The Hindu Business Line : Tata-Fiat alliance agrees to leverage mutual strengths

THE much speculated alliance between Tata Motors and Fiat Auto India will finally be put to rest with their planned joint presentation and announcement, to be made at the Auto Expo here.

The chiefs of the two companies - Mr Ratan Tata of Tata Motors and Mr Sergio Marchionne, CEO of Fiat s.p.a of Italy, are expected to make a joint announcement later this week.

The alliance is likely to be a joint marketing and manufacturing arrangement in which Tata Motors will jointly manufacture Fiat models at its facilities in Pune and at Fiat's facilities in Kurla near Mumbai and in Ranjangaon near Pune.

The two companies have been in talks for more than a year and had made an announcement in September last year about their intention to explore the possibility of an alliance.

The co-manufacturing and co-marketing alliance is widely expected to enable Fiat to leverage the large manufacturing and marketing network that Tata Motors has. In the absence of adequate financial support from its Italian parent, with Fiat going to the brink of bankruptcy, Fiat's Indian subsidiary has been hamstrung and not been able to either bring in new models or increase capacities. Further, with product sales crashing, Fiat has been desperately looking for alternative strategies.

If the new alliance includes fund infusion by Tata Motors into Fiat India's Ranjangaon unit, which was earlier expected to be the new base from which Fiat would produce its more modern cars, then there are at least three relevant cars that can be manufactured for the Indian market. These include the new Palio, which features a whole new interior package and new design headlamps and tail-lamps. It has already been introduced successfully in markets such as Brazil in South America. It could also include the new Grande Punto, which has won a few awards in Europe for its unique design and practicality. Fiat India has also been conducting clinics at its dealerships to gauge the Indian consumer's interest and expectations from the Grande Punto.

The alliance between Tata Motors and Fiat is expected to be a mutually beneficial agreement. The bargain for Tata Motors is expected to come from the co-development efforts that the tie-up will include as part of the deal.

Tata Motors is expected to benefit from and draw on the enormous expertise that Fiat has built over the years in developing economically priced small cars and entry-level sedans.

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