On-going negotiations between Premier Automobiles Ltd (PAL) and Peugeot of France have taken a new turn with Italian auto major Fiat proposing to pick up a substantial stake in the Doshi-run Premier Automobiles.
Company sources confirmed the move but declined to give details.
If Fiat picks up a major stake in Premier Automobiles then the Italian major could end up controlling the ailing Premier Automobiles Ltd--Peugeot joint venture and also, subsequently, partner rather than compete with the French auto major.
Premier Automobiles Ltd has a 32 per cent stake in PAL-Peugeot with the French major holding 32 per cent.
Sources say that the Doshis could use the proceeds from such disinvestment in Premier Automobiles Ltd to fund their equity contribution in the proposed joint venture for Fiats Palio car project.
Fiat chief Paolo Cantrella will be visiting India shortly to discuss the issue, the sources said. It is, however, not known whether Peugeot will go all the way and buy out the entire PAL stake in PAL-Peugeot, thereby pipping Fiat to the post.
The Italian giant has already appointed consultancy firm Price Waterhouse to do a due diligence of Premier Automobiles, sources added. Fiat had earlier announced its intention to pick up a 10 per cent stake in the Indian auto manufacturer. Talks are, however, now underway for a higher stake for Fiat.
When contacted, top Premier officials refused to comment on the subject.
With its operations in China meeting an abrupt end following General Motors taking over the plant there, the Indian operations have assumed additional importance to ensure Peugeots Asian presence.
If the Fiat move to acquire a substantial holding in Premier automobiles Ltd comes through, this could be the first multinational JV in India between the two European giants, the Peugeot PSA Group of France and Fiat Auto of Italy. Fiat and Peugeot get along well in Europe and share the same monospace platform to make Peugeot 806 and Fiat Ulysses vans.
As opposed to competing individually in the rather crowded automobile market, the monoliths in combination may prove unbeatable. The combined strength of Peugeot as a diese l and utility vehicle manufacturer and that of Fiat as a family car manufacturer could translate into a formidable line-up of products being churned out.
While Fiat and PAL chose to launch the petrol version of the Uno model, Peugeot stopped making the petrol Tu3F2 engines to give way for the popular Tud5 Diesel units that power the relaunched Peugeot 309 GLD. Peugeot has already announced their plans to introduce the Partner utility vehicle which will share the engine and drive train of the Peugeot 309 Diesel.
If the proposal materialises then Fiat may not have to scout for a green field site for the world car project and move to the sprawling Kalyan plant of PAL-Peugeot.
Fiat had earlier tied up with the Doshi family for its prestigious Fiat A178, Palio project, where the Doshi family was to hold a 24 per cent stake. The Italian auto major proposes to introduce its models through this new joint venture company while the Uno currently being produced by PAL under a technical collaboration with Fiat will remain with PAL.
The Doshi family own a 24.25 per cent stake in PAL while directors and relatives own another 0.34 per cent of the equity. Financial institutions hold 29.25 per cent, foreign holding is a miniscule 0.28 per cent and the rest of the 45.51 per cent equity is held by the public.
PAL holds a 32 per cent stake in PAL-Peugeot while its French partner holds another 32 per cent and the rest is with the public. The company had reported a substantial Rs 94 crore loss during the last financial year and a Rs 67.9 crore loss during the first half of the current financial. The two partners have had several rounds of discussions to arrive at a formula to turnaround the company. Reportedly, PAL was not keen to capitalise the losses as suggested by Peugeot and talks were on for Peugeot to buy out the PAL stake in the joint venture.
