inter corporate investments in automotive industry

8/8/2019 Inter Corporate Investments in Automotive Industry

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Financial Accounting and Management | FAM ADDICTS

IMT GHAZIABAD

INTER-CORPORATE INVESTMENT IN AUTOMOTIVE INDUSTRY


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IMT Ghaziabad | INTER-CORPORATE INVESTMENT IN AUTOMOTIVE INDUSTRY 2

P ROJECT M EMBERS

SAGRIKA DANI 10FN -098

SHIBANI C HATTOPADHYAY 10 DM -149

K APIL BANSAL 10 IB -0

K ANISHK DOSHI 10 FN -049

G URBANEET SETHI 10 FN -044

K ARAN R AZDAN 10 FN -052


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Contents

INTERCORPORATE INVESTMENT ......................................................................................................... 5

TYPESOF INTERCORPORATEINVESTMENTS........................................................................................................ 5

TEMPORARYINVESTMENTS............................................................................................................................. 6

LONG TERM INVESTMENTS.............................................................................................................................. 6

WHY IS INTERCORPORATE INVESTMENT NECESSARY? ............................................................... 7

ALLIANCES ANDJOINT VENTURES..................................................................................................................... 7

THE 'CHINA PRICE' ......................................................................................................................................... 8

SIZE OF INVESTMENTS ........................................................................................................................... 9

INVESTOROWNERSHIP OF INVESTEECOMMON SHARES....................................................................................... 9

AUTOMOTIVE INDUSTRY ............................................................................................................................... 9

WORLDWIDETRENDS..................................................................................................................................... 9HISTORY..................................................................................................................................................... 10

WORLD MOTOR VEHICLE PRODUCTION............................................................................................................ 10

COMPANY RELATIONSHIP ................................................................................................................... 11

VOLKSWAGEN GROUP .......................................................................................................................... 11

VOLKSWAGEN & SUZUKI ......................................................................................................................... 11

WHAT IT MEANS FORVW? ........................................................................................................................... 11

WHAT IT MEANS FORSUZUKI? ....................................................................................................................... 11

IMPACT ON MARUTIINDIA? .......................................................................................................................... 12

VOLKSWAGEN & PORSCHE ..................................................................................................................... 12

VOLKSWAGEN & SCANIA & MAN SE ....................................................................................................... 13

TOYOTA .................................................................................................................................................... 14

TOYOTA & TESLA MOTORS ..................................................................................................................... 14

RENAULT .................................................................................................................................................. 15

RENAULT & AVTOVAZ ............................................................................................................................. 15

FIAT ............................................................................................................................................................ 16FIAT & GM ............................................................................................................................................... 16

FIAT & CHRYSLER .................................................................................................................................... 16

FORD .......................................................................................................................................................... 17

FORD & ASTON MARTIN ......................................................................................................................... 17

FORD AND VOLVO ................................................................................................................................... 17


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DIAMLER AG ............................................................................................................................................ 18

DAIMLERCHRYSLER ................................................................................................................................. 18

DAIMLER-RENAULT-NISSAN .................................................................................................................... 18

BMW .......................................................................................................................................................... 19

BMW & ROLLS-ROYCE ............................................................................................................................. 19

TATA MOTORS ........................................................................................................................................ 20

TATA & JAGUAR & LAND ROVER ............................................................................................................. 20

TERMS OF DEAL:................................................................................................................................. 20

EFFECTS OF DEAL: .............................................................................................................................. 21

CONCLUSION ............................................................................................................................................... 22

BIBLIOGRAPHY ....................................................................................................................................... 23


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INTRODUCTIONINTERCORPORATE INVESTMENT

Intercorporate investments in the form of joint ventures have increased considerably over thepast 20 years. Firms in many industries partner to share risks, to share capital costs, and togenerate synergy between companies. Examples include process technologies, productioncapacity, distribution networks, and access to raw materials. In particular, international jointventures represent an increasingly attractive way to expand into foreign markets whileminimizing political and economic risks like expropriation and currency shocks inherent in

international business activities.An analysis of intercorporate investments is necessary to separate operating performance frominvesting performance and to understand the potential accounting distortions that arise as a resultof accounting rules and/or earnings management ploys that may occur. The analyst also mustunderstand the comparative financial statement effects that occur from the consolidation orproportionate consolidation of intercorporate investments. The investments made by onecorporate organization into another to take the advantage from the growth of it. The process canbe into many diverse fields and a company can analyze its investments and plan accordingly.

Companies invest in the shares of other companies for many reasons; the relationships betweencompanies lead to several reporting alternatives:

Temporary investments, transitory in nature. Portfolio investments, longer term, but no influence. Significant Influence investments known as affiliates Controlled inter corporate investments, subsidiaries . Joint ventures with control shared with other companies.

Each of these classifications raises a series of accounting and reporting issues, and may lead tounique aspects of financial reporting.

T YPES O F INTERCORPORATE INVESTMENTS

Temporary Investments Long- term Investments


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T EMPORARY INVESTMENTS

Investments may be short term or long term This is in part a question of managementintention, and in part based on the characteristics of the investment.

Investments should be classified as current assets only if capable of reasonably promptliquidation. This ensures that only liquid assets are reported as current assets on thebalance sheet.

Includes marketable equity securities, bonds, treasury bills, investment certificates andnotes disclosure as to the nature and characteristics of investments, as well as theirvaluation, aids the users of the financial statements in assessment of the reportingcompany

There are a variety of provisions which govern the accounting for, and disclosure of,temporary investments

Securities issued by affiliates should be set out separately.

The basis of valuation should be disclosed. For marketable securities, both quoted market value and carrying value should bedisclosed.

When the market value of temporary investments has declined below the carryingvalue, they should be carried at market value.

L ONG T ERM INVESTMENTS

A clear distinction is made between temporary and Long-term investments.

Long-term investments are carried as non-current assets on the balance sheet.

The investor can own any amount of shares in the investee.

Influence varies directly with the amount of shares owned - the greater thenumber of shares, the greater the potential for influence.

When only a few shares are owned (low percentage), there is unlikely to be any influenceof the investor on the investee

Such investments are referred to as long -term portfolio investments and arecarried at cost by the investor.

Dividends are recognized as investment revenue.

The carrying value of the investment is not adjusted for market fluctuations -similar to most non-current items.


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WHY IS INTERCORPORATE INVESTMENT NECESSARY?

ALLIANCES AND J OINT VENTURES

Private-equity firms, in particular, are hungrily eyeing auto supply companies for investmentopportunities, according to Wharton management professor John Paul MacDuffie andChristopher Benko , director of the PricewaterhouseCoopers Automotive Institute in Detroit.

Benko suggests that while there may be some automaker restructurings leading to changes inrelative positioning, the major automaker lineup will remain largely intact over the next decade.Today's "Global 10" automakers Toyota, GM, Ford, DaimlerChrysler, Honda, Hyundai, BMW,Volkswagen, PSA and Renault-Nissan will probably still be around in 2016. But, someautomakers will be forced to rethink their global market positioning and engage in more targeted

alliances and joint ventures as they take steps to adjust to market challenges. Any number of such combinations has already occurred since the 1990s. These have already been highlighted inthe research above.

Apart from the "Global 10" automakers, the weaker automakers are more likely to shrink thandisappear, according to MacDuffie, who is also co-director of the International Motor VehicleProgram, a network of researchers at universities worldwide that receives funding from majorautomakers and suppliers. According to him, people expect GM to come out of bankruptcy andcontinue to function regardless of where they stand on the issue of whether GM will go intobankruptcy. In that sense, there are no companies that look so weak that they would disappear.

Neither MacDuffie nor Benko would say whether GM will or should file for bankruptcy, butboth say any troubled automaker would do all it could to avoid that step, both as a matter of prideand out of fear that such a move would spark a sharp decline in sales. But people's willingness tobuy a ticket from a bankrupt airline is different from their willingness to buy a car from anautomaker in Chapter 11.

"Chapter 11, in itself, doesn't have the stigma it used to," Benko says. "Most people know it hasbecome a tool to restructure a business. But a car company going bankrupt may differ from anairline. People don't have a long-term vested interest in an airline except for frequent-flier miles.They know airlines are in bankruptcy right now, but they still fly bankrupt carriers. Buying aticket is a short-term transaction. But consumers may feel differently about a car company goingbankrupt. They worry about long-term service and warranties and parts. Traditionally,automakers have done whatever they could to avoid Chapter 11, if just from a public relationsperspective."

Benko and MacDuffie agree that the coming shakeout among companies that supply componentsto automakers will be significant. After the restructuring, he says, there will be larger, more


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globally oriented suppliers with better portfolios of business that can leverage scale andsustainable research and development capabilities to bring products to their customers to helpthem maintain or increase market share. That, however, will only happen after a painful shakeoutperiod among parts suppliers.

T HE 'C HINA P RICE '

According to MacDuffie, many Western parts suppliers are under immense pressures from lowcost Chinese parts producers and need to consolidate to strengthen their chances of survival.Automakers demand products from their suppliers at prices which the Chinese suppliers arewilling to sell at. Every supplier is facing those demands." Some suppliers that have alreadyconsolidated ran into trouble by combining for the sake of scale instead of sound strategicreasons, taking on huge amounts of debt in the process. This, in turn, placed even more pressure

on the combined companies. The idea of the market having fewer suppliers that are more globalin nature remains a sound one. But suppliers today have neither the cash nor the stock to use ascurrency to continue the necessary consolidation. That offers opportunities for private-equityfirms to enter the picture and accelerate consolidation by buying up weakened companies.

Benko adds that the amount of money going into private-equity funds these days is enormous,but such investors typically are not focused on the auto industry. Since there is not a lot of demand for struggling parts companies, prices will not be bid up very high and the number of private-equity firms that end up changing the nature of the supplier sector will be few in number.

Talk of restructuring among auto-parts companies is not new; parts-makers Delphi and Visteonare spin-offs from GM and Ford, respectively. In the 1990s, research by MacDuffie shows,between 700 and 900 different suppliers were selling car and truck parts to each vehicleassembly plant in North America and Europe. By 2001, the number of suppliers to each planthad been cut to about 450. In the fall of 2005, GM and Ford announced new plans to furtherreduce the number of suppliers with whom they do business.

As carmakers pressure parts suppliers to reduce costs, they run the risk of causing long-termharm to their own business of selling cars. If suppliers lack sufficient capital to invest in researchand development to continually improve their products, automakers will suffer.


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SIZE OF INVESTMENTS

INVESTOR O WNERSHIP OF INVESTEE C OMMON SHARES

Cost Equity Consolidation

Method Accounting Accounting

AUTOMOTIVE INDUSTRY

The automotive industry designs, develops, manufactures, markets, and sells the world's motorvehicles. The automotive industry is one of the most important economic sectors by revenue.

The term automotive industry usually does not include industries dedicated to automobiles afterdelivery to the customer, such as repair shops and motor fuel filling stations.

W ORLDWIDE T RENDS

In 2007, worldwide production reached a peak at a total of 73.3 million new motor vehiclesproduced worldwide. In 2009, worldwide motor vehicle production dropped 13.5 percent to 61million. Sales in the U.S. dropped 21.2 percent to 10.4 million units; sales in the European Union(supported by scrapping incentives in many markets) dropped 1.3 percent to 14.1 million units.China became the world's largest motor vehicles market, both by sales as by production. Sales in

China rose 45 percent in 2009 to 13.6 million units. In recent years, private Chinesemanufacturers emerge.

About 250 million vehicles are in use in the United States. Around the world, there were about806 million cars and light trucks on the road in 2007; they burn over 260 billion gallons of gasoline and diesel fuel yearly. In the opinion of some, urban transport systems based around thecar have proved unsustainable, consuming excessive energy, affecting the health of populations,and delivering a declining level of service despite increasing investments. Many of these

0 % ~20 % ~ 50 % ~100 %


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negative impacts fall disproportionately on those social groups who are also least likely to ownand drive cars. The sustainable transport movement focuses on solutions to these problems.

H ISTORY

The first practical automobile with a petrol engine was built by Karl Benz in 1885 in Mannheim,Germany. Benz was granted a patent for his automobile on 29 January 1886, and began the firstproduction of automobiles in 1888, after Bertha Benz, his wife, had proved with the first long-distance trip in August 1888 - from Mannheim to Pforzheim and back - that the horseless coachwas absolutely suitable for daily use. Since 2008 a Bertha Benz Memorial Route commemoratesthis event.

Soon after, Gottlieb Daimler and Wilhelm Maybach in Stuttgart in 1889 designed a vehicle fromscratch to be an automobile, rather than a horse-drawn carriage fitted with an engine. They alsoare usually credited as inventors of the first motorcycle in 1886, but Italy's Enrico Bernardi, of the University of Padua, in 1882, patented a 0.024 horsepower (17.9 W) 122 cc (7.4 cu in) one-

cylinder petrol motor, fitting it into his son's tricycle, making it at least a candidate for the firstautomobile, and first motorcycle; Bernardi enlarged the tricycle in 1892 to carry two adults. :

W ORLD MOTOR VEHICLE PRODUCTION

Year Production Change1997 52,987,0001998 57,987,000 -2.70%1999 56,258,892 2.98%2000 58,374,162 3.80%

2001 56,304,925 -3.50%2002 58,994,318 4.80%2003 60,663,225 2.80%2004 64,496,220 6.30%2005 66,482,439 3.10%2006 69,222,975 4.10%2007 73,266,061 5.80%2008 70,520,493 -3.70%2009 60,986,985 -13.50%

By Year: Global Production of Motor vehicles (Cars and commercial vehicles)


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COMPANY RELATIONSHIPIt is common for automobile manufacturers to hold stakes in other automobile manufacturers.These ownerships can be explored under the detail for the individual companies.

Notable current relationships include:

VOLKSWAGEN GROUP

VOLKSWAGEN & SUZUKI

Volkswagen has taken a 19.9% stake (nearly $2.5 billion) in Suzuki and in return Suzuki saidthat it will acquire a stake in VW and it did so by taking 5% stake in VW.

The step taken by VW is an effort to become the worlds no. 1 automaker beating GM andToyota, by emphasizing on the small car market segment and fuel efficient cars. This deal is afoundation of a long term strategic partnership, said VW chief executive Martin Winterkorn.

W HAT IT MEANS FOR VW?

This definitely means expanding its foothold across segments and markets. VW is eyeing anincreasing pie of smaller cars globally and Suzuki has the one of the best technology in makingsmaller engines. The point of partnering is to enhance its presence in India where Suzuki enjoysover 60% market share. Also, VW wants to add additional brands to its portfolio. It has just

completed purchase of 49.9% stake in Porsche automobile SE holding this week and has brandslike Passat, Jetta and Skoda under its umbrella. This move could also be driven by the emissionnorm changes being made mandatory in Europe in 2012.

W HAT IT MEANS FOR SUZUKI ?

Maruti could be an original equipment manufacturer (OEM) supplier to VW for small cars.Given the size of VW globally, sourcing from Suzuki could mean a quantum jump for thecompany. It is a common platform for cost sharing. The deal will give access to technologies of

VW and the synergies could be garnered in engine components, common sourcing and evencontract manufacturing for VW, akin to Maruti's current exports of A-Star for Nissan.
http://en.wikipedia.org/wiki/Volkswagen_Grouphttp://en.wikipedia.org/wiki/Volkswagen_Group


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IMPACT ON M ARUTI INDIA ?

There has been no open offer for Maruti India right now. The management is still unsure whetherVW will get stake in Maruti or not. So, VW indirect stake is at 10.8% so no question of openoffer.Currently, Japans Suzuki Motors holds 54.2% stake in Maruti Suzuki India.

VOLKSWAGEN & PORSCHE

Europes auto major Volkswagen is set to become the worlds number one, pushing JapansToyota to the second place, by taking over sports car manufacturer Porsche. Porsches attempt to

take over the much bigger Volkswagen backfired and its CEO Wendeln Wiedekind had to leavein July. It suffered heavy losses largely due to its unsuccessful bid.

VW has a 49% stake in Porsche and it is in the process of acquiring the same by 2011. This isstep taken by VW group eyeing the 1 st spot in the automaker list. This will be the 10 th addition inthe family.

Porsche racked up huge debts to get 51% stake in Volkswagen, but fell short of the 75% stakeneeded to take over the company when it could not raise the money needed due to the globalfinancial crisis and drop in car sales. In August, the two families buried their differences and

agreed to a fusion in order to protect their stakes in the company.

Company Cars Sold ( in millions)Volkswagen and Porsche 4.4

Toyota 4.0Ford-Mazda 3.7

General Motors 3.6

The fusion between the two companies is being planned in two Phases. Volkswagen will take-

over 49.9% of Porsche till the end of 2009 and it will be completed by 2011. Porsche willcontinue to operate as an independent company within the VW family. Volkswagen plans toinvest 25.8 million Euros in the next two years with focus on Germany to build up Porsche andKarmann and to strengthen the companys position in world markets, VW managementannounced after the board meeting at its headquarters in Wolfsburg. It intends to produce a newsmall new car under the brand name Karmann.


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TOYOTA

TOYOTA & DAIHATSU

Toyota has announced it will take over Daihatsu in Australia, with the company being"progressively assimilated" into Toyota Australia from July 1, 2000 to strengthen the position of the two companies. Beginning 32 years ago through technological and engineering cooperation,this has continued to expand to the mutual benefit of both, resulting in a decision in September1998 by Toyota Japan to take a 51.2 percent shareholding in the Japanese Daihatsu operations.

Daihatsu Australia Director Leon Kratsas noted that senior executives of both Daihatsu Australiaand Daihatsu Japan saw the change as positive, and one that would only enhance the Daihatsubrand in Australia.

Daihatsu products will continue to be distributed from existing facilities, again in the "immediatefuture". Mr Conomos went on to say; "In the longer term, operations would be integrated fullyinto Toyota Australia".

TOYOTA & TESLA MOTORS

Toyota has agreed to purchase $50 million of Teslas common stock issued in a private placement to close immediately subsequent to the closing of Teslas currently planned initialpublic offering (IPO). In January, Tesla announced the IPO. Goldman, Sachs & Co., MorganStanley, J.P. Morgan and Deutsche Bank Securities are acting as the joint book-runningmanagers for the offering. Last year, Daimler AG acquired an equity stake of nearly 10 percentof Tesla.

Separately, Tesla has purchased the former NUMMI factory in Fremont, Calif., where it willbuild the Model S sedan and future Tesla vehicles. As recently as April of 2010, the NUMMIfactory was used by Toyota and GM to produce various vehicles. That venture recently ended,when GM and Toyota pulled the plug.

The Model S is an electric premium sedan. The sedan, which Tesla unveiled in 2009, has ananticipated base price of $49,900, including a federal tax credit. With an optional extended-rangebattery pack, the Model S will travel over 300 miles per charge. In January, Tesla Motors andPanasonic announced that they will collaborate to develop next-generation battery cells forelectric vehicles. Tesla will use Panasonics battery cells in their newest battery packs. The cellsare comprised of nickel-based lithium ion chemistry. Panasonic is midway through a three-year


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$1 billion investment in lithium-ion battery cell R&D and production facilities. The first of thenew facilities in Suminoe, Japan will begin production in April 2010. Teslas current batterystrategy incorporates proprietary packaging using cells from multiple battery suppliers. This newcell will also be compatible with other cell form factors to enable the continuation of Teslasstrategy of using cells from multiple suppliers.

RENAULT

RENAULT & AVTOVAZ

French giant Renault is conducting a due diligence review before signing a final deal to buy a25% blocking stake in Russia's largest carmaker AvtoVAZ, a respected business daily saidTuesday. The value of the deal has not been disclosed so far. But Sergei Chemezov, head of theRussian Technology state-run corporation, which comprises AvtoVAZ, said the stake would besold at a price close to its market value.

Renault will pay another 20% of the deal price after acquiring the stake in full in July, accordingto the paper. The sellers will receive the other 30% installment by 2010, and the amount willdepend on AvtoVAZ's performance.

A Troika source said the final installment sum will depend on the plant's average EBITDA in2008-2009, Vedomosti said. In 2006, the carmaker received 2.5 billion rubles ($100 million) innet profit, almost 80% up on 2005. Revenue in 2006 gained 15% on 2005 to reach 152.4 billionrubles ($6.1 billion). In 2007, the company expects to earn a total of 166 billion rubles ($6.6billion). Renault already owns 25% in AvtoVAZ, and will control the stake de facto afterFebruary 25. Russian Technology will have a 50% blocking stake in the Russian carmakerregardless, Chemezov said earlier.

Renault launched production of the inexpensive Renault Logan model in Russia in late 2005 atthe Moscow-based Avtoframos plant, in which the Moscow city government has a stake. TheFrench carmaker invested $250 million in the project.


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FIAT

FIAT & GM

Over time, most automotive companies around the world have become holding companies of foreign as well as domestic competitors. For example, General Motors owned a controllinginterest in Saab Automobile and, until recently, in Isuzu. Fresco, CEO of Fiat Auto signed a

joint-venture agreement in 2000 under which GM acquired a stake in Fiat Auto. This made itappear as if Fiat was next, although GM has made joint ventures with other companies (such asToyota) without acquiring them. Nevertheless, Fiat did not see the GM partnership as a threat,rather as an opportunity to off-load its automotive business. The agreement with GM includeda put option, which held that Fiat would have the right to sell GM its auto division after fouryears at fair market value. If GM balked, it would be forced to pay a penalty of $2 billion. WhenFiat tried to sell GM the company, GM chose the penalty. On 13 May 2005 GM and Fiatofficially dissolved their agreement.

FIAT & CHRYSLER

On 20 January 2009, Fiat S.p.A. and Chrysler LLC announced that they were going to form aglobal alliance. Under the terms of the agreement, Fiat would take a 20% stake in Chrysler andgain access to its North American dealer network in exchange for providing Chrysler with theplatform to build smaller, more fuel-efficient vehicles in the US and reciprocal access to Fiat'sglobal distribution network.

The new equity holder would have the option of increasing that to as much as 35%. Fiat, thestronger of the two, would not immediately put cash into Chrysler. Instead it would obtain itsstake mainly in exchange for covering the cost of retooling a Chrysler plant to produce one ormore Fiat models to be sold in the U.S. Fiat would also provide engine and transmissiontechnology to help Chrysler introduce new, fuel-efficient small cars.

The partnership would provide each company with economies of scale and geographical reach ata time when both are struggling to compete with larger and more global rivals like Toyota,Volkswagen and the alliance of Renault S.A. and Nissan.
http://en.wikipedia.org/wiki/Holding_companyhttp://en.wikipedia.org/wiki/General_Motors_Corporationhttp://en.wikipedia.org/wiki/Controlling_interesthttp://en.wikipedia.org/wiki/Controlling_interesthttp://en.wikipedia.org/wiki/Saab_Automobilehttp://en.wikipedia.org/wiki/Isuzuhttp://en.wikipedia.org/wiki/Put_optionhttp://en.wikipedia.org/wiki/Chryslerhttp://en.wikipedia.org/wiki/Chryslerhttp://en.wikipedia.org/wiki/Put_optionhttp://en.wikipedia.org/wiki/Isuzuhttp://en.wikipedia.org/wiki/Saab_Automobilehttp://en.wikipedia.org/wiki/Controlling_interesthttp://en.wikipedia.org/wiki/Controlling_interesthttp://en.wikipedia.org/wiki/General_Motors_Corporationhttp://en.wikipedia.org/wiki/Holding_company


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FORD

FORD & ASTON MARTIN

From 1994 until 2007 Aston Martin was part of the Ford Motor Company. On 12 March 2007, itwas purchased for 479 million by a joint venture company, headed by David Richards and co-owned by Investment Dar and Adeem Investment of Kuwait and English businessman JohnSinders. Ford retained a US$77 million stake in Aston Martin, valuing the company at US$925million. It helped Ford in raising capital.

FORD AND VOLVO

Volvo Car Corporation was part of Ford Motor Company's Premier Automotive Group(PAG).Ford announced in December 2008 that it was considering selling Volvo Cars and makingcomplex evaluations again to raise capital after the economic downfall.. Ford raised $1 billion

from the sale of Aston Martin, and could conceivably score significantly more for Volvo. It paid$6.5 billion for the company in 1999. Given Volvo integral role at Ford and Mazda in terms of safety and platforms, it is likely Ford would expect a hefty sum for the Swedish firm; a sale priceof US$6 billion was reported.

Ford ultimately chose Geely Holding Group to acquire Volvo Cars. Geely initially denied theplan for buying Volvo, followed by denials from both Ford and Volvo. When later estimatessuggested that Volvo is only worth US$1-1.5 billion, Geely's parent company, Geely GroupHoldings Co., planned to bid for Volvo, with Goldman Sachs investing HK$2.59 billion (334million USD) to the holding company.

Ford Motor Company decided to consider putting Volvo Cars on the market in December 2008,after suffering huge losses that year. On October 28, 2009, Ford confirmed that, after consideringseveral offers, the preferred buyer of Volvo Cars was Zhejiang Geely Holding Group, the parentof Chinese motor manufacturer Geely Automobile. On December 23, 2009, Ford confirmed thatall substantive commercial terms of the sale to Geely had been settled. It is the largest overseasacquisition by a Chinese automaker.


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DIAMLER AG

DAIMLERCHRYSLER

DaimlerChrysler was founded in 1998 when Mercedes-Benz manufacturer Daimler-Benz (1926 1998) of Stuttgart, Germany merged with the US-based Chrysler Corporation. The deal created anew entity, DaimlerChrysler. However, the buyout failed to produce the trans-Atlanticautomotive powerhouse dealmakers had hoped for, and DaimlerChrysler announced on May 14,2007 that it would sell Chrysler to Cerberus Capital Management of New York, a private equityfirm that specializes in restructuring troubled companies.

On August 3, 2007, DaimlerChrysler completed the sale of Chrysler Group to Cerberus CapitalManagement. The original agreement stated that Cerberus would take an 80.1 percent stake inthe new company, Chrysler Holding LLC. DaimlerChrysler changed its name to Daimler AGand retained the remaining 19.9% stake in the separated Chrysler.

DAIMLER-RENAULT-NISSAN

Renault-Nissan Motors have an alliance involving two global companies linked by cross-shareholding, with Renault holding 44.3% of Nissan shares, and Nissan holding 15% of (non-voting) Renault shares. On April 7, 2010 Renault-Nissan executive, Carlos Ghosn and Dr. DieterZetsche announced a partnership between the three companies in a joint press conference.

Under the new agreement, Daimler will hold a 3.1-percent stake in Renault and Nissan and theexisting alliance partners will hold an identical stake in the German company. The partners willdevelop a combined platform that will be used as the basis for the next generations of theRenault Twingo and Smart cars, including a new four-seater. These new models will launch in2013 and the current Smart factory in France will continue building the two-seat version. Thenew four-seater, along with the Twingo, will be built at a Renault factory in Slovenia. All threevehicles will be available from launch in gas, diesel and electric drive variants.


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The automakers will also share powertrains for other models. Renault-Nissan will provide smallgas and diesel engines to Daimler for use in its smaller cars, including presumably the nextgeneration A, B and perhaps even C-Class Mercedes-Benz models. Going the other way,Daimler will provide some of its engines to Nissan for use in Infiniti models. The partners willalso collaborate on light commercial vehicles, with Renault providing a new entry-level van tobe sold as a Mercedes.

BMW

BMW & ROLLS-ROYCE

In 1998, owners Vickers decided to sell Rolls-Royce Motors. The most likely buyer was BMW,who already supplied engines and other components for Rolls-Royce and Bentley cars, butBMW's final offer of 340m was beaten by Volkswagen's 430m.

A stipulation in the ownership documents of Rolls-Royce dictated that Rolls-Royce plc, the aero-

engine maker would retain certain essential trademarks (the Rolls-Royce name and logo) if theautomotive division was sold. Rolls-Royce plc chose to license not to VW but to BMW, withwhom it had recently had joint business ventures. VW had bought rights to the "Spirit of Ecstasy" bonnet (hood) ornament and the shape of the radiator grille, but it lacked rights to theRolls-Royce name necessary to build the cars. Likewise, BMW lacked rights to the grille andmascot. BMW bought an option on the trademarks, licensing the name and "RR" logo for 40m,a deal that many commentators thought was a bargain for possibly the most valuable property inthe deal. VW claimed that it had only really wanted Bentley anyway.

BMW and VW arrived at a solution. From 1998 to 2002 BMW would continue to supply engines

for the cars and would allow use of the names, but this would cease on 1 January 2003. Fromthat date, only BMW would be able to name cars "Rolls-Royce", and VW's former Rolls-Royce/Bentley division would build only cars called "Bentley". The Rolls-Royce's Cornicheceased production in 2002.


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E FFECTS O F DEAL :

R EVENUE $14.250 BillionO PERATING INCOME $10.40 Billion

NET INCOME $1.198 BillionT OTAL ASSETS $15.430 BillionT OTAL EQUITY $763 Million

All figures are for year 2009.

Tata Motors(TAMO.BO) swept past forecasts with a fourth straight quarterly profit, driven bydemand for its luxury Jaguar and Land Rover brands, boosting its shares to their highest in atleast two decades. The company's Jaguar and Land Rover (JLR) unit, which Tata bought fromFord Motor Co in 2008, is expected to fuel growth in coming quarters as demand for luxurybrands increase, particularly in emerging economies. Rising numbers of wealthy, brand-conscious Chinese are overtaking debt-burdened Europeans and Americans as the source of sustained demand for Europe's premium cars.

Tata Motors reported a consolidated net profit of 19.89 billion rupees ($429.59 million) for thequarter to June 30, swinging back from a year-ago net loss of 3.29 billion rupees. Revenues roseto 270.56 billion rupees from 164.73 billion rupees.


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C ONCLUSION

Automobile companies in India & around the world are investing substantially in other autocompanies. This new growth strategy is a part of the long term strategy of these companies.Private-equity firms, in particular, are hungrily eyeing auto supply companies for investmentopportunities. Also, the result of the shakeout among companies that supply components toautomakers will be significant. After the restructuring, there will be larger, more globallyoriented suppliers with better portfolios of business that can leverage scale and sustainableresearch and development capabilities to bring products to their customers to help them maintainor increase market share.

The auto companies are investing mainly due to reasons like expanding their foothold acrosssegments and markets. For example, VW is eyeing a foothold of smaller cars globally. Since,Suzuki has the one of the best technology in making smaller, fuel-efficient engines; the dealbetween the two will give access to technologies of Suzuki to VW. This technological andengineering cooperation is to the mutual benefit of both as Suzuki will get reciprocal access toVW's global distribution network.

It is argued that the end product of this process will be the creation of new and sharper forms of development and qualitative differentiation between companies will narrow down.


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BIBLIOGRAPHY

1. http://www2.toyota.co.jp/en/history/2000.html

2. http://www.shmula.com/291/toyota-motor-corporation-company-history

3. http://www.slideshare.net/expkarma/tata-j-l-r-deal

4. http://www.vwfsag.de/fsag/ucus/vwfsag/en/company/history.htx

5. http://en.wikipedia.org/wiki/Automotive_industry

6. http://www.livemint.com/2009/11/22155606/Porsche-takeover-will-make-Vol.html

7. http://knowledge.wharton.upenn.edu/article.cfm?articleid=1365

inter corporate investments in automotive industry

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