Saturday, July 28, 2012


Losses are Accumulating and Troubles are Increasing with every passing day... But still Fiat has to give more than 100% to save its JV with Tata Motors. Because its failure may just end Fiat’s journey on The Indian Soil. 

But then, to some extent, Fiat also needs to blame itself for the disaster. After the initial engine problems faced by the Linea at the onset of its India journey, the model now stands no where in the segment it operates in. While the model sold 350 units in June 2011, its competitors like Hyundai Verna sold as many as 4,102 units. Similar has been the fate of its hatchback – Grande Punto. While many consumers were impressed by the design and features of the car, its relatively smaller engine and cheap plastic quality resulted in lowering the unit sales of the product. As a result, players like Volkswagen, which entered India much later, now have a stronger hold in the Indian market. Against Fiat’s 1% market share, Volkswagen already has captured 2.6% of the Indian market.

In the mean time, going one step ahead, Ratan Tata has already made it public that the JV has not delivered results as initially expected and his personal rapport with Sergio Marchionne has not translated at the professional level. Moreover, citing Fiat’s faults for the failure of the JV, in an interview with market research firm J. D. Power, Tata had said, “I think that Fiat has to launch more models in the market to keep the dealers interested. It also has to look at its cost structure in terms of parts and components.” But considering that the JV is still of utmost importance to both the companies, the question remains, is there a comeback in sight?

Well, the first spark was seen in 2008-09 season when Fiat introduced products like Fiat 500 followed by Linea and Punto. The launch of 500 was to showcase the power of Italian engineering to the Indian consumer while the Linea was to establish its presence in the sedan segment and Punto was supposed to bring gigantic volumes at the door of the company. Undeniably, 500 did its job efficiently, but the other two simply failed, creating the mess. However, in the current season, the Italian major again seems determined to stage a comeback. And it’s not only the new positioning strategy which attracts customers by saying ‘Diesel on the price of petrol’, it has also announced a major reshuffle in its board. For the less informed, two of its key India members Giovanni Bartoli (third most powerful executive in Fiat SpA and one of the senior-most board members of Fiat India) and Harald Jakob Wester have already stepped down from the company’s board. And to replace them the company has nominated Ezio Barra, Giovanni Sella and Silvia V. Blina – all senior officials at the company’s Turin headquarters. In fact, Gianni Coda, Alessandro G. Baldi and Alfredo Altavilla, who are currently serving on the board, have been given additional responsibilities. In addition, to boost operations, the company invested Rs.1.5 billion in April this year.