IMT INTER-CORPORATE INVESTMENT IN

GHAZIABAD AUTOMOTIVE INDUSTRY

Financial Accounting and Management | FAM ADDICTS

 PROJECT MEMBERS
SAGRIKA DANI – 10FN-098
SHIBANI CHATTOPADHYAY – 10DM-149
KAPIL BANSAL – 10IB-0
KANISHK DOSHI – 10 FN -049
GURBANEET SETHI – 10 FN -044
KARAN RAZDAN – 10 FN -052

IMT Ghaziabad | INTER-CORPORATE INVESTMENT IN AUTOMOTIVE INDUSTRY 2

Contents
INTERCORPORATE INVESTMENT......................................................................................................... 5
TYPES OF INTERCORPORATE INVESTMENTS ........................................................................................................ 5
TEMPORARY INVESTMENTS ............................................................................................................................. 6
LONG TERM INVESTMENTS .............................................................................................................................. 6
WHY IS INTERCORPORATE INVESTMENT NECESSARY? ............................................................... 7
ALLIANCES AND JOINT VENTURES ..................................................................................................................... 7
THE 'CHINA PRICE'......................................................................................................................................... 8
SIZE OF INVESTMENTS ........................................................................................................................... 9
INVESTOR OWNERSHIP OF INVESTEE COMMON SHARES ....................................................................................... 9
AUTOMOTIVE INDUSTRY ............................................................................................................................... 9
WORLDWIDE TRENDS..................................................................................................................................... 9
HISTORY..................................................................................................................................................... 10
WORLD MOTOR VEHICLE PRODUCTION ............................................................................................................ 10
COMPANY RELATIONSHIP ................................................................................................................... 11
VOLKSWAGEN GROUP .......................................................................................................................... 11
VOLKSWAGEN & SUZUKI......................................................................................................................... 11
WHAT IT MEANS FOR VW? ........................................................................................................................... 11
WHAT IT MEANS FOR SUZUKI? ....................................................................................................................... 11
IMPACT ON MARUTI INDIA? .......................................................................................................................... 12
VOLKSWAGEN & PORSCHE ..................................................................................................................... 12
VOLKSWAGEN & SCANIA & MAN SE ....................................................................................................... 13
TOYOTA .................................................................................................................................................... 14
TOYOTA & TESLA MOTORS ..................................................................................................................... 14
RENAULT .................................................................................................................................................. 15
RENAULT & AVTOVAZ ............................................................................................................................. 15
FIAT............................................................................................................................................................ 16
FIAT & 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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 INTRODUCTION
INTERCORPORATE INVESTMENT

Intercorporate investments in the form of joint ventures have increased considerably over the
past 20 years. Firms in many industries partner to share risks, to share capital costs, and to
generate synergy between companies. Examples include process technologies, production
capacity, distribution networks, and access to raw materials. In particular, international joint
ventures represent an increasingly attractive way to expand into foreign markets while
minimizing 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 from

investing performance and to understand the potential accounting distortions that arise as a result
of accounting rules and/or earnings management ploys that may occur. The analyst also must
understand the comparative financial statement effects that occur from the consolidation or
proportionate consolidation of intercorporate investments. The investments made by one
corporate organization into another to take the advantage from the growth of it. The process can
be 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 between
companies 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 to
unique aspects of financial reporting.

TYPES OF INTERCORPORATE INVESTMENTS

• Temporary Investments
• Long- term Investments

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TEMPORARY INVESTMENTS

• Investments may be short term or long term – This is in part a question of management
intention, and in part based on the characteristics of the investment.
• Investments should be classified as current assets only if capable of reasonably prompt
liquidation. This ensures that only “liquid” assets are reported as current assets on the
balance sheet.
• Includes marketable equity securities, bonds, treasury bills, investment certificates and
notes disclosure as to the nature and characteristics of investments, as well as their
valuation, aids the users of the financial statements in assessment of the reporting
company
• 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 be
disclosed.
– When the market value of temporary investments has declined below the carrying
value, they should be carried at market value.

LONG TERM 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 the
number of shares, the greater the potential for influence.

• When only a few shares are owned (low percentage), there is unlikely to be any influence
of the investor on the “investee”

– Such investments are referred to as “long-term portfolio investments” and are

carried 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 JOINT VENTURES

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

Benko suggests that while there may be some automaker restructurings leading to changes in
relative 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, some
automakers 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 in
the research above.

Apart from the "Global 10" automakers, the weaker automakers are more likely to shrink than
disappear, according to MacDuffie, who is also co-director of the International Motor Vehicle
Program, a network of researchers at universities worldwide that receives funding from major
automakers and suppliers. According to him, people expect GM to come out of bankruptcy and
continue to function regardless of where they stand on the issue of whether GM will go into
bankruptcy. 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, but
both say any troubled automaker would do all it could to avoid that step, both as a matter of pride
and out of fear that such a move would spark a sharp decline in sales. But people's willingness to
buy a ticket from a bankrupt airline is different from their willingness to buy a car from an
automaker in Chapter 11.

"Chapter 11, in itself, doesn't have the stigma it used to," Benko says. "Most people know it has
become a tool to restructure a business. But a car company going bankrupt may differ from an
airline. 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 a
ticket is a short-term transaction. But consumers may feel differently about a car company going
bankrupt. 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 relations
perspective."

Benko and MacDuffie agree that the coming shakeout among companies that supply components
to 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 and
sustainable research and development capabilities to bring products to their customers to help
them maintain or increase market share. That, however, will only happen after a painful shakeout
period among parts suppliers.

THE 'CHINA PRICE'

According to MacDuffie, many Western parts suppliers are under immense pressures from low
cost 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 are
willing to sell at. Every supplier is facing those demands." Some suppliers that have already
consolidated ran into trouble by combining for the sake of scale instead of sound strategic
reasons, 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 global
in nature remains a sound one. But suppliers today have neither the cash nor the stock to use as
currency to continue the necessary consolidation. That offers opportunities for private-equity
firms 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 Visteon
are 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 vehicle
assembly plant in North America and Europe. By 2001, the number of suppliers to each plant
had been cut to about 450. In the fall of 2005, GM and Ford announced new plans to further
reduce the number of suppliers with whom they do business.

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

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 SIZE OF INVESTMENTS

INVESTOR OWNERSHIP OF INVESTEE COMMON SHARES

Cost Equity Consolidation

Method Accounting Accounting

0% ~20 % ~ 50 % ~100 %

AUTOMOTIVE INDUSTRY
The automotive industry designs, develops, manufactures, markets, and sells the world's motor
vehicles. 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 after
delivery to the customer, such as repair shops and motor fuel filling stations.

WORLDWIDE TRENDS
In 2007, worldwide production reached a peak at a total of 73.3 million new motor vehicles
produced worldwide. In 2009, worldwide motor vehicle production dropped 13.5 percent to 61
million. 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 Chinese
manufacturers emerge.

About 250 million vehicles are in use in the United States. Around the world, there were about
806 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 the
car have proved unsustainable, consuming excessive energy, affecting the health of populations,
and delivering a declining level of service despite increasing investments. Many of these

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

HISTORY
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 first
production 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 coach
was absolutely suitable for daily use. Since 2008 a Bertha Benz Memorial Route commemorates
this event.

Soon after, Gottlieb Daimler and Wilhelm Maybach in Stuttgart in 1889 designed a vehicle from
scratch to be an automobile, rather than a horse-drawn carriage fitted with an engine. They also
are 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 first
automobile, and first motorcycle; Bernardi enlarged the tricycle in 1892 to carry two adults.:

WORLD MOTOR VEHICLE PRODUCTION

Year Production Change

1997 52,987,000
1998 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 RELATIONSHIP
It 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 said
that 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 world’s no. 1 automaker beating GM and
Toyota, by emphasizing on the small car market segment and fuel efficient cars. This deal is a
foundation of a long term strategic partnership, said VW chief executive Martin Winterkorn.

WHAT IT MEANS FOR VW?

This definitely means expanding its foothold across segments and markets. VW is eyeing an
increasing pie of smaller cars globally and Suzuki has the one of the best technology in making
smaller engines. The point of partnering is to enhance its presence in India where Suzuki enjoys
over 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 brands
like Passat, Jetta and Skoda under its umbrella. This move could also be driven by the emission
norm changes being made mandatory in Europe in 2012.

WHAT 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 the
company. 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 even
contract manufacturing for VW, akin to Maruti's current exports of A-Star for Nissan.

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IMPACT ON MARUTI INDIA?

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

VOLKSWAGEN & PORSCHE

Europe’s auto major Volkswagen is set to become the world’s number one, pushing Japan’s
Toyota to the second place, by taking over sports car manufacturer Porsche. Porsche’s attempt to
take over the much bigger Volkswagen backfired and its CEO Wendeln Wiedekind had to leave
in 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 is
step taken by VW group eyeing the 1st spot in the automaker list. This will be the 10th addition in
the family.

Porsche racked up huge debts to get 51% stake in Volkswagen, but fell short of the 75% stake
needed to take over the company when it could not raise the money needed due to the global
financial 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 4.0
Ford-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 will
continue to operate as an independent company within the VW family. Volkswagen plans to
invest 25.8 million Euros in the next two years with focus on Germany to build up Porsche and
Karmann and to strengthen the company’s position in world markets, VW management
announced after the board meeting at its headquarters in Wolfsburg. It intends to produce a new
small new car under the brand name Karmann.

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VOLKSWAGEN & SCANIA & MAN SE
VW holds a 37.73% stake in Scania (68.6% voting rights) and 29% stake in MAN SE. Please
check out the financial history of Scania as attachment.

Volkswagen Group (Volkswagen AG) is the controlling shareholder in the Swedish commercial
vehicle maker Scania AB, with a capital stake of 37.73%, and 68.60% of the voting rights.
Volkswagen AG originally acquired a stake in Scania after Volvo's aborted takeover attempt in
2000, and then increased that to a capital stake of 16.5% and a voting stake of 33.4% in 2007.
On3 March 2008, Volkswagen announced that it would acquire all the shares in Scania AB held
by Investor AB and the Wallenberg Foundation. Once cleared by the relevant authorities, Scania
will become the ninth brand in the Volkswagen Group.

On 4 October 2006, Volkswagen acquired a 15.1% stake in German commercial vehicle

maker MAN AG, and later increased to 29.9%. In 2007, MAN AG launched a hostile offer to
acquire Scania AB, but this was subsequently withdrawn.

Former Volkswagen Group CEO Bernd Pischetsrieder, and his successor Prof. Dr. Martin
Winterkorn, have considered a three-way merger between MAN AG, Scania AB, Volkswagen
AG's own Brazilian heavy truck division, and possibly their light truck and van division as well.
Due to the size of Volkswagen AG's stakes in MAN and Scania, it is expected that Volkswagen
AG would own a majority stake in such a merged entity.

SHAREHOLDER A SHARES B SHARES % OF CAPITAL % OF VOTES

NAME
Volkswagen 306,232,239 59,037,822 45.66 70.94
Aktiengesellschaft
MAN SE 73,047,179 33,718,857 13.35 17.37
Clearstream 1,170,514 32,973,450 4.27 1.02
Banking
JP Morgan Chase 461,584 36,220,219 4.59 0.93
Bank
Others 17,464,110 156,978,292 21.81 7.54
Total Ownership 400,000,000 400,000,000 100.00 100.00
Scania AB (publ) principal shareholders

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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 September
1998 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 Australia
and Daihatsu Japan saw the change as positive, and one that would only enhance the Daihatsu
brand in Australia.

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

TOYOTA & TESLA MOTORS

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

Separately, Tesla has purchased the former NUMMI factory in Fremont, Calif., where it will
build the Model S sedan and future Tesla vehicles. As recently as April of 2010, the NUMMI
factory 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 an
anticipated base price of $49,900, including a federal tax credit. With an optional extended-range
battery pack, the Model S will travel over 300 miles per charge. In January, Tesla Motors and
Panasonic announced that they will collaborate to develop next-generation battery cells for
electric vehicles. Tesla will use Panasonic’s battery cells in their newest battery packs. The cells
are 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 the
new facilities in Suminoe, Japan will begin production in April 2010. Tesla’s current battery
strategy incorporates proprietary packaging using cells from multiple battery suppliers. This new
cell will also be compatible with other cell form factors to enable the continuation of Tesla’s
strategy 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 a
25% blocking stake in Russia's largest carmaker AvtoVAZ, a respected business daily said
Tuesday. The value of the deal has not been disclosed so far. But Sergei Chemezov, head of the
Russian Technology state-run corporation, which comprises AvtoVAZ, said the stake would be
sold 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, according
to the paper. The sellers will receive the other 30% installment by 2010, and the amount will
depend on AvtoVAZ's performance.

A Troika source said the final installment sum will depend on the plant's average EBITDA in
2008-2009, Vedomosti said. In 2006, the carmaker received 2.5 billion rubles ($100 million) in
net profit, almost 80% up on 2005. Revenue in 2006 gained 15% on 2005 to reach 152.4 billion
rubles ($6.1 billion). In 2007, the company expects to earn a total of 166 billion rubles ($6.6
billion). Renault already owns 25% in AvtoVAZ, and will control the stake de facto after
February 25. Russian Technology will have a 50% blocking stake in the Russian carmaker
regardless, Chemezov said earlier.

Renault launched production of the inexpensive Renault Logan model in Russia in late 2005 at
the Moscow-based Avtoframos plant, in which the Moscow city government has a stake. The
French 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 controlling
interest 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 it
appear as if Fiat was next, although GM has made joint ventures with other companies (such as
Toyota) 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 included
a put option, which held that Fiat would have the right to sell GM its auto division after four
years at fair market value. If GM balked, it would be forced to pay a penalty of $2 billion. When
Fiat tried to sell GM the company, GM chose the penalty. On 13 May 2005 GM and Fiat
officially dissolved their agreement.

FIAT & CHRYSLER

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

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

The partnership would provide each company with economies of scale and geographical reach at
a 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.

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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, it
was 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 John
Sinders. Ford retained a US$77 million stake in Aston Martin, valuing the company at US$925
million. 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 making
complex 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 price
of US$6 billion was reported.

Ford ultimately chose Geely Holding Group to acquire Volvo Cars. Geely initially denied the
plan for buying Volvo, followed by denials from both Ford and Volvo. When later estimates
suggested that Volvo is only worth US$1-1.5 billion, Geely's parent company, Geely Group
Holdings Co., planned to bid for Volvo, with Goldman Sachs investing HK$2.59 billion (334
million 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 considering
several offers, the preferred buyer of Volvo Cars was Zhejiang Geely Holding Group, the parent
of Chinese motor manufacturer Geely Automobile. On December 23, 2009, Ford confirmed that
all substantive commercial terms of the sale to Geely had been settled. It is the largest overseas
acquisition 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 a
new entity, DaimlerChrysler. However, the buyout failed to produce the trans-Atlantic
automotive 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 equity
firm that specializes in restructuring troubled companies.

On August 3, 2007, DaimlerChrysler completed the sale of Chrysler Group to Cerberus Capital
Management. The original agreement stated that Cerberus would take an 80.1 percent stake in
the new company, Chrysler Holding LLC. DaimlerChrysler changed its name to Daimler AG
and 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. Dieter
Zetsche 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 the
existing alliance partners will hold an identical stake in the German company. The partners will
develop a combined platform that will be used as the basis for the next generations of the
Renault Twingo and Smart cars, including a new four-seater. These new models will launch in
2013 and the current Smart factory in France will continue building the two-seat version. The
new four-seater, along with the Twingo, will be built at a Renault factory in Slovenia. All three
vehicles 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 small
gas and diesel engines to Daimler for use in its smaller cars, including presumably the next
generation 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 will
also collaborate on light commercial vehicles, with Renault providing a new entry-level van to
be 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, but
BMW'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 the
automotive division was sold. Rolls-Royce plc chose to license not to VW but to BMW, with
whom 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 the
Rolls-Royce name necessary to build the cars. Likewise, BMW lacked rights to the grille and
mascot. 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 in
the 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. From
that 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 Corniche
ceased production in 2002.

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TATA MOTORS
Tata Motors Ltd is a multinational corporation headquartered in Mumbai, India. Part of the Tata
Group, it was formerly known as TELCO (TATA Engineering and Locomotive Company).
Established in 1945, when the company began manufacturing locomotives, the company
manufactured its first commercial vehicle in 1954 in collaboration with Daimler-Benz AG,
which ended in 1969. Tata Motors is a dual-listed company traded on both the Bombay Stock
Exchange as well as on the New York Stock Exchange. Tata Motors in 2005 was ranked among
the top 10 corporations in India with an annual revenue exceeding INR 320 billion.

TATA & JAGUAR & LAND ROVER

Car giant Ford has sold its luxury UK-based car brands Jaguar and Land Rover to Indian
company Tata. Tata, India's biggest vehicle maker, is paying $2.3bn (£1.15bn) for the British
brands after months of negotiations over price and supply relationships. The negotiations started
last June when Ford announced its intention to sell the companies as a package.

Jaguar and Land Rover employ about 16,000 staff at UK plants in the West Midlands and
Merseyside. Although Land Rover remains profitable, Ford has never managed to make money
from its investment in Jaguar. Ford has been forced to sell the two companies, based at Solihull
and Castle Bromwich in the West Midlands and Halewood on Merseyside, in order to
concentrate on its loss-making core US car business, which it hopes to turn around in the next
two years. The $2.3bn price tag is about half the amount Ford originally paid for the marquees,
leading some analysts to argue that the purchase was a mistake.

TERMS OF DEAL:
Under the terms of the deal:

1. Ford will contribute about $600m to the Jaguar and Land Rover pension plans.
2. Ford will continue to supply Jaguar and Land Rover for differing periods with engines,
stampings and other car components, in addition to a variety of technologies.
3. Ford Motor Credit Company will provide financing for Jaguar and Land Rover dealers
and customers during a transitional period of up to 12 months.

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EFFECTS OF DEAL:

REVENUE $14.250 Billion

OPERATING INCOME $10.40 Billion
NET INCOME $1.198 Billion
TOTAL ASSETS $15.430 Billion
TOTAL EQUITY $763 Million
All figures are for year 2009.

Tata Motors(TAMO.BO) swept past forecasts with a fourth straight quarterly profit, driven by
demand for its luxury Jaguar and Land Rover brands, boosting its shares to their highest in at
least two decades. The company's Jaguar and Land Rover (JLR) unit, which Tata bought from
Ford Motor Co in 2008, is expected to fuel growth in coming quarters as demand for luxury
brands 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 the
quarter to June 30, swinging back from a year-ago net loss of 3.29 billion rupees. Revenues rose
to 270.56 billion rupees from 164.73 billion rupees.

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CONCLUSION
Automobile companies in India & around the world are investing substantially in other auto
companies. 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 investment
opportunities. Also, the result of the shakeout among companies that supply components to
automakers will be significant. After the restructuring, there will be larger, more globally
oriented suppliers with better portfolios of business that can leverage scale and sustainable
research and development capabilities to bring products to their customers to help them maintain
or increase market share.

The auto companies are investing mainly due to reasons like expanding their foothold across
segments 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 deal
between the two will give access to technologies of Suzuki to VW. This technological and
engineering cooperation is to the mutual benefit of both as Suzuki will get reciprocal access to
VW'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

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