Indian automobile majors Tata Motors and Mahindra & Mahindra (M&M) have shown interest in taking over the Termini Imerese plant owned by Italy’s largest car maker Fiat.
Fiat has already decided to relocate the Termini Imerese plant, preferably to cost-effective areas of Poland or Germany, in 2011.
The exploratory work by Tata Motors and M&M, which have emerged as major players in the vibrant Italian auto market, is crucial especially when Chinese companies have conveyed their willingness to strike the deal with Fiat.
The plant makes the Lancia Ypsilon (a three-door hatchback) and has a daily production capacity of 400 cars, and employs 3,500 people. Another 3,000 are engaged in vendor and related activities.
Senior officials accompanying Italy’s Minister of Economic Development Claudio Scajola told Business Standard on Wednesday that both Indian auto makers have shown their desire for the proposed takeover and are believed to have launched separate negotiations with Fiat. The minister asserted, “Indian investors, including Tata Motors and M&M, are welcome in Italy.”
Scajola clarified that he was not aware of negotiations initiated by Indian auto giants with Fiat. The minister went on to add, “During my visit to Delhi and Mumbai, I was pleased to see Linea and Punto.”
When contacted, M&M officials declined to comment, while a Tata Motors spokesperson said, “Tata Motors does not comment on such matters.”
Last month, Fiat Chief Executive Sergio Marchionne said that keeping all its six plants in Italy operational was not feasible due to tight financial conditions. It is contemplating keeping the beleaguered Imerese plant open for products other than cars.
The Italian government is keen on not letting the facility shut its operations as it involves job loses. Despite financial assurances given from the local and federal governments to Fiat involving a support of ¤400 million, the company has decided to move away from the plant. Sicily also happens to be home for Italian Prime Minister Silvio Berlusconi.
Regular manufacturing of passenger cars from Termini Imerese has become a costly affair for Fiat. According to a recent industry report, it costs ¤800 more to produce cars from Imerese compared to its other cost-effective plants. The difference is due to economic disparities in the region and the high cost of infrastructure, according to the company. The Termini Imerese plant will stop making cars when the current Lancia Ypsilon is phased out early 2011. Fiat owns Lancia, a small volumes company restricted within Europe that makes four models — Delta, Ypsilon, Musa and Phedra.
Since the 1970’s, Fiat has made models such as Fiat 126, the original Fiat Panda as well as the Punto at the Imerese plant. Since 2005, the plant is the sole assembly site for Ypsilon and in 2006 such a vehicle became the four-millionth one to be produced there. The plant is the smallest of the six Italian plants owned by Fiat.
Recently, Fiat cut production to cope with lower demand and put thousands of workers at its plants on temporary layoffs with reduced pay across Europe. In Italy alone, the company has 21,000 employees. This is unlike its India operation where the company has substantially increased production of cars and engines over the past two years and has launched multiple models.
