Fiat India Automobiles
Pvt Ltd (FIAPL), the three-year old joint venture
company formed through the association of Tata Motors
and Fiat Auto SpA, is facing rough weather, as it posted
record losses last year, reports India's Business
Standard. The 50:50 JV company posted a
loss of Rs 970.7 crore for 2009-10, an increase of 39
per cent over the Rs 698.4-crore loss in the year
before.Tata
Motors, India's largest automobile company, has
published the financial details of its various
subsidiaries and associate companies in the annual
report for last year, released on Monday. The company
publishes financial records pertaining to its own share
in the entity.
FIAPL, which owns the
Rs 4,000-crore Ranjangaon facility near Pune, is the
company responsible for manufacturing cars, engines and
transmissions for both Fiat, one of Italy's largest
carmakers, and Tata Motors’ brands. While neither
company commented on the reason for the losses, analysts
said it was primarily due to under-utilised plant and
high material costs.
Production of Fiat
products such as the Grande Punto and the Linea has been
on a much lower level than earlier anticipated by the
market. The company had discontinued the Palio model
recently due to muted response and increased
competition. At present, Fiat makes less than 2,300
units per month at the plant, whose capacity is 16,500
per month. The Italian company utilised less than 15 per
cent of the installed capacity of the plant last year,
producing just 26,180 units for both domestic and export
markets.
Tata Motors produces
the Indica Vista and Indigo Manza at the plant, which
has flexible production lines. The models of both Fiat
and Tata produced at the plant share engines and
transmission. Production of Tata branded products from
Ranjangaon was not to be ascertained.
Fiat sales have been
sliding for two months, with a drop of 14 per cent seen
in domestic sales last month, at 2,301 units. As a
result of an agreement between Tata and Fiat in 2006,
both companies sell their products through joint
outlets, making use of a single distribution channel.
This has resulted in increased instances of product
cannibalisation, according to some sales representatives
employed at various showrooms.
Further, according to
the report, Tata Motors has cut on finance provided to
FIAPL substantially to Rs 197.50 crore during the
reporting year, against Rs 291.47 crore given in the
previous one. Tata had an investment of Rs 999.54 crore
as on March 31, representing 50 per cent of the holding.
Tata Motors has also given a letter of comfort to
certain banks and other lenders against credit
facilities extended to FIAPL. This is, however,
restricted to 50 per cent of the value of credit
facilities extended, Rs 1,193.8 crore as of March 31.
Report courtesy of
Business Standard