FIAT STILL STUCK
IN A JAM, TO WRITE OFF RS 1,300-CR LOSSES
Troubled car maker Fiat Auto is writing off accumulated losses
of over Rs 1,300-crore from its existing equity capital of Rs
1,367.98 crore. The Italian parent will infuse fresh equity
worth Rs 420 crore, and increase its stake to 99.75% from 97.66%,
as per the financial recast plan.
Sources said the company has filed a petition
in the Bombay High Court to sanction the restructuring. The
write-off is one of the largest by an MNC in India , sources
said.
The other stakeholder, Premier Automobiles (PAL), has, however,
declined to infuse any fresh equity, and has also opposed
the financial recast plan. The restructuring will reduce PAL's
stake in Fiat India from 2.34% to about 0.25%. PAL, which
held 49% in Fiat India , has over time steadily reduced its
stake.
The Italian company and the Doshis of
PAL had earlier been involved in a legal fight over the board
representation of Fiat. "Fiat has invested about Rs 2,000
crore in Indian operations, compared to PAL's Rs 32 crore.
Its contention of alienating the Doshis from the board was
valid and understandable," the company had said in a
statement. If the court gives its nod, the infusion of fresh
equity is expected to take place over next 2-3 months. Sources
said the company has borrowed working capital from Citibank,
and does not have any secured debt.
Once the recast is over, the company is
likely to shift its operations phase-wise to Ranjangaon, near
Pune, from Kurla in suburban Mumbai. Fiat is setting up a
full-fledged assembly unit at Ranjangaon. It plans to launch
a stripped-down version of its latest product 'Panda' in India
next year.
The mid-segment car, which was launched
in Europe last year, has been a roaring success. Sources said
the car maker is betting heavily on the diesel version of
the Panda, which claims to have a high fuel efficiency of
17-20 km per litre.
Fiat also plans to introduce ' Petra ', on the Siena platform,
and then a brand new C-segment model. The list may be expanded
to include the luxury brand Alfa Romeo in India .
"For Fiat, India is a huge market
that could not be tapped properly for various reasons. Despite
launching good products such as Uno and Palio, the company
could not sustain growth. Panda could be ideal for the Indian
market that is highly conscious of fuel efficiency,"
said sources.
The company has stopped production of
most of its cars, except for the Palio NV and the new diesel
version of Palio. Production takes place only on a couple
of days, with a maximum production of less than 100 vehicles
per day. Sources said the company has stopped production of
the Uno and the Siena completely.
Though the company has been able to get
rid off most of its old stocks, a lot of cars and car parts
- mostly of the Siena - are still lying in the company premises.
Sources said unease among its employees has led to many leaving
the company over the last few months
