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When Mahindra & Mahindra took charge of SsangYong Motor in March 2011, it set itself five ‘five key directions’ to work on.
One was to increase sales immediately; two, build a stronger product pipeline; three, develop the brand and network; four, create strong internal capabilities (in terms of people); and five, achieve a financial turnaround.
“It has been over a year now and things have gone reasonably as per the script. Each of these goals is roughly where we would have expected them to be,” Dr Pawan Goenka, M&M’s President (Automotive & Farm Equipment Sectors), told Business Line .
Sales
From the viewpoint of sales, SsangYong did 1,13,000 units last year and hopes to wrap up 2012 with 1,23,000 units in a declining market. “We have very aggressive plans for 1.6 lakh 160,000 units next year and 3 lakh 300,000 by 2016,” he said.
As for new products, the Korando Sport launched in January has been doing well with a refresh due soon. M&M and SsangYong have also kicked off new product development on a shared platform which will translate into substantial cost benefits. In addition, new engine platforms will ensure a diverse range in the coming years.
“We are also working on technology projects including the electric powertrain and transmission which neither of us could have justified on a standalone basis,” Dr Goenka said.
On the brand and network, SsangYong has its domestic focus in Korea as well as the global arena. The brand had been ‘beaten down over the turmoil-filled years’ while the network pretty much lost its energy.
“We are putting in efforts to change the showroom, rope in new dealers and invest in the brand,” he said.
Key market
SsangYong products have also been launched through Mahindra South Africa and other markets are being explored. Russia has been identified as a key region while volumes are picking up slowly in China which is also top priority.
SsangYong had ‘lost some momentum’ in Western Europe which is now being revived with newer products and distributors. Chile is a strong market while Brazil will be a renewed focus for the Korean automaker. According to Dr Goenka, India will also emerge a ‘reasonably good’ market. “The volumes here will not be small and if we do well with Rexton, we will bring other products though testing the price range is important,” he said.
The tougher part about the turnaround script concerns manpower, especially when key people were lost in the ‘down period’. “It has not been easy since SsangYong is not a very strong employer brand but we have been able to hire local heads for purchase, HR and IT. We are still not in a comfortable space yet,” Dr Goenka admitted.
Financial turnaround
The most difficult task on hand is the financial turnaround.
Losses last year were nearly $80 million but the first quarter of 2012 saw positive EBITDA. By the end of the day, “SsangYong is a small company with a three per cent market share in Korea and we don’t have the muscle that M&M has in India,” he said.
Their joint strengths, however, hold the key to the recovery plan. For instance, the engine development plan hinges on the cost-effective sourcing business model of M&M (tractors included) and SsangYong.
“It is a question of two sets of people working for two companies who have to think together without compromising on either entity they are working for,” Dr Goenka said.
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