Tata – Fiat JV Under Scrutiny again : trouble in the making?

Confessing that the joint venture between Tata Motors and Fiat has not been as dynamic as scheduled, Tata Group Chief Ratan Tata has said the relationship needs to be critically examined to optimize its potential.

In an interview in market research firm JD Power’s report on the Indian automobile industry, Tata said his good personal bond with Fiat Chief Executive Officer Sergio Marchionne has not been transformed at the working level of the two firms.

“… I have to admit that so far, the venture with Fiat has not been as active as we had thought,” Tata said at ‘India Automotive 2020: The Next Giant from Asia’. With Fiat yet to make its mark in the Indian car market, Tata said the Italian company urgently needed to bring in more new models to India. ”… I think that Fiat has to launch more models into the market to keep dealers interested. It also has to look at its cost structure in terms of parts and components. So the joint venture needs to be looked at quite critically and until that happens, it’s not going to be optimised,” he said.

As part of a 50:50 joint venture agreement signed in 2007, the two companies had agreed to a joint distribution network and back-end support, besides co-manufacturing of products at the Ranjangaon facility near Pune. Afterward, Fiat cars are being sold at Tata Fiat branded showrooms, but it has not been able to clock volumes.

Recently, the associates decided to redraw distribution plans, with Fiat wishing for having its own independent brand showroom, although it will continue to sell cars through Tata outlets. In 2010-11, Fiat sold 21,066 units, as against 24,727 units in the previous fiscal, down 14.81%. Tata also pointed out the need to have close coordination at the working level of the two companies to take forward the partnership.

“As far as what else we can do with Fiat, I think Sergio Marchionne and I can really talk to each other. However, at the working level, it hasn’t quite been that way. We have looked at Latin America to do something together, but things haven’t moved as they should have” he said. He, however, ruled out giving up on the partnership, saying “… I think there’s nothing wrong with the concept of the deal — it is a very healthy concept.”