 11 cities that cover 70% of

market share. Under this deal, TM dealers would sell Fiat cars

from March 2006.

The 28 dealers were to sell Fiat’s Palio & Palio Adventure in

addition to all TM passenger cars(Indica, Indigo, Sumo &

Safari) through 44 outlets.

Fiat Auto’s alliance with TM took place against the backdrop

of a revival in sales in Europe. The co. earned a quarterly

trading profit for the first time in 4 years.

Fiat Auto and TM also commissioned a 60-day study aimed at

exploring industrial and commercial cooperation in Latin

America.

Moreover, the Fiat Group intended to take TM’s assistance in

establishing a market for its truck unit Iveco in India.

In mid-2006, Fiat India began using the paint booth facility at its

Kurla complex for painting the tatamobile 207 TM picks up.

In July 2006, TM signed another MoU with Fiat Auto for setting

up a joint venture in India to manufacture passenger vehicles,

engines & transmissions.

Joining Hands• JV will make Fiat’s premium cars,

Grande Punto and Linea at Ranjangaon in Maharashtra.

• The July MoU was an indication of the growing commitment & co-operation between the two companies to work together & use their combined strengths to capture key markets.

• Distribution and service of Fiat branded cars in India will be managed by Tata Motors.

• Investment 650 million euro and the plant will employ more than 4,000 people.

Alfredo Altavilla (left), Senior Vice-President, Business

Development, Fiat Group Automobiles, with Ravi Kant,

Managing Director, Tata Motors, in Mumbai 

Reasons

• Cost reduction• Fiat wanted the enter into indian

market which TM could give them.

• Joint venture has reported a loss of 1,214 crores during 2007-2010

• Tata wanted the technical know how which fiat had.

• Good customer service of tata motors

• Component sourcing from tata

Fiat looks at life beyond Tata Motors’ dealerships

• Fiat needs to reinvigorate the brand at the ground level and building its own distribution network gaining brand affinity in the market

• opening exclusive company-owned brand stores in major cities to generate more sales

“space with the existing Tata dealerships was insufficient to house both the brands” - Rajeev Kapoor, managing director of Fiat's India operations

Advantages of the alliance :

• Improved dealership network for Fiat India.

• To improve position of TM in diesel passenger car segment.

• Access to next generation petrol & diesel Engines.

• Compete effectively with rivals in India.

• Improve TM competitiveness in global markets like Eastern Europe & Latin America.

Threats : Competition from other alliances like Renault SA and Mahindra

& Mahindra.

Challenge to TM’s diesel supremacy.

Threat from GM ( Chevrolet - Optra, Aveo, Spark )

Problems for TM in European market.

Brand Dilution for both Companies.

Entrance of Honda , Nissan, Toyota Volkswagen and Skoda into Indian Hatchback Car Market

COST REDUCTION

Strategic Outcome

EXPORT BASE

ENTRY INTO INDIAN MARKET

SALES AND DISTRIBUTION NETWORK

TECHNOLOGICAL KNOW HOW

21-01-2013