CASE ANALYSIS ON TATA MOTORS & FIAT AUTO ( JOINING FORCES )

By : Abhishek Pawar Sangram Pawar Sumit Kela Vikash Anand Ved

INTRODUCTION :
 

In July 2006, FIAT and TATA motors signed a MOU. Earlier 2006, both had signed a marketing and distribution agreements. Earlier 1990s TM was mostly a manufacturer of commercial vehicles. It entered to CAR segment through INDICA. By, 2003 company also targeted the global market.

 

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After World War 2, FIAT became a major manufacturer of small cars in ITALY, and later on in Europe. In the 1950s, 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 MOTORS


TM 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.

TATAS 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 Daewoos Commercial Vehicle Business.

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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 (Peoples Car) New Approach in Commercial Vehicle Market.

FIAT AUTO :
      

July 11, 1899 established by Giovanni Agnelli together with a group of investors. 1900- First Fiat car manufacturing facility was opened in coros Dante, Italy. 1908- Company started Exporting to USA, Australia, France and the UK. 1911- Diversified into the production and marketing of commercial vehicles, marine engines, trucks and trams. 1925- It has entered the steel, railways, Power and Public transportation Businesses. 1969- It Purchased controlling interest in Ferrari and Lancia. 1970s- Fiat auto had plants in Italy, Poland, Brazil and Argentina

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1986- Fiat auto took over Alfa romeo , a sports car manufacturer. 1993- It acquired Maserati, another sports car manufacturing. 1905- Entered in India With Appointing Bombay motor cars Agency as the sales Agent 1950s- Entered into a License agreement with PAL, which allow PAL to manufacture the Fiat 500, Fiat 1100, Padmini 1995- wholly owned subsidiary in India 51:49 joint venture with PAL The joint venture company manufactured Uno 1998- Fidis, Fiat auto subsidiary in the Auto finance business, entered into joint venture with sundaram Finance Ltd, to form Fiat sundaram Auto Finance Ltd.

FINANCIAL PROBLEMS AT FIAT :



   

In 1990 Fiat auto was in trouble it had failed to move beyond the small car segment to the segments for bigger cars The Italian govt. withdraw the concessions and subsidies given to the company and at the same time, give foreign auto companies free access to the Italian market Falling sales and Increasing costs In 1998 Fiat auto market share is decreased from 62% to 41%. By 2002, Fiat auto had accumulated losses of Us 2.5 billion dollar. The Fiat group as a whole had debts of almost 33.4 billion euro.

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 car market. 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 Officials said that new agreements would be reached as and when their feasibility was established. Fiat Autos alliance with TM took place against the backdrop of a revival in sales in Europe.

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 TMs 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.

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.

THREATS :


Competition from other alliances like Renault SA and Mahindra & Mahindra. Challenge to TMs diesel supremacy. Threat from GM.. Problems for TM in European market. Brand Dilution for both Companies. Entrance of Honda , Nissan, Toyota Volkswagen and Skoda into Indian Hatchback Car Market