In July 2006, Tata Motors, an Indian auto maker, and Fiat Auto, an Italian automaker, announced their intention to form a joint venture to produce passenger cars, engines, and transmissions in India. 

TM had found its success primarily by operating in the commercial vehicles sector, but when the demand for commercial vehicles fell, it crafted its turnaround strategy based on international growth, in an effort to reduce the dependence on their Indian domestic market. Fiat Auto had gained dominance in the small car sector in its domestic market of Italy, as well as widely throughout Europe and other parts of the world. Due to changing economic conditions in Europe, they lost market share when they were unable to adapt quickly enough. Fiat adopted a growth strategy that entailed the entrance to new markets, of which India was highly attractive.

This case reviews the histories of each company in greater detail, and examines the forces that drove the two companies together. The case assignment questions are designed to help the student evaluate the joint venture decision by identifying its strengths and weaknesses, and anticipating the competitive advantages that would or would not come as a result of the joint venture.

1. What is Fiat’s current situation in India?

2. What is the business opportunity in India? Do you think that Fiat needs a partner?

3. Do you think Fiat and Tata make for good partners? Compare the Fiat-GM relationship with the Fiat-Tata relationship.

4. Is the business case convincing for the joint venture? Back up your answer with a financial analysis.

5. How would you assess the negotiation process between Fiat and Tata?

6. What would you recommend for the alliance to be successful?