Ford, Mahindra to scrap proposed JV

M&M said the decision will not have any impact on its product plan but will enable it to focus on the core business of SUVs and also develop electric vehicles

New Delhi: US-based auto major Ford Motor Co and India’s Mahindra & Mahindra (M&M) on Friday said they have decided to scrap a previously announced automotive joint venture, citing changes in global economic and business conditions partly due to the coronavirus pandemic.

While Ford said it will continue its independent operations in India as it is, M&M said the decision will not have any impact on its product plan but will enable it to focus on the core business of SUVs and also develop electric vehicles. The two companies determined they will not complete a previously announced automotive joint venture between their respective companies. The decision follows the passing of the December 31, 2020, “longstop”, or expiration, date of a definitive agreement the organisations entered into in October 2019, Ford Motor Company said in a statement.

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The outcome was driven by fundamental changes in global economic and business conditions — caused, in part, by the global pandemic — over the past 15 months. Those changes influenced separate decisions by Ford and Mahindra to re-assess their respective capital allocation priorities, it added.

Ford further said its independent operations in India will continue as it is. “The company is actively evaluating its businesses around the world, including in India, making choices and allocating capital in ways that advance Ford’s plan to achieve an 8 per cent company adjusted EBIT margin and generate consistently strong adjusted free cash flow,” Ford Motor Co said. EBIT stands for earnings before interest and tax.

Addressing a video conference, M&M MD and CEO Pawan Goenka said both the companies were clear that given the current situation, this is “the most prudent decsion for them to make and move on” and focus on the core business.

“This particular JV clearly got impacted by the significant upheaveal that has happened in the whole world becaue of the pandemic,” he said.

Goenka added that all the assumptions and scenarios when we signed the definitive agreement (DA) and the current situation are different. “That’s what led to this one.” Goenka further said, “In the changed scenario, the investments would have been significantly higher than what was there when the DA was signed. Therefore, it just did not make business sense for either partner to go ahead with this JV.”

As part of the agreement, M&M was to acquire 51 per cent stake in a wholly-owned arm of the US auto major — Ardour Automotive Private Ltd, currently a wholly-owned subsidiary of Ford Motor Company Inc, USA for around Rs 657 crore. The balance 49 per cent equity shareholding in Ardour was to be held by FMC and/or any of its affiliates.

M&M keen to sell majority stake in SsangYong Motor

Mahindra & Mahindra (M&M) on Friday said it is in discussions with a potential investor to sell its majority stake in South Korean arm SsangYong Motor Company (SYMC) which has already filed for bankruptcy, and expects to sign a non-binding agreement next week. The Mumbai-based auto major, which currently holds nearly 75 per cent in the Korean firm, expects to finalise the deal by February end.

“We are in discussion with a potential investor for majority stake in SsangYong. We hope to conclude the term sheet with the investor sometime next week,” M&M managing director Pawan Goenka told reporters in a virtual press conference. On December 21, the homegrown automaker had announced that SYMC has filed for bankruptcy.

The loss making firm has filed an application for commencement of rehabilitation procedure with the Seoul Bankruptcy Court under the Debtor Rehabilitation and Bankruptcy Act of South Korea. The troubled automaker has also applied for an autonomous restructuring support (ARS) programme which is a court-designed process. “Under ARS scheme the court gives approval to the company to find solution on its own in certain timeframe and during this time the company is managed by its management and the court doesn’t intervene,” Goenka said.