As the losses continue to
rise, Fiat and Tata Motors are pumping fresh equity into
Fiat India Automobiles Ltd (FIAL), ensuring, in the
shorter term at least, that their 50-50 Indian market joint venture
will continue to survive while the partners look for
fresh ways to push towards profitability.
FIAL operates its Indian retail
arm through around one hundred and forty dealerships,
mostly joint-branded, and employs around 2,500 staff. FIAL assembles its key models, the Grande Punto and
Linea, at the former Fiat factory located at Ranjangaon
in the Pune District of Maharashtra which has so far
seen investment of more than 650 million euros. Capacity
is 200,000 cars per year and 300,000 engines per year,
the latter's mix which is currently made up of the 1.3
Multijet turbodiesel and 1.2/1.4 FIRE petrol units. The
joint venture was formed in October 2007 when the retail
networks were folded together.
However the joint
venture hasn't been a success story so far, failing to
live up to its early promise without a strong commitment
from either side, despite strong products, and FIAL is
hastily engaged casting around for ways to boost its
flagging sales.
In the short term
however FIAL's future is assured as both partners have
now agreed to pump fresh equity into the JV, most likely
to be mainly used to reduce debt levels. "[The board]
resolved that in terms of applicable provisions of the
Companies Act 1956 and the Articles of Association of
the Company, 15,000,000 shares of R100 each for cash at
par be and hereby allotted, 7,500,000 equity shares each
to Tata Motors Limited and Fiat Group Automobiles Italy
respectively ranking pari passu with the existing
shares in the share capital of the company, except for
payment of dividend for the financial year ended March
31, 2011," read a statement that was seen by India's
Financial Express, which also quoted a FIAL
spokesperson as saying: "The company raises money based
on its needs for meeting its short and long term
requirements."
For the most recent
month, March 2011, FIAL sold a total of 1,865 cars, down
from 2,107 units during the same period last year. For a
cumulative 12 month period to the end of March, FIAL has
21,066 sales compared to 24,727 during the equivalent
previous 12 month period. FIAL had in fact ambitiously
targeted 50,000 sales for 2010, achieving less than half
its objective. For the same period the overall market
climbed by 30 percent year-on-year while FIAL dropped 15
percent. There were in fact only three losers on the
market, and, as well as FIAL, Honda (-4 percent) and
Hindustan Motors (-20 percent) also missed the upwards
trend. The most recent addition to the range was the 1.4
T-Jet version of the Linea C-segment sedan which hit the
showrooms last October.
