SsangYong Motor to join Mahindra-Ford alliance
Mahindra & Mahindra, the Indian multinational automaker, plans to have SsangYong Motor, in which it has a major stake, join a threeway alliance with Ford Motor, its joint venture partner, in developing products — including electric vehicles — platform sharing and global marketing, according to the head of the group.
“SsangYong products are very much similar to products Mahindra and Ford are developing,” Pawan Goenka, Mahindra’s managing director and chairman of the SsangYong board, said in an exclusive interview Thursday at his office in Seoul.
“SsangYong can also participate in product development, which will help reduce costs substantially — cost sharing among three parties rather than two.
“Ford is very well aware of our SsangYong ownership, and SsangYong management is keen to join. Mahindra and Ford are discussing Mahindra converting Ford vehicles into electric ones, which will be jointly made by Mahindra and Ford, and potentially used by SsangYong.”
SsangYong has lost money for 12 consecutive quarters with its operating loss for the latest July-September quarter more than doubling to $89 million. Sluggish sales and competition are among key reasons for this.
Goenka, however, denied reports that SsangYong was so short of money that it had to delay product development.
“We have many new products being developed right now,” he said. “We have said in the past that we will have a new major product or major upgrade every year. It is happening right now. Today we had a full review of product development.”
Goenka said he had a turnaround plan.
“We are looking at how we can increase our sales outside Korea and how we can launch new products faster at lower costs,” he said. “The joint venture we have with Ford can potentially become very helpful for SsangYong when we look at joint product development and reducing costs and increasing our network access outside Korea.”
Asked whether the company had a plan to inject equity anytime soon, Goenka said, “Mahindra will support SsangYong when needed. Mahindra, as majority shareholder, will ensure SsangYong will be able to invest when it should invest.”
However, he said that it was not clear whether any additional money was needed.
“We will determine what is required or whether any additional investment will come from the major shareholder or borrowing from outside,” he said.
Goenka said that he wanted to set one record straight about his boss, Chairman Mahindra’s comment regarding his commitment to invest 1 trillion won.
“That statement is often misunderstood. When we said that we would make an investment, we mean SsangYong will invest 1 trillion won in product development. Whether the 1 trillion won comes from Mahindra, borrowing or internal generation was not specified. So the 1 trillion won is not what Mahindra promised to invest in SsangYong. It is what SsangYong promised to invest in new product development.
“Where Mahindra needs to support, we will support. We have so far invested 130 billion. We will keep looking into the future to see what any other requirements are.
He said Mahindra was not ready to hold current CEO Yea Byung-tae responsible for the current woes.
“He has been in the post for six months,” Goenka noted, pointing out that the two previous CEOs each served four years since the Mahindra takeover. He said that considering various factors contributing to the situation, he would not guarantee any better performance even if he were in charge.
“As chairman, I give the current CEO my vote of confidence.”
Regarding the recent union-management agreement highlighted by no industrial action and a major cut in benefits, he said it would not be right for him to say whether it was good or not.
“It is up to CEO and management to decide what is the right thing to do.”
Nor would he say whether the company would accept the union’s demand for job security.
“It is an internal operational matter,” he said.
But he indirectly said that the workforce was at an appropriate level.
“The current workforce is designed to produce 140,000 to 150,000 cars a year,” he said. “It produced 143,000. We had overtime for many months last year. Earlier this year, we hired 107 people. If we didn’t have work, we wouldn’t have hired them.”
He said that his target was 154,000 cars annually to get close to the breakeven point.
He also said SsangYong would stick to its schedule to introduce an EV model in the first quarter of 2021.
“We can’t hasten it because we have started with that timeline and the timeline is intact,” he said. “There are a lot of people and work involved in various companies. Everything should come together.”
Goenka said he would be retiring next year as stipulated by company regulations, taking a non-executive chairmanship as Indian rules require.