Fiat India’s Managing Director Paolo Castagna is recalled as Tata Motors and Fiat set up a 15-member team to explore co-operation possibilities between the two carmakers.

Last week Fiat, and India's biggest carmaker, Tata Motors, announced that - after several months of negotiations - they had just signed a "Memorandum of Understanding" which will see the two firms undertaking a comprehensive feasibility study to look at areas in which they could co-operate in the future, and strike up a mutually beneficial alliance. The newly formed committee - made up of a mix of Tata and Fiat personnel - will now study these areas which include, research and development, manufacturing and assembly, raw materials, sourcing, componentry and distribution.

On Wednesday Fiat India announced that Managing Director Paolo Castagna had resigned and would be returning to Turin for unspecified duties. Castagna will be replaced from tomorrow (1st October) by Giovanni De Filippis, although he reportedly will remain the MD of Fiat India Automobiles - the holding company of the Fiat India - in the short term to ensure the smooth transition of the personnel switch. Castagna - who had only been in the job since June - was reported by several Indian newspapers to be unhappy at the peripheral role that Fiat India had played in the negotiations between Tata and Fiat, although sources seemed divided in their opinion, and other media outlets claimed he had held a central role in the talks.
 

Castagna's exit though has quickly led to local media speculation that Fiat Auto will now terminate its manufacturing operations in India.

Fiat has two manufacturing plants in India, and has recently tried to turnaround flagging sales by cutting the entry-level cost of its biggest-selling Palio compact hatchback. However, its Kurla plant in Mumbai - which was heavily damaged by the severe flooding which hit the city during the last week of July - is reportedly still out of action. Fiat dealers are believed to be at present just selling existing stocks, with only eighty cars having been sold during August.

Fiat could now move to dispose of the Kurla factory and switch its Indian production to Tata Motor's Pune facility. The joint venture between Tata and Fiat is expected to see the Indian firm assisting Fiat with local production, while Tata Motors - part of India's biggest industrial conglomerate - will get access to the Italian carmaker's technology and designs.