The LML-Piaggio Break-Up|Business Strategy|Case Study|Case Studies

The LML-Piaggio Break-Up

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Case Details:

Case Code : BSTR006
Case Length : 7 Pages
Period : 1998-1999
Organization : LML, Piaggio
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Automobile & Automotive

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Building of a Relationship

The LML-Piaggio relationship started with a licensing agreement in 1984, for the production of Vespa.

The contract was later converted into a technical and financial joint venture in 1990, with Piaggio taking up a 23.6% equity stake in LML. In the same year, LML was spun off as a separate company. The Indian promoters had a 23.6% equity stake in the new company. Two of these were Singhania, and his brother Lalit Singhania, who held the stake through a holding company, Suryodaya Trading and Investment Co. The third Indian promoter was Sanjiv Shreya, a cousin of the Singhanias, who held the stake through Gold Rock Investments. Piaggio held the stake through Piaggio Vespa BV and Piaggio & C SpA. However, Singhania believed that Giovanni personally held the stake...

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Marriage of Convenience?

On December 13, 1997, Giovanni, the heir to the Agnelli family, died of cancer.

His death made Singhania apprehensive. In 1995, the joint venture agreement had been signed with the support of only Giovanni. Giovanni's family had been planning to form a joint venture with Bajaj Auto. The family had also planned to acquire LML, through a partnership with Escorts, in 1993. They had cancelled an MoU signed with LML to set up a 400-crore venture to manufacture 75,000 three-wheelers per annum and entered into an agreement with Greaves to manufacture the same. Singhania felt that the Agnelli family could create problems for him and LML. "Our relationship was with Giovanni. We had tremendous faith and confidence in each other," he commented...

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