Tata Motors chairman Ratan Tata with MD and group CEO Carl-Peter Forster in Mumbai on Friday. (PTI)

Mumbai, Aug. 12: Tata Motors is hoping to rework its contractual relationship with Fiat Motors after half of the value of its almost Rs 1,200-crore investment in a 50:50 joint venture with the Italian auto maker has been wiped out at Fiat India Automobiles Ltd (FIAL).

The Tata Motors balance sheet shows that the auto maker had invested Rs 1,199.54 crore in FIAL as on March 31 this year, giving it a 50 per cent stake in the Pune-based joint venture. The balance sheet goes on to show that the reserves and surplus attributable to Tata Motors on account of its 50 per cent stake in the venture had slumped to a negative Rs 607 crore.

A shareholder at the AGM said this meant that half the value of Tata Motor’s investment in FIAL had already been wiped out.

“Our company’s share of the loss (50 per cent) for the year is Rs 123 crore and its share of accumulated losses is Rs 607 crore. It has already wiped out 50 per cent of our investment. Why is it (FIAL) incurring losses despite using our marketing skills? Is the company thinking of making an accounting provision against this investment,” he asked.

While admitting that FIAL had suffered losses, Tata Motors chairman Ratan Tata said the joint venture had been formed in 2006 on the basis of certain assumptions made at that time. He indicated that Fiat’s projections about the demand for its cars in India had failed to materialise.

“Those assumptions in terms of volumes did not work out — more so for Fiat than for us — because there was a downturn. As we are 50 per cent owners, we had to share the losses of the company. Both Fiat and we are relooking at that whole contractual undertaking to see that we can make it more realistic. I hope we will be able to resolve that in course of time,” he told the shareholder.

Tata did not give any indication of the sort of changes that it would like to incorporate in the contractual undertaking with Fiat.

Both partners have been unhappy with the way the partnership has evolved over the years. The two sides had signed a memorandum of understanding in July 2006 and formalised the agreement for the venture in December that year. The plan was to set up a capacity to produce more than 100,000 cars and 200,000 engines and transmissions yearly at Ranjangaon, near Pune. The total investment in the project was to rise to over Rs 4,000 crore, but that never happened.

Nano units

Tata Motors aims to establish assembly facilities for the Nano in Indonesia and eastern Europe. It also plans to set up similar plants for its other vehicles in Brazil and South East Asia as it strives to broaden its international footprint.

“We are looking at how we can maximise the penetration of the Nano and some other products like the Ace,” Tata said at the auto maker’s 66th AGM.