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Mercedes may end pact with Tata Motors

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Zorce Jedi Master

Joined: 01 May 2005
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PostPosted: Sat Jul 31, 2010 4:54 am    Post subject: Mercedes may end pact with Tata Motors Reply with quote

NEW DELHI: Mercedes Benz may finally say bye-bye to Tata. The German luxury carmaker may end the more than half-a-century-old relationship by not renewing the paint shop tie-up with Tata Motors and erecting its own shop.

“We are looking at our own paint shop and discussing that option with my management globally,” Wilfried Aulbur, MD and CEO of Mercedes Benz India told ET. “There is no final decision just yet. We are looking at the financial feasibility of the project,” he added.

If it’s feasible, the paint shop will come up at Mercedes’ brand new factory at Chakan in the outskirts of Pune. Mercedez has been using the paint shop at Tata Motors’ Pune facilities since it began operating in India.

When contacted, the Tata Motors spokesman confirmed that the agreement with Mercedes ends in December. “A decision (on refreshing the deal) will be taken in due course of time. Any decision taken is internal to Tata Motors and Mercedes Benz India,” he said.

Once the paint shop arrangement, which comes up for renewal in December, ends, it will bring the curtains down on one of the longest running local-global collaborations in the country.

It started back in 1954 when Tata Motors (then Telco) and Daimler Benz decided to jointly manufacture medium commercial vehicles. The first vehicle rolled out within six months of the contract. The truck deal lasted only 15 years.

The two firms came together again in 1994 when they signed a joint venture agreement to manufacture Mercedes Benz passenger cars in India and the Mercedes Benz E220 the roads the very next year. Tata Motors, however, sold off its entire stake in Mercedes Benz India by 2000-2001.

Mercedes’ parent Daimler too started progressively selling its 10% stake in Tata Motors. It sold its last tranche of 5.3% stake in Tata Motors for e300 million earlier this year.

When it exited Tata Motors, Daimler said in a statement, “This has been done in full consultation with Tata. Relations between the two companies are excellent and will not be adversely affected by this sale.”

Daimler has invested around $64 million in the Mercedes Benz Chakan plant and is pumping in another $1 billion in a commercial vehicle plant outside Chennai. It is also investing around `150 crore into its R&D facility in India as it looks at moving from component development to model development in India over the next couple of years.

As for the ties with Tatas, it may not be all over yet. “Our tie-up with the Tatas is still there but we have to see how that moves ahead,” said Mr Aulbur.

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