MUMBAI: Italian car maker Fiat may not have had a great presence in the car market these days, but its joint venture with Tata Motors has quietly broken into profits for the first time since its establishment thanks to the voracious appetite for diesel engines from Maruti Suzuki, export of engine components to China and better cost efficiencies.

ET learns that post the organisational restructuring in FY-12, wherein Fiat separated the manufacturing company from the marketing company and wrote off losses of about Rs 300 crore in Fiat India, the company posted a profit of Rs 269 crore in the six months ending March of 2013.

Fiat's exposure in the engine business is expected to rise further as its breadwinner engine business and the impending 7-9 new products planned by both Tata Motors which include Falcon 4 -code name for new small car and Falcon 5- a sub-four metre sedan which are in the works along with the upcoming new vehicles from the Fiat-Chrysler's range are expected to grow its revenues in the coming years.

Fiat-Chrysler's plans include the launch of a New Linea, as well as new launches such as Abarth, Grand Cherokee, Punto Cross and 2-3 new utility vehicles which's proposed to be manufactured and in some cases assembled at the Ranjangaon plant. For this purpose, the Fiat-Tata joint venture infused additional capital of Rs 650 crore in June of 2013.

During the October 2012 to March of 2013 period, the average engine production rose by over 20-30% compared to FY-12. Fiat India produced 80,736 engines in six months, with an average of 13,000 units a month. The company supplied over 1,00,000 engines from its Ranjangaon plant to Maruti Suzuki over the last 12-18 months.

The company's exports increased three-fold in the second half of FY-13 compared to second half of 2011-12 led by exports to GAC-Fiat's China plant for 100% of its primary engine components such as cylinder block, lower cylinder head and upper cylinder head.

A judicious utilization of Plant resources and rationalization of working days and shift timings yielded up to 30% production efficiency and some savings in costs and improvement in working capital management despite uncertain market conditions. When contacted Tata Motors spokesperson confirmed the JV has turned profitable, largely helped by the restructuring arrangement, increased product volumes and efforts towards cost management. An email sent to Fiat India did not elicit any response.

In order to strengthen the JV, Fiat and Tatas have infused about Rs 1,500 crore over a span of two years. A sum of Rs 850 crore was capitalised into the JV through a fresh issue of equity shares in FY-12 (September of 2011) and there was an additional infusion of Rs 650 crore in June of 2013.

"We look forward to sustained performance momentum with further products enhancements as well as exploring various other opportunities, the details of which will be announced as and when decisions are reached. We also confirm that as part of the restructuring arrangement, the JV partners have further capitalized the JV," the Tata Motors spokesperson added.

The fresh investment is likely to go towards setting up of new assembly line for Jeep products and retooling of lines for production on new Vista and Manza.

Source : economictimes.indiatimes.com