Fiat, Peugeot Likely To Forge Alliance In India

Italian automobile major Fiat and its French rival Peugeot are likely to strike a strategic alliance in India under which Peugeot may share its existing manufacturing facility in the country with Fiat for the latters world car Palio project in India.

Fiat and Peugeot, which shares manufacturing facilities through similar alliances in other parts of the world, might repeat the experiment in India as well once Fiats acquisition of a majority stake in Doshi-controlled Premier Automobiles Ltd (PAL) is finalised.

With its controlling stake in PAL, that is currently being negotiated between the Doshis - promoters of PAL - and Fiat, the Italian multinational will hold a significant stake in PAL-Peugeot and, thus, become a joint venture partner of the French automobile giant even while the two compete in the marketplace with their respective models.

Reliable sources confirm that Peugeot is also not averse to the idea of Fiat playing a role in the PAL-Peugeot joint venture. However, J. Manlay, managing director of PAL Peugeot, who is abroad at present could not be contacted by Business Standard for comment.

Sources point out that it makes sense for Fiat and Peugeot to join hands in India and share manufacturing facilities because of the excess capacity at PAL-Peugeots sprawling Kalyan plant which Fiat profitably exploit for the Palio project.

Such an alliance will obviate Fiats need to set up an entirely greenfield site in the country at a much greater investment for its Palio project which is being launched by Fiat Auto India Ltd, a separate joint venture with the Doshis.

Fiat and Peugeot already have a strategic alliance in France where they share the same platform to simultaneously roll out Peugeot 806 and the Fiat Ulysses models.

Premier Automobiles, which manufactures Fiat Uno under a technical collaboration with the Italian auto major, currently has a 32 per cent stake in PAL-Peugeot with the French company holding another 32 per cent; the balance is widely held.

Fiat has appointed consultancy firm Price Waterhouse to conduct a due diligence of PAL to make a valuation for the share buyout.

The Doshi family owns a 24.25 per cent stake in PAL while directors and relatives own another 0.34 per cent of the equity. The financial institutions hold 29.25 per cent while the foreign holding is put at 0.28 per cent. The remaining 41.51 per cent is held by the public.