Les University of Navarra 15200 opoten Center for Globalization and Strategy Fiat's Strategic Alliance with Tata “Like the Tatas. Hike the organization and the way they operate> Sergio Marchionne, CEO of Fiat Group Introduction On Oct, 11, 2007, firm handshakes between top execuitives of Italy's Fiat Group and India's Tata Motors were exchanged at the official ceremony to mark the signing of a joint venture (JV) to manufacture passenger cars, engines and transmissions for the Indian and overseas markets. Several ‘executives from both sides had worked tirelessly on securing the agreement since the initial idea to collaborate had emerged in early 2005. From the first memorandum of understanding (MoU) signed in September 2005, the relationship had expanded substantially; in addition to the recently signed JY, the alliance encompassed an agreement to jointly manufacture pick-up ‘trucks in Flat's Argentinean facility as well as a distribution arrangement between Fiat’s commercial vehicle subsidiary, Iveco, and Tata's commercial division, * poe tel pwd Tt aC vent he Pes Tf aa Lint, May 3,207 “This case wos prepared by Jordan Mitchel, Research Assistant and Brin Hohl, MBA 2009, under the supervision of Professors Africa Ariso and Pinar Ozcan, within the joint project between the Center for Globalization and Svategy of IESE and KPMG on “Strategic Allances and Joint Ventures, as basis for classroom discussion and not anilustration of goed or bad ‘management ina specific sitvation. March 2008. ‘The authors woud lke to thank KPHAG fer the funding provided. ‘This case was written withthe support of the Center for Globalization and Strategy, IESE. Copyright © 2008, ESE. To order copes or raquest prmision to repredice mates, contact ESE PUBLISHING va the website, wawiesep.com. AReratvel, call 934 932 534 200, send 8 fx to "3h 992 534 343 or rit IESEP, Cen de Als 43-0034 Boreelona, Spain, or esep@iesep com [No pot ofthis publcaton may be repreduce, stored na retrieal system used in a spreadsheet, ‘tarsmitted in any form or by any means ~ electronic, mechanicel, photocopying, recording, 0° otherwise without the permision of ESE=} a ‘e520 Flats Strategic Aliance with Tita Observers lauded the tie-in stating that Fiat had the potential for more sales in the burgeoning Indian market while Tata stood to gain technology and new export markets. While there was a lot to celebrate, Fiat and Tata executives had been given a clear directive that all contracts detailing different aspects of the companies’ collaboration such as engineering support were to be wrapped up by the end of the year. Fiat executives thought about the immediate road ahead of getting the final agreements in fewer than three months. As the ceremony was coming to a close, one observer quipped: “You know, in India, the average joint venture with a foreign firm lasts three and half years.” The bittersweet remark gave Fiat executives pause to ponder: How could the Fiat team guarantee long-term success? Section I: Background Global Automotive Industry ‘Valued at USS1.2 trillion (€956bn*) in 2006, the global automobile market encompassed retail sales of new cars, light commercial vehicles? and motorcycles.* Including suppliers, spare parts and other strata of the auto industry, the entire sector was estimated to be ‘worth over §2 trillion (€1.6 trillion), which was equivalent to the gross domestic product (GDP) of the United Kingdom, the world’s sixth largest economy.s The market had grown by 5.2% over the previous year and since 2002, the value of the automobiles market advanced at a compound annual growth rate (CAGR) of 4.796, Tn 2006, 65.7 million automobiles and commercial vehicles (excluding motorcycles) were sold, representing an increase of 4% over the previous year. It was estimated that there were 900 million cars and light vehicles on the road in 2006; of, one automobile per seven people on a global basis.’ Exhibit 1 shows volume and revenue growth between 2002 and 2006. ‘The leading revenue-generating region in the auto industry was the U.S. market, with 38.1% of the global value, followed by Europe with 29.3%, Asia-Pacific with 23.3% and the rest of the world with 9.1%, Much of the growth in recent years had occurred in the Asia-Oceania region, where production had surged forward by 9%. Other Growing production regions included South America and Central/Eastern Europe. Exhibit 2 provides a breakdown of automobile production by region and company. 2 piteen US Dat Eo exchange te were paid depending oh theme ee 2 ug commer voices re dette 25 ee gues veces ap sa ates Wat do ot eee 3.5 tomes an ave easy fox UP ‘to 15 purges Sour trating, Revnd Speci Lifer Ligh Commute Vier 200 “ Daamontor Atmos Indy Prose Global Mse07, Mach 2007, Rene cee 0189-2011, 7 2 tmerntonlOrpntation of Motor Vel Manafatren, “The Ato Industry ~ A Ky Payer inthe Wo 2006 Eon ofthe Wort Aue Idy Key Fagur 5 6 souce:Butamostr, Astomotil nd Profle Gb Mach 2007, March 2007, Reference co 6189-211, 3.7 7 Tec Ante ndacy nthe 2st Cnty, Toy Procter aed hn Constable, reference # 307-1805. p.5Fatt Strategic Alince with Tate There were 18 manufacturers that produced more than one million vehicles per year. The top five companies were responsible for almost half of the industry's output, and the top 10 represented more than 68%# In terms of revenue, General Motors (GM) was the leader with a 17.3% market share. In volume, Toyota was about to overtake GM as the largest global player, even outselling GM in the U.S.® See Exhibit 3 for global market shares. Most of the major automakers had been established in the late 1800s and early 1900s, Of the newer entrants (manufacturers that entered after World War I, only a handful had subsequently become high-volume producers - the most prominent ‘were Korean brands: Hyundai and Kia, In recent years, automotive manufacturers had been plagued by overcapacity. One estimate suggested that if combined, car makers had the capacity to produce 24 million more cars than could be sold each year. The oversupply caused car makers to engage in price wars, thus destroying margins and reducing profits. In an attempt to lower costs, most major automotive makers had set up factories in ‘emerging markets such as China, India, South America and Eastem Europe. While lower production costs were one incentive, experts also suggested that car makers could gain access to growing and fertile marketplaces. For example, retail sales in Asia-Pacific (excluding the mature Japanese market) increased 11.19% while retail sales in China heaved forward with 26% growth in 2006. According to a 2007 study of the industry, 78% of auto manufacturer executives indicated that they would likely locate or expand operations in China in the next five years compared with 619 who indicated opening or ‘expanding in Eastern Europe, 549 in India, and 52% in Latin America. All manufacturers with production greater than one million vehicles were involved in one or more alliances with other producers. Automobile manufacturers formed alliances for a variety of factors with the primary rationale being an attempt to reduce labor, energy, and raw material costs. Experts pointed to increased globalization, industry overcapacity and the rationalization of globally-marketed products as additional motivations for the formation of alliances.*+ Significant capital outlay was required to enter into the automotive industry, such as ‘the installation of complex and costly manufacturing systems and engineering know- how. The cost of the development of new car models was estimated at approximately $t-2bm. taking between three and five years. Each year thereafter, investments were ® tzematonatOrgaalzator of Motor Venice Manufcttes, Won Ranking of Maruca ICA Comespondens Survey, 2007 9 pet iy “Me Tey yao being No 17 BN, 25,207, peas Uns Aco! Ag 2,207 10 Gait Kan, Stephen Power, Aleands Gallon “Separation Ane Once a Dre Cove, CFs May Face Mesy Beet” ‘he Wl see oa, ty 9,200, A. 1 Labor cous epee shout i of wholesale poof te suet can Europe. Cent Eatops, fr example the cot ar owes, sn labors prpotton ofthe wholesale pce mene by mz mich ae 4m (Source! “Ula Automotive Review” Desc Bark ‘Gaean Tokenode ae Jochen Geb, Dec, 2006.3) "2 treatin Ogaiztion of Motor Vice Manutictnen “Wes Motor Vile Peducon by Court", OICA Conesponden 13 ove Ong, OM Crporton eve, 207 -tuooation in ements: 2007 angle Gob Nartering Iu Group 2007, 2 pasmenitr,Automehile duty Profle Gabel e200, Marc 207, elena oie 0189-2011 9.8 we a lESaczwe a ‘S202 Flats Strategic Alfiance with Tata required for engineering changes to annual models. Nearly all manufacturers operated with profit margins of under 3%. A vehicle consisted of up to 15,000 separate parts, and the material costs could reach about 70% (including both suppliers and assemblers) of the automobile’s wholesale value. The sourcing of parts usually involved 30 direct suppliers as well as 70 or more indirect suppliers (who served the direct suppliers). Automobile manufacturers usually established long-term relationships with their suppliers and involved suppliers in the development of new models. As part of their own initiatives, suppliers sought opportunities to increase margins by developing proprietary technologies that would add value to the manufacturer and the automobile. See Exhibit 4 for an approximate breakdown of the automotive value system. Automobiles in india The automobile industry in India was valued at over $23bn (€18bn) in 2006. Unit sales in the same year exceeded 1.5 million passenger cars (commercial vehicles accounted for an additional 547,000 vehicles). It was estimated that seven in 1,000 Indians ‘owned a car; by 2010, this statistic was expected to climb to 11 in 1,000: India's total population was 1.1 billion people. By means of comparison, the U.S. had the highest penetration of automotive owners in the world with one out of two people owning a car. The majority of Indians used motorcycles and three-wheel diesel-powered rickshaws or non-motorized means such as walking, bicycles and cycle rickshaws. Public transport such as trams, trains and buses were also commonly used. ‘The first imported car arrived on Indian soil in the 1920s, and by the 1940s, cars were being manufactured in the country.* During the 1950s, the Indian government permitted only those companies who were manufacturing to operate in the automotive sector (opposed to those that were solely importing); seven Indian firms were given licenses to continue (foreign companies were not given licenses), among them, Tata Motors {then called Telco), Hindustan Motors, Premier Automobiles and Mahindra & Mahindra (M&M). One of the most symbolic cars of this period became Hindustan Motors’ Ambassador, a model that had been based on the UK's Morris Oxford. As of 2007, it was still being built and was one of the country’s hallmark automobiles, reinforced by the fact that it was the country’s most common taxi, The Indian government launched its own company, Maruti Limited, in an effort to develop and manufacture the “People’s Car.” To bring the “People’s Car” to market, the government of India entered into a 50:50 JV with Japan's Suzuki Motors in 1982. The venture produced the Maruti 800, outselling all other passenger cars. In commercial vehicles, Tata began producing light commercial vehicles in the 1980s, quickly becoming the largest commercial vehicle manufacturer in the country (and the fifth: "S procter Toy and Conable obs, Ihe Aomotve ndusy tn he 2s Cent een #3071805, 8.9 snow Cain edi” Datamonitor, Oster 2005 an Trash in nia” Detain, Nos 2006 % Jom Madsen “ea prepares (or sutomlive Soom” BBC, ApH, 3 2007, lnk uLRbusieses21998.60, ‘Accessed Au 11, 2007. "9 auto nda Mar Wea, Everts and Milestones edlan cr sry. din ianarcanleaseenthtnl, Aco Ay 1, 2007Fats Strategic Alliance with Tata largest in the world). The liberalization policies in 1991 opened up India to new import and export possibilities. As of 2007, the top players in the domestic passenger car market were Maruti Udyog. with 48.8 market share, Tata with 20% and Hyundal with 19.0%. The market was divided into four primary segments: compact cars (A), midsize cars (B), premium cars (©), and sports-utility vehicles (SUVs) (D). ‘The market for commercial vehicles was dominated by Tata Motors with 65%, followed by Ashok Leyland with 15.1%, Isuzu with 3.3%, and M&M with 2.2%. See Exhibit 5 for ‘more information on the Indian automotive market. India's automotive sector had attracted international attention for both its manufacturing capabilities and blooming market potential. Nearly all international automotive players had ownership stakes in a manufacturing facility in India, Over the past five years, the number of new car sales had grown at a CAGR of 19.2% while the number of trucks had posted a CAGR of 24.3%. Over the next decade, future growth ‘was expected to exceed 10% year on year. One industry analyst projected that India's annual volume would reach 3.5 million cars by 201528 To add to the excitement of an explosive marketplace, Tata was in the process of developing the 1-lakh rupee (US$2,500, €1,750, 1 Jakh=100,000 rupees) car for 2008. Many predicted that the car would dramatically change the Indian automotive landscape considering that it would cost half as much as the least expensive car currently available Renault had announced that it too would pursue the development of an ultra-low cost vehicle to be ready in as litle as three years. Renault was planning, a plant to produce 400,000 units in its JV between M&M and Renault's division, Nissan Background on the Fiat Group Established in 1899 by Giovanni Agnelli and a group of investors in Turin, Italy, Fiat Group was Italy’s largest car maker and one of the country's dominant industrial groups. The Fiat Group posted net revenues of €51.8 billion and net profits of €1.1 billion in 2006. The group comprised five business areas: + Automobiles (49.3% of net revenues); including Fiat, Lancia, Alfa Romeo, ‘Maserati and an 85% ownership stake in Ferrari ‘+ Agricultural and Construction Equipment (20.3% of net revenues) under the company CNH; 20 ye Carn nn” Dato, Ot, 2006. 31-year nna” Datamonitor, Ot, 200 at “usa i” Dataorior,Nov. 208, BosinesWeck Onlin Jan 2007. 7 souc: "Tat sl Fats Saal ign Ind 22 ryemas Rar Real Far New USS.000 Ct," lobal sigh aly Analysis June, 42007 ie S203a 1eSa02 Flats Strategic Allance with Tata + Trucks and Commercial Vehicles (17.6% of net revenues) under the Iveco brand; ‘* Components and Production Systems (23.9% of net revenues) under Fiat Power Train, Magneti Marelli, Teksid and Comau; and, © Other businesses (3.1% of net revenues}*s including services, publishing and communications such as the ownership of Italy's La Stampa daily newspaper and holding companies, Refer to Exhibit 6 for Fiat Group's financial statements and divisional performance. Although Fiat had been credited as the first successfull automaker to build 2 “global car” with the Palio model in the mid-1980s¥, most commentators agreed that the past 10 years had been rough for Fiat, especially in its ailing auto division. Market share in Tialy fell from 60% in the mid-1980s to 30% by 2006.” Within Europe, Fiat's share dropped from 13.8% in 1990 to 6.5% in 2005.2* Between 2001 and 2004, the company overall lost nearly $12 billion (€10 billion) 29 Several reasons were seen to contribute to Fiat's difficulties including its low-margin mix of smaller cars, languid new product introductions and the onslaught of more Japanese cars in Italy due to the abolition of In 2003, the company’s management began taking steps to reduce costs and sell non- core divisions. The period was also marked by a series of changes in top management, Long-time chairman, and grandson of Fiat’s founder, Gianni Agnelli died in 2003; Umberto Agnelli assumed the role of chairman until his death in 2004, Ferrari's CEO and long-time Agnelli acquaintance, Luca Cordero di Montezemolo was appointed as the chairman, John Elkann (Gianni Agnelli's grandson) a5 vice-chairman and Sergio Marchionne as CEO. Marchionne, an talian-Canadian, had been recruited from the top post of SGS (Société Générale de Surveillance, a Swiss certification company partially owned by the Agnelli family). Marchionne set out to perform “radical surgery” by reducing Fiat’s management, firing underperformers and refinancing the bank debt. He continued with the former management's plan to sell off non-core assets and breathe new life into the frail auto division through new product introductions» The company recruited 2 number of high profile auto executives, including top design talent from Rolls-Royce and BMW to infuse a nimble culture of design and innovation into the company. 12,000 jobs were shed across the entire group, including a large proportion outside of Italy; the company chose not to close its national plants to avoid a clash with 25 Fat Aanvol Pepe. 206, Dee, 31,200, 9. 25. Nete hat cnieston account rte othe 262% 26 Leman Nand Fa Makes 2 New Bice nae" Des. 5, 2008 77 eyeing wih Fat: ising Steep wi old wes Tae” The Benoni Tie Sp 7, 286, 38 pamoneson Gat "Rat's Comebact-& I for Feal” Buses Weck Jy, 25 208, epost om gobi niet ae nNOS aS Atanas, Accessed Av 8 207 29 sémondson Ga," Testo Tes Ret" Nor 10.206 opin tases colsalloeeitn2OOSiM2O0SL0 338868, Aces AW, 12, 2007 29 Edmonton al el “iat Baeeg om Emp” Buns Hoek Mey. 19, 2002, hncglloenhusinisneek coast cose Sf) ele ktmteaneie, Acose AUG 6 2007 31 xan Gai “Fo 80 says aor surgery drives eval De al See ama rope Nov 4 2005,Fiat's Strategic Allance with Tate Italy's powerful unions. To spur on a change of mindset, Fiat's management set targets of growing volume from 1.3 million units in 2006 to 1.9 million units by 2010. Alliances at Fiat ‘The GM-Fiat Alliance In 2000, GM and Fiat signed an agreement to exchange 20% of Fiat Automobiles shares with 5.19 of GM shares, both valued at $2.4bn (€2.6bn). The companies formed two JVs: Fiat-GM Powertrain and GM-Fiat Worldwide Purchasing. The JVs were aimed. at developing engines and transmissions and creating a common purchasing organization.» The intention of the agreement was for GM to gain supply chain savings with its European operations and Fiat hoped to strengthen its overall in light of recent automotive consolidation while not compromising its position within Italy and Europe. Many observers believed that if Fiat Automobiles were sold to a European carmaker (in early 2000, DaimlerChrysler had reportedly offered about €12bn in cash for Fiat Auto}, Fiat would be merged into the European operations of the buyer. ‘The Fiat-GM arrangement included a put option’s whereby GM could purchase the other 80% of Fiat at fair market value beginning in 2004. To service its high debt level, Fiat sold a number of assets including its stake in GM. Fiat asked GM for more cash in a round of financing, When GM refused, Fiat sought additional financing from other sources (including a capital injection from the Agnelli family).7” GM's share in Fiat was subsequently diluted to 10%. With continuing financial troubles at Fiat, GM wrote down their investment in Fiat to zero.3* Fiat then began negotiating with GM to exercise the put option (something which was previously seen to be included in the original contract as a type of “insurance”). In early 2005, the two sides negotiated a break-up fee of $2bn (€1.55bn) paid to Fiat by GM. Both joint ventures were subsequently dissolved. Fiat Powertrain was then formed to design and produce transmissions and engines for passenger and commercial vehicles. A Fiat executive gave one viewpoint on the GM-Fiat relationship: “One of the complications with GM was with mutual ownership participation. We needed to go to them and ask them when we wanted to do something and vice-versa.” Another Fiat executive stated: *[GM] did a classic financial due diligence, when in reality, the acd James, “sevew: See Marcon, Chie Becctve of at. The imps bind Migs ay, 22, 205, ove nt ger ge” rao ee tus, “Marcle: at wl pus i ls“ Auto News Europ Dec, 1, 200,37 2 sox ant at sgn separation agreement Press Rls Fa Grep, Amster, Devo, Turn. May 13, 2005. 2% ain gs oe ay he 0 hs rer eit st pty ly aa pon ey 2 specie 25 mondson Gl et "Fat Rosny on Enpty nies Weck May, 1, 202, puns haesnoc en igugieionena OMsmaniainntaateash, Accesed ANG, 8207 57 xaha Gabel, Powe: Sper Gao’ Alesina, “Sparton Ansys Dace & Dream Cpl, GPs May Face Messy Bap.” The Wall Sec ou any 2, 205 7 is 0a a veSa02‘me a Sao Flats Strategic allance with Tata situation was much more complicated, and required understanding the strategic, political and social situation of the company."? Other Alliances Despite the break-up with GM, Fiat sought a number of partnerships in an effort to increase efficiencies and reduce costs. In 2005, Fiat signed a deal with Ford to collaborate on the development and manufacturing of a common platform for Fiat's retro Cinquecento and the next generation of Ford's Ka. The building of bot cars was to take place at Fiat's plant in Poland. Later in the year, Fiat reached an agreement to license its JEDi 1.3 litre diesel engine to Suzuki for production at its Maruti plant in India It also renewed a contract for a 10-year period to license transmissions from PSA Peugeot-Citroén to be manufactured in Fiat's factory in Cérdoba, Argentina. In the summer of 2006, Fiat signed three agreements for joint projects: the production of heavy trucks in China with Chinese firms Saic Motor Corporation and the Chongging Heavy Vehicle Group; the production of Fiat's Ducato van line with Russia's Severstal Auto; and, the creation of Fiat Auto Financial Services with French bank Credit Agricole to assume the role of Fiat's financing arm previously managed by Fiat's wholly-owned company, Fidis.# In the summer of 2007, Fiat agreed to supply 80,000 light-duty diesel engines to Japan's second largest truck maker, Mitsubishi Fuso (majority owned by DaimlerChrysler). See Exhibit 7 for a list of Fiat's major joint ventures as of the end of 2006. Fiat's Operations in india Credited as helping to *motorize Mumbai,” Fiat appointed Bombay ‘s Motor Cars Company as its national sales representative in 1905, long before the first car arrived in the country. By the 1920s, Fiat cars were being imported from Italy. In 1951, Fiat licensed its passenger car, the Fiat 1100, to the Indian firm Premier Automobiles. Renamed as the Premier Padmini, the model quickly became a product hit as it was associated with sturdiness and value for money.‘ Premier Automobiles later released a car with the body of the Fiat 124 and an engine and transmission from Nissan.‘? Premier Automobiles marketed versions of the Padmini until 2000. See Exhibit 8 for a photo history of Fiat's major models in India, 9 Kam Gabel Power Sepen. Glo Alesand, “Separation AnxigtOnce& De Couple, GM Fla ay Face Messy Breakup ‘The Wal Set ewaa Jan, 26,2008 p AL 8 eimondor Gl Fats Comeback fret” Busse ck hy, 25, 2006, ‘i f Ey Accused Aug, 8, 2007, ‘Nana Sen Gupta,“ may eve a mal car with lt ee! engin” The Erno Tes Aa 12, 2006, * Neonoa Pan “Pata Alfance Coser Investing USS100 me Argentine Pant” Gla Het Day rly Avg 7, 006. © vit emer lice with nls Tata” ANSA English Mes Servi, J, 25, 2006 “Reed oto and Mla Aan, “Fico te Ft ages Daniele engine eu Blavo es cmh Sae 19,207. “© sean was ofall called Bombay ntl 1995, © Labsiman Nadi Ft Makes Noe Fen ef” De, 15,2008,Flats Strategic Allance with Tata The Indian government's liberalization plan in 1991 paved the way for Fiat to establish ‘a wholly-owned subsidiary, Fiat India, in 1995. Fiat India and Premier Automobiles formed a joint venture (51:49 in Fiat India's favor) to produce Fiat's compact car, the Uno, in Premier's plant in Kurla, Mumbai. At the time, Premier Automobiles also had a Joint project with Peugeot. Demand for the Uno initially grew, but after minimal promotional efforts and inconsistent dealer service, the model did not reach its expected level of sales. Fiat India upped its participation in the joint venture, eventually assuming control of the Kurla factory. Throughout the tie-in with Premier, the plant endured troubles with the labor force including a long-strike in 2001. (Peugeot's joint venture also suffered from Tabor setbacks, causing it to leave the country]. To boost sales, Fiat India tried its hand at releasing other models including the Siena and the globally-formatted Palio, and signed an agreement between Fiat's Fidis and Sundaram Finance to offer consumer auto financing, Palio sales were given a boost and in preparation for future predictions, Fiat started the construction of a second production facility at Ranjangaon, Maharashtra. However, sales slowed after consumers complained about fuel efficiency and poor dealer service. Fiat's other products failed to provide sufficient volumes to justify the completion of the construction of the second plant. In the early years after 2000, Fiat India was loss-making and its Kurla plant was operating under capacity. In an attempt to turn Fiat India into a profitable division, Paolo Castagna was named as the head of the affiliate in March 2005. Castagna had worked within Fiat Group since 1988 and had extensive intemational experience previously as the managing director of a Fiat Group company in Austria and Germany.ss Plans for a tumaround were set back when Fiat India’s Kurla plant suffered a work stoppage for six months due to severe damage caused by flooding.” Throughout 2006, Fiat India instigated a voluntary retirement scheme and a relocation program to reduce its workforce at the 53-acre Kurla plant as the company planned to eventually close it and consolidate all production activities at the newer 200-acre Ranjangzon facility. In addition to realizing savings through the consolidation, the Kurla plant was deemed “unsuitable for large-scale production after the damage from the floods in 2005. ‘The company was faced with a decision of whether to close down the Indian operation. or look for an alternative such as finding a local partner. Michele Lombardi, Fiat Group manager today responsible for strategic alliances in Fiat Powertrain ‘Technologies, explained the impetus for a local partner: ne 4 scastagn to beat Fat Inia” $ Coron Buren In Mm May 31; 2005, klhoe aif amansyRonsiny/ ARSED. Acct a 18,2098. 50st goden handle fr Kus ust enpayen” The omen Tes 22 Avg 2006, ‘urplfeasanisines ndltincsramwcez By. CenpanyiComaatic he EE Companies Ens goon bash fot Kara -ensoyessarclesbow81412.cxs, Aswesed Nov. 15,2007. Ste. 58m thes Fat Re 60 ce” Te Tegra Now, 227 igalnooetlegrlada coi? oNampinainesistey AS63423, Acsed Nov 16, 2007 we a veSa02im air 1eSoo2_ Flats Strategic Allance with Tata ‘You can't just go it alone ~ well, some companies like Toyota do. However, we are not large enough to do it alone. When the GM joint ventures ended, we identified three specific areas for focused alliances: product technology, industrial know-how and scale and geographical markets. Alliances are definitely the right way for Fiat as they can provide incredible efficiencies and knowledge. Even with our direct market presence, our market share was quite low. So in India, wwe began looking for a partner. We wanted that partner to be local since they needed to understand the market, the customer and the complicated value chain. Fiat Group executives initially short-listed two potential partners. While both candidates had several years in the automotive sector, neither party seemed to possess ‘the competencies or the commitment Fiat Group was after. Lombardi commented: One of the partners was willing to put down a financial commitment but we were uncertain whether they would be able to support us in identifying the right product, determining the appropriate pricing, marketing to the right customer and building the right distribution. With the other partner, we did not get the sense that ‘management was in it for the long-term. We decided that we needed to have a much more committed player who would really provide a benefit from an entire market level. We had had a relationship with Tata from a group level perspective and that enabled us to initiate a conversation about a potential partnership. During early 2005, Marchionne and other Fiat Group senior executives first approached Tata Group's chairman Ratan Tata and his senior managers about potential collaboration. Brief on Tata Group Tata Group was one of India's foremost industrial conglomerates with ownership interests in automotive, engineering, steel, energy, chemicals, information technology. consulting, food and beverages, consumer products, hotels, publishing, financial services and several other lines of business. See Exhibit 9 for more detailed information on the Tata Group. Tata Motors Tata Group's automotive division, Tata Motors, was India’s largest automotive producer {when taking into account all types of vehicles) with sales of €4.5bn. The division was the world’s fifth largest commercial vehicle manufacturer. It had acquired Korea's second largest truck maker from Daewoo in 2004, purchased a 21% stake in the Spanish bus manufacturer, Hispano Carrocera, in 2005 and signed a joint venture {51:49 in Tata Motors’ favor) with Brazilian bus maker Marcopolo to open a bus factory in India. ‘Tata Motors had initiated the production of passenger vehicles in 1991 with the hybrid car-truck, the Sierra. Tata Motors followed with several models such as the Estate in 1992, a sports utility vehicle (SUV), the Safari, and a compact economy car, the Indica in 1998, The Indica was seen as a technological breakthrough for Indian industry as it included an in-house developed diesel engine and several features such as airFlats Swategic Alliance wth Tata conditioning and power steering, which were only available in up-scale models, Development costs were estimated to be €400m, far below the average €1 billion-plus development cost of a new car. The Indica captured 22% market share in the compact segment within five years and was one of the top three selling cars in the country. See Exhibit 10 for more information about Tata Motors and Exhibit 11 for selected photos of Tata Motors’ models, Section Il: The Fiat-Tata Relationship Fiat and Tata’s Initial Meetings and Agreements After conversations between top level Fiat and Tata executives, negotiating teams from both sides were put in place. At Fiat, a team of four members was construct Alessandro Nasi and Michele Lombardi represented Fiat Group at corporate level, Ezio Barra from Fiat Automobiles and Giovanni De Filippis from Fiat India. Later, other managers such as Roberto Grazioli from Fiat Powertrain were brought on to the team. All team members had previous experience with alliances. Additionally, De Filippis had worked on projects at Fiat India since 2003. Tata Motors’ negotiating team included the following executives: the CFO, the head of exports, head of domestic sales, head of business development and strategy and other experts. In the first meeting, the two sides signed a non-disclosure agreement and briefly outlined their strategic priorities and interests in working together. As further initial meetings unfolded, the two sides found common ground in the distribution and manufacturing of cars. De Filippis described the proces: We started with a blank white board and talked about where we saw potential ‘opportunities. As more meetings took place, we saw that we shared a common set of values. Even if two companies have common values, they may not cooperate. However, we were very fast in finding common ground. ‘We were very confident in Tata since they are a large company that can deliver. In the past, we haven't had good experiences with small partners. You feel like you can't control it and many times, they cannot invest. We've been in situations where we had no car delivery and no spare parts. We were sure that this would not happen with Tata. Lombardi commented om his initial impressions: Going in, we knew that Tata had great products, a respected history, and an excellent domestic and international reputation. From the meetings, we saw that they really had a great commitment for the long term. We concluded that their ‘management has a similar spirit to ours. Memorandum of Understanding (MoU) 59 naa Mor Asal Report 2009-2006, Mare, 31,2004 ps Isao"eSaca Fats Strategic liane with Tata ‘The teams came together throughout the spring and summer of 2005 in India at Tata's head office and began drafting up a memorandum of understanding (MoU) to document the relationship. On Sept, 22, 2005, both companies announced that the MoU had been signed with the following purpose: “to analyze the feasibility of cooperation, across markets, in the area of passenger cars that would encompass development, manufacturing, sourcing and distribution of products, aggregates and components." In the press release, Marchionne stated: ‘The possible strategic cooperative agreement with Tata Group represents another step in our clearly defined strategy that calls for targeted alliances across the automobile value chain. It is consistent with successful ventures established with premier partners including PSA Peugeot Citroen and Suzuki, and the recently announced signing of a MoU with Ford Motor Co. 1 want to thank the Tata team, especially its chairman, Mr, Ratan Tata, for the outstanding work shared with us.55 Ratan Tata commented: We are delighted to be in dialogue with the Fiat Group on the range of possibilities between the two corporations. Fiat is a globally respected corporation, with a long- standing presence in automobiles. Both companies will benefit from this alliance in terms of possible joint product development, shared platforms and aggregates.* After the signing of the MoU in September 2005, Giovanni De Filippis, who had been involved in the negotiations and the drafting of the MoU, took over as the head of Fiat India from Paolo Castagna. As De Filippis explained: “I was sent to manage the Indian affiliate for two purposes: to restructure Fiat India and get the joint venture signed with Tata.” ‘The Agreement for Tata to Distribute Fiat cars in India In January 2006, the two sides signed an agreement for dealer network sharing in India, The agreement called for Tata Motors to manage the marketing and distribution of Fiat's Palio and Palio Adventure via existing dealers in 11 cities throughout the country from March 2006 onwards. Two Fiat models would be displayed alongside Tata's five main passenger cars and the Fiat logo would be showcased beside Tata's on the dealers’ exteriors. As part of the agreement, the dealers would offer service, spare parts for Fiat cars and consumer financing through Tata Motors Finance. The dealer network included a total of 28 dealers; 25 were Tata Motors dealers and three were Fiat India’s. At the time of the announcement, Marchionne said: “This agreement is a milestone in our presence in India. It enables us to increase our customer base in the country and to provide superior quality service and facilities to our existing customers. ‘The joint team is doing an excellent job and I am confident that our cooperation with rat and Tina Grog explore sete lance porns” FatTara Pres Release, Sep, 22,2005 Sau, 55 ra and Ta Groupe expr state ance opportuni” Fata Pres Reese, Sept 2, 2005Fiavs Strategic Allance with Tata Tata will further expand in the areas of product development, manufacturing and sourcing.” The Road to the Joint Venture During the summer of 2006, several key actions signaled the strengthening of the relationship between the two entities. In May 2006, Ratan Tata was appointed to Fiat Group's board of directors. As one observer noted: “The appointment of Ratan Tata to Fiat's board is telling the world that Tata is traly a partner.” A month later, Fiat India began using excess capacity at its Kurla plant by painting 3,000 to 4,000 Tata Motors, pickup truck bodies. At the time, Fiat was producing, between 250 and 300 of its own cars, On July 25, 2006, both groups announced two additional cooperation agreements. The first involved the signing of another MoU to establish an industrial joint-venture to manufacture passenger cars, engines and transmissions for both the Indian market and overseas. The second agreement was a 60-day study to explore the possibility to use Fiat's facility in Cérdoba, Argentina, to produce both Fiat and Tata utility vehicles and pickups for sale within Latin America and export markets. See Exhibit 12 for a description of the companies’ other agreements. Lombardi talked about how the scope of the relationship broadened: At the beginning, it was only cars. Then, as the conversations continued, the idea for producing engines and transmissions came up. Tata was particularly interested ‘im the joint engine production because they have expressed interest in a “new generation” engine for their vehicles. The way that we discussed further collaboration is very much in line with the spirit of the relationship to look for new opportunities. After identifying that the two sides were interested in manufacturing powertrains, they thought that a possible structure could involve the formation of two separate companies: fone focused on powertrains and the other for the manufacturing of cars or two companies with different shareholding patterns between Fiat and Tata. However, after additional discussions, the teams decided that they would view all projects as an equal split as it was felt that both sides were contributing equal knowledge and resources. During the second half of 2006, the two sides jointly developed a business plan with targets for the demand of cars and powertrains. The directive was to achieve a project payback of eigat years and at least €30m in net present value. Roberto Grazioli explained the process: When developing the business case for a joint venture, we start by defining the key strategic terms. In this first phase the basic principles are determined such as the location, the types of products, the range of volumes and the approximate price points. Then, different scenarios are constructed to explore alternatives such as building the plant from scratch or only assembling instead of manufacturing the powertrain and the car together. 57 si cao be saben nda through Tata dele fo March 2006" Batata Fes Rees, a8 1, 2006 52 tans dels have bee guid to proce: oaiersaly we au lessonwe aw Sao Fats Strategie alance with Tata In the development of the plan, you then need to translate those strategic and financial discussions to the technical side. For example, you might have target prices for engines and you need to work with the technicians to figure out a way to reduce the cost of the engine. Typically, there are different plans developed ~ one internally for each company and then the joint venture business plan. The reason for the internal plans is not because the partners want to hide anything, but there may be corporate level plans such as the introduction of a new model that have not been internally approved yet When the time comes, the information is shared with the partner and it is worked into the plan, By the end of 2006, the business plan called for the JV to produce both Fiat and Tata vehicles including the Fiat Palio and Adventure as well as premium cars for the B and C segments, such as the Fiat Grande Punto and the new Fiat Linea sedan. The first ‘completed cars were scheduled for early 2007. Other products included the Fiat 1.3 liter multi-jet diesel, the 1.4 liter diesel engine, a new 1.2 liter gasoline engine and Fiat ‘transmissions. Initial volumes were planned at 100,000 cars and 200,000 engines and transmissions. Average prices were estimated at approximately €6,000 for cars and €1,400 for powertrains (including both engines and transmissions). Typical margins in the industry ranged from 12 and 16% for cars and 15 to 20% for powertrains. Using the initial volumes, the teams estimated the required investment to reach capacity. It was determined that the investment would be made in phases and would reach a total of €665m.% As part of the accord, Fiat would contribute its factory at Ranjangaon, Maharashtra, which would be managed by both parties. Fiat would also license certain cars and powertrain technology to the joint venture and inject cash in the form of equity and loans. Tata's contribution would be in the support provided by its sales distribution network as well as cash injection in a combination of equity and loans. On Dec, 14, 2006, the companies announced to the press that they were working towards the signing of a single 50:50 joint venture agreement. Several press reports at the time pushed the scope beyond what had been declared, speculating that Fiat would contribute its expertise to the I-lekh automobile project. which tumed out to be incorrect. The Joint Venture Agreement (JVA) Negotiations regular meetings occurring once per month (typically for four days in a row) for over a year (from autumn 2006 to autumn 2007), the two negotiating teams hammered out the details of the JVA. ‘The discussions revolved around several issues such as the value of the Fiat's assets at the Ranjangaon plant and the exit clauses for both sides. In negotiating the value of, Fiat's assets, Fiat's team first presented a list of assets with market values backed by an independent assessment. The two sides then negotiated for approximately a six-month 5 ancl dts have een godt pte conde © case weiter ns tia, aa plan wo produce ow ost car for Inn make 2008” AFK Alan 26207, © Paty, Fat to power Tas Rs ath ea” The one Tins Not 8 2098Fats Strategic Allance with Tata period on the value of those assets. In the situation of the exit clauses, there were two main aspects: the rights of both companies in the case that one company exited; and, the continuity of other contracts (such as the distribution deal of Fiat cars in India) if the JV was terminated. Grazioli talked about overcoming challenges in the negotiations: Since I've been involved with the negotiations, there has not been a roadblock or one big issue to face. The overriding issue was getting through the volume of work in the specified time period Obviously, there are difficult moments in any negotiation. During negotiations we might face particular challenges with a detailed negotiation point. If the negotiating teams are not capable of resolving the issue, we have put in place structured escalation procedures, which gradually move the issue up the decision ladder. To date, this process has worked nicely. Fiat's Team Fiat's team comprised the business specialists and legal experts. On the business side, there was the core negotiation team (Nasi, Lombardi, Barra, Grazioli and De Filippis) who coordinated other participants for certain issues. In negotiating the JVA, there were over 50 employees involved from Fiat’s side. Those employees included representatives from each function suc as quality, supply chain, purchasing, diesel and gasoline engine engineering, transmissions enginecring, finance and warranty. On the legal side, a dedicated legal manager was involved in most of the negotiations. ‘There were also local Fiat and Tata lawyers dealing exclusively with Indian law and Fiat's top legal counsel was involved for key decisions. Grazioli commented on the interplay between the business and legal side in the negotiations: In the course of the negotiation, we also had specific moments when the two teams preferred to have ad-hoc sessions without the legal people involved, in order to be more focused on the “business issues”. The legal aspects were addressed at a later stage, when the “open items” were discussed and solved. Meetings and Cuitures Most of the negotiations were held at Tata's head office in Mumbai. Given that Fiat executives had 10-hour flights from Italy to India, the Fiat team requested alternative locations such as Fiat's head office or a relative mid-way point such as Dubai, UAE. Indian citizens entering Europe required a week-long waiting period, which usually meant that the meetings were in India. One Fiat executive commented on the timing of some of the meetings: It is always difficult going to the other company’s offices as they still have other ‘work to attend to. So, we might have a meeting scheduled to start at 10am, which then starts at 11am and might end up being regularly interrupted by other issues. ‘We also tried phone conversations, but there’s nothing like the face-to-face contact where you can see body language and reduce the number of distractions. Another Fiat executive talked about the differences in cultures: we a (520,ma ‘a ‘S202 Fate Strategie Allance with Tata ‘There are two layers of culture. The first is Italian and Indian culture and the second is the difference in company culture. Even with another Italian company, Flat can be very different. In past experiences such as the GM negotiations, { saw that the Americans were step by step. They may take 10 days to decide, but when they do, that's their position and they don’t budge. I would say that Fiat works on trying to speed up the process. We might have one position and three days later, the position is different. Also, we were given a lot of autonomy in our decisions. I got the sense that perhaps at Tata, the decisions need to be escalated up higher into the organization. Making the IV operational In making the JV operational, due diligence on all financial values was carried out by KPMG. Fiat and Tata formed a 10-person board of directors for the new company with five directors from each company. Tata Motors Managing Director, Ravi Kant, was made chairman and the CEO of Fiat Powertrain Technologies and senior vice-president business development of Fiat Group Automobiles, Alfredo Altavilla, was made vice- chairman, The remaining directors were from top-level positions and were matched equally on both sides; for example, the CEO of Iveco and the CEO of Tata Commercial Vehicles were included on the board. The board of directors also set up committees including an Audit Committee and an Organization and Compensation Committee. For the CEO of the newly formed company, the board of directors recruited Rajeev Kapoor from motorcycle manufacturer Hero Honda, where he had held the position of vice-president of manufacturing (Hero Honda manufactured 1.5 million motorcycles per year). The CFO, currently a Fiat representative ad interim, would be nominated by Tata, while the industrial managers of the cars and powertrain divisions were nominated by Fiat. Fiat and Tata's respective human resource departments were responsible for defining the organization structure together and hiring the other managers. Plant Operations In late 2006, the companies commissioned the assembly line at the Ranjangaon plant for the Fiat Palio and Fiat Adventure. An operations manager from Fiat Powertrain was designated as launch manager and set up the new assembly line by organizing the configuration of the new machinery, dealing with suppliers and coordinating the labor flow. Responsibility for plant operations was then passed to the newly installed plant manager. In total, the plant was expected to involve 4,000 direct and indirect employecs. Positions at the plant were filled by current workers at the Ranjangaon and relocated workers from the Kurla plant, De Filippis commented on the work ethic of the employees: © heni acy “Boece Kapeor to ead FaeTata tndan joint verre” Automeave News Birpe. Ost, 122007 ain ine: 2/58e0710: 204) ssl, ACCESS Nov 15,2007.Fiat's Strategic Albancewith Tata When I arrived in 2005, the employees were not very clear on the future of the affiliate. We had 700 employees, and we were in crisis. There was a flood at the Kurla plant. We were not sufficiently supplying to the market, By restructuring and secing the results quickly, we created a good and positive feeling amongst everyone. Tae dedication was tremendous since many people worked long hours to tum around the affiliate. They were motivated to do so because they are very proud of being part of Fiat Conclusion: Looking Toward the Future Tae relationship between Tata and Fiat had garnered considerable press and many were curious if the partnership would be a long-term success. The first agreement for the distribution of Fiat cars through Tata's dealerships had already provided quantifiable benefit - Fiat's sales in India had spiked by 51% in the first quarter after the accord had been put in place.6 Cars, engines and transmissions would soon roll off the production line at the joint venture plant, according with the target plan, and other ‘opportunities such as potential collaboration in commercial vehicles would be imminently pursued. Now that the manufacturer joint venture had been signed, observers in and outside of the automobile industry asked: What could be leamt about how the two companies had approached the alliance? How could the two teams guarantee future success?. et: Fiat working om ota with Tat” Aura Hl ep. 5, 2086cy a Sea Fiat's Strategic lance with Tata Exhibit a Global Automobile Market Size GLOBAL AUTOMOBILES - VALUE (USD $) Year Sbilion —_% Growth ——1e_Stilion 46 Grown 2002 9802 «2003 1011.9 3.2% 2004 1081.2 49% 2005 11188 5.4% 2008 11769 52% CAGR: 2002-2006 47% GLOBAL AUTOMOBILES - VOLUME (Units) Year et ___Unis milion % Growth 2003, 2004 2005 2006 CAGR: 2002-2008 3.5% ‘Source Global Automobile Manufacturers, Ostamonitor March 2007, pp. 30-8Exhibit 2 Fiat's Strategic Alliance with Tata Production by Manufacturer: Vehicle Type and Region 2006 Production by Manufacturer by Type (Vehicle Units) Wie Toad Total oe Tae Tay Hay Bir Commercial Commercial ‘Venicles "Vehicles ar TOE | _ aes _] ‘ex ae Sees as es] br as uoozs | 1049345 | taza | sa. sleoeo. am ‘Saoosss_ | 205205 ‘Bie SNOURSTAGEN 2a a0 2897 2075 | ___ 5a sleonas 3 249787 TiS 7Z Dass 3%, Bashar 5.20 eso Zea Sro.iss| ieee | slcheter Tiozor | fasazs9 ofRENAUTE hes 897 20563 solbyunaa Bat Ses a a fear arses sie Baer | 2a.6e lam 2064510 Ze 1s GAMERS Tes Sree | sae ‘Ms sea 723.998 arr +s] aieverr $0705. 28 e/a “ese 7 iss “313 00 | 1008970 aT aoe ‘3)Danatss rasa ra 305.832 6,657 a rolavrovar Tez Tes ea7 2ofEub zie sur ss az 2 08% 551.087 S455 16358 | ea 2006 Production ky Manure and Replon Total Veil Ua pes). fez a 3 ‘al sean Source: international Organization of Motor Vehicle Manufscuress, Comespendents Survey, 2006 Note:The above gues cefero aeaducton and nat aes Ee 60 ‘World Motor Vehicle Predution’, OICA me ay S202Cy 15203 Fats Strategic lance with Tata Exhibit 3 Global Market Share (Based on Revenues) Global Market Share ee ise ‘Source; GabaT Avtomcbil Nan cfacuurers,Datamionta March soo Exhibit 4 Revenue in the Automotive Value System Revenue Share For Participants in the Automotive Value System Recommended Retail Price 700% Beaters 20% Marketing toaistes 10% [Assemblers 70% [Suppliers 80% Source: Toby Procter and John Constable, The Automotive dusty in the 2ast Century, Reference #307805. 9.20a FoesStraapicAllance with ata IeSte2 Exhibit 5 Indian Automotive Market AEVCARSMLNOU.VARUEWUSO HVA OU vas 9 ror vauewuso 9 Sea oat Se aoe mer tara. ot eee be 0 mt tae zo m lest Be OBe ccna s08 me chon ze sao caamsrasne m6 NOVAS seu ug cu, era nou eT mat ae Sr = ml ne re Seas mee me 8 RS Sefer BS oem | BS Sook Sook ae Bs tes AR sehen mek tm Se Et ak csc saan nee coon amass ex caoranacnn ax ‘Source: New Carsin nda and Tracks n indi, Datamonitr, October 2006we a (Sao Fists Strategic Alliance with Tata Exhibit 6 Fiat Group Financial Statements Bie 88 8085 Net revenues 51832 4544 Cost of sales 3088 39526 ‘Seling, general and acministstive costs 4687 4513 Research and development cosis 1401 1364 Qier income 105 43 “Trading proft 725i ooo Gains (esses) on the disposal of investments 607 905 Restructuring costs 450 502 ‘Other unusual ineome (expenses) 47 312 erating result 206F B15 Financial income (expenses) 378 283 Unusual nancial income 858 Resul fom investments; 158 4 Net result of invesiees accourted for using the equty method 125 115 = Other income (expenses) from investments 31 81 osu bafore taxes, Tat Bass Income taxes 490 Bee Resuh from continuing operations 1181 1420 Regu from discontinued operations Netresut sy Ta “Atbutable to: Equity holders oF the parent 1085, v3 IMinortyintorests 8% 28 Besic earnings per ordinary and preference share 0789 1.250 Basic earings per savings share 1364 1250 Diluted earings per orinary and preference share ores 1250 Dilutee earings per savings share 11863 1250 Sovce: Fiat Annval Report, Dacember 3, 2006p. 86. =r asses Total Nov-curert assets zis ese Tota Covent zets See S0ea7 TOTAL Assets. soos 6aase =Total sais alte for assttbacked Snaning ranactons wes S175, assumes. Seeker equity too gat Prowsione aa Bese Dee zoe 25.81 (ther Moan labilies 0s ‘29 “Trade payables i017 ther payaioe: som akat Deter txtabatos "53 205 ‘Accrued expenses and deterred income sie 4200 Usbies ned for ata soe 0 TOTAL STOCKHOLDERS EQUITY AND ABILITIES soso aad ‘Toa stoomolers equity and ates adusted for ascet-back rancng rarssctons «49.858 «5,725 Source: Fat Anna Report December sy, 2006, pp. 87-88we a! FatestatgicAllancewithTata—ESa02 Exhibit 6 (continued) Results by Division, Business Area and Geography oe Teng Pome Sperating resale ereooeenceag files seamcrrener = ie Shenec bares sh 2 8 Seopa sete teas, Sete poecinapee ee ooo Soe waee sae 20° SSeS oy mite Tans Cm De Core’ etre ees woe um Barotnn ty nse ese aoe a) Fee ET Tami iT aes an areata Coven Easpment ‘os? tua am ‘Mais ad Covet Vous yaaa foe Songer ond Prsicoe Syrtane eae er Sax merase tat to 3a Sraions aa amt rs Sources Fat Anal Report, December 33,2008, .23,.26, ‘a SRT aR ST ERSTE WREST” STRESS BTR) Boe our oe ans ame Eemamarginy BE Be 6 06S SO tase Naess % ae of OH a eur x au op & & See Soe Serres a ae 0B OP 3 tte Soe Teal a cy a Ce} Source: it Annual Report 2006p.aw S02 Fats Strategic Allance with Tata Exhibit 7 Fiat's Joint Ventures Rae ae Tame coaey Flt of RF Inserest “Teun salons) at Ao Financ! Services Sp. (oc Fils Reta kale S.A) katy soon sae “Tote-Trk Otro Fabre Tole AS Tiekey 31% 206 Navooo tt, china 0% vr ‘Soci Europea Veco Lager Seve Sa. fay 200% Sout Europe de Vides Loar dv Nort Sovtnoré Soils Anonyme Free 0% Consctdsted Deel Carmpany ey sno BX company Lie Usa SoH New elans HET Japan he. esan som ‘Terk Traktor Ve Ziaat Main 3, Tatkey 375% ‘Nan Sng Fat Auto Ga rs Chine 00% ‘Transole FinenceExtabocnlania Fherlero do Codi SA. Spain 00% New foto Taknak Tor AS, Tereey ar ‘chi de exes St ce CY Meee 0% (Ober ioe ‘ota investmonts in olny controlled entities aaa Source: Flat Annual Report 2008, December 3, 2006 3wa ar Fiat's Strategic Alliance with Tata ‘S202 Exhibit 8 Photo History of Fiat Cars in India Fiat Palio (1996-present}we a eae Flats Strategic lance with Tata Exhibit 9 Information on Tata Group Established in the 1870s by Jamsetfi Tata as a textile manufacturer and trader, the group moved into a number of business areas throughout the 20+ century: hotels (1902), iron and steel (1907), electricity (1910), education (1911), consumer goods (1917), aviation (1932), chemicals (1939), automobiles (1945), tea (1962), consulting (1968), publishing (1970) amongst several other businesses. As of 2007, Tata Group was India’s largest industrial conglomerate running over 90 companies. Major acquisitions included the Tetley tea brand in 2000 (the first acquisition of an international brand by an Indian group) and the $12.2 billion (€9.2bn) buyout of steel manufacturer Corus Group, creating the sixth-langest steel ‘company in the world, Tata Group Figures EUR million Total Value of Exports Profits turnover Assets 2005-06 18,000 14.948 4,400 1761 2004-05 14,185 12073 3,654 1.410 2008-04 12,162 10,296 2,628 1,034 200203 11,328 10,638 2732 813 2001-02 41,758 11,686 2,989 815 2000-01 1,984 10817 11875 258 4999.00 8,640 9344 4,123, 445 Note: Tate Motors wos included under the engineering eon Tata Motrs had revenues of approsimately ex.s milion 2005+ 3, “Tota Group Revenues by Business Arca Source waa tea comFats Strategic Aliance with Tata Exhibit 10 Tata Motors Information Tata Motors was India’s largest automotive maker. Over four million Tata vehicles were in use in India. The company’s vision was: “to be best in the manner in which we operate, best in the products we deliver, and best in our value system and ethics.” Tata Motors had 32,000 employees spread over four main production facilities: Jamshedpur (Jharkhand) in the east, Pune (Maharashtra) in the west, and Lucknow (Uttar Pradesh) and Pantnagar (Uttarakhand), both in the north. The company was setting up a new plant in Singur (close to Kolkata in West Bengal) for the manufacture of the 1-lakh automobile, ‘The company had over 2,000 dealerships, services and spare points locations throughout India. It offered customer financing through TML Financial Services Limited.ss ‘Tata Motors had been traded on the New York Stock Exchange since September 2004. {As of late 2007, the company’s market capitalization was $7bn (€4.8bn). EUR milions Year Ending March 31 2006107 2005/06 ‘Summarized Balance Sheet What the Company Owned Net Fixed Assets 1,104.3 eat Investments ‘4278 375.2 Net Current Assets 4808 4744 Miscellaneous Expenditure 17 28 Total Assets (Ne!) 20187 1,603.8 00 0.0 ‘What the Company Owed 0.0 0.0 Loans es24 546.8 Net Worth 1,186.4 1,091.0 Deferred Tax Liability 138.9 1159 Total Funds Employed 20147 1,693.8 ‘Summarized Profit and Loss Account Income Sale of Products and Other Income 55129 4,406.7 Total Expenditure 4368.1 3517-4 00 09 ProfilLoss) before exceptional items anc tax 445.4 380.3 Profit before tax 444.3 362.1 Profit after tax 3308 2845 Bal, Sheet (Year End) - Mar 31/07 - Indian Rupee to EUR oo1727 0.01862 PAL (265 day avg,)- Indian Rupee to EUR 0.01728 0.01861 Source: Tata Motors Anal Repor, Match 33, 2007, p. 3: Exchange rates applied by case writer taken from sw panda com) 5 tac Mot Webae npulnematncomiur eatin. Aeasil Noe 32907 SaofeSaoz Flats Strategic Allance with Tate Exhibit 14 Photos of Tata CarsFits Strategie Allance with Tata Exhibit 12 Other Agreements Between Fiat and Tata ‘Throughout the joint venture agreement (JVA) negotiations in 2006 and 2007, the two companies had several topics of discussion on the table including an investigation to co-produce in China, the possibility of joint production in Fiat’s South African plant (Tata Africa had acquired a plant in Rosslyn, South Africa from Nissan in 2006)* and, the joint analysis of producing trucks at Fiat's Argentinean plant. By February 2007, the companics announced that Fiat would be producing a Tata pick-up truck under license with the Fiat badge in Argentina. Annual production was estimated at 20,000 units with total planned investment to be $80m (€58m). The pick-up would provide Fiat with Tata's know-how on pick-up trucks with the exception of the engine, which ‘was designed by Fiat and produced at Fiat's Brazilian facility in Sete Lagoas; Fiat planned on marketing and distributing the pick-ups with the Fiat badge throughout South America and in select European locations through Fiat's dealer network. Upon the announcement, Marchionne stated: “This agreement is a further step in the building of a large, focalized partnership with Tata and will allow Fiat to enter a specific car segment with a very competitive product. We believe in a win how exchange with our Indian partner.”* know- ‘The teams also talked about the possibility of cooperating outside of passenger cars ‘and powertrain technologies. Specifically, both groups felt that their commercial ‘vehicles divisions should converse about possibilities of collaboration. Executives from Iveco, Fiat Group's commercial division, met with Tata Motors Commercial Vehicles division in 2006. In November 2006, Fiat announced that Iveco would likely set up 2 joint venture with Tata to distribute Iveco-Tata commercial vehicles in Brazil through Iveco’s dealer network In mid-February 2007, Iveco and Tata announced the signing of an Mol to analyze cooperation in various aspects of commercial vehicles such as engineering, manufacturing, sourcing and the distribution of products and components. 5 cokayne Roy, “Tat an Flt Ast cs ming veil at cal pnt” Te St Oe 31,2006 pe 57 tt and semen eer fr ik prodstn in Arena” Fs-Tata Pes ease Feb 14, 2007. 6 sco Sees, ee Contes V With Ta In Agen, Bs "Dow Sone Neweins, Nv, 9, 206 55 yc ad Tote Motos emote sae alan eppersntic,” Fat-aa Press Rese eb 142007. we a Sao