MAHINDRA TO RESCUE FORD’S INDIA BUSINESS
US automobile major Ford on Wednesday said it was engaged with Mahindra & Mahindra (M&M) for strategic cooperation to achieve “commercial, manufacturing and business efficiencies” in India.
Reports have said Ford is all set to transfer some of its key assets, including manufacturing plant in Chennai to a joint venture with M&M as the US auto major struggles to make a mark in India. “Forging a partnership for the future, we remain engaged with Mahindra to develop avenues of strategic cooperation that will help us achieve commercial, manufacturing and business efficiencies,” a Ford India spokesperson said.
The spokesperson further said, “We look forward to sharing more information at the appropriate time and cannot comment on ongoing speculations.” M&M spokesperson said.
M&M will own 51 per cent of the new entity, sources said. Ford will get equal voting rights and board representation, one of the people said. The venture, to be announced as soon as next week, doesn’t include Ford’s global business services division or an export-focused engine plant in Sanand.
Ford’s compensation is likely to be far below the $2 billion it’s poured into India, only to achieve market share of less than 3 per cent. The deal keeps Ford in the heavily populated market while letting it share the financial burden with Mahindra. Ford Chief Executive Officer Jim Hackett is leading an $11 billion restructuring and paring money-losing overseas operations.
Ford is “insulating themselves a little bit,” said Deepesh Rathore, an independent automobile analyst based in Bengaluru. “For Mahindra, it makes sense, because they are increasingly looking at the urban market.” Global carmakers have had a tough time making inroads into India, which is dominated by Suzuki Motor’s cheap, fuel efficient vehicles. General Motors scrapped a $1-billion investment in India two years ago and stopped selling Chevrolet models here. The market as a whole faces challenges, with sales contracting for the past 10 months, forcing the industry to cut production and jobs. A final agreement hasn’t been reached and the discussions could still fall apart, the people said. Reuters reported some elements of the venture in April.
M&M shares fell as much as 4.3 per cent to ~535 Wednesday in Mumbai. Ford shares closed 0.6 per cent down on Tuesday.
Latest foray
As envisioned, the new entity will hold most of Ford’s assets in India, including the two car plants it owns in the country. Ford was one of the first automobile companies to enter India when it liberalised the economy in the early 1990s. Ford first entered India in 1926 but shut down that operation in the 1950s. “Ford remains committed to growing its customer base and product portfolio in the world's fourth-largest automobile market, and will continue to make in India, for India and the world,” Lori Arpin, a spokeswoman for the Dearborn, Michigan-based automaker, said in a statement while declining to discuss specifics.
The deal will allow M&M to sell some Ford vehicles in developing markets under its own brand, the people said. Ford and M&M also are jointly developing a midsized sport-utility vehicle for India. Back in 2012, Ford had aimed to make the South Asian nation one of its three largest markets by 2020.