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Auto major Mahindra & Mahindra said today that it has completed the acquisition of a majority stake in South Korea's SsangYong Motor Company.
M&M, which emerged as the preferred bidder for SsangYong in August 2010, will now hold a 70 per cent stake in the company, for which it has shelled out $463 million (about Rs 2,105 crore).
With the new management taking control, SsangYong Motor Co will invest over 240 KRW (nearly Rs 960 crore) this calendar year on product development and brand-building. The company will increase its investment in product development by 70 per cent in 2011 compared to last year, at over KRW 200 billion (over Rs 800 crore).
It will also invest over 40 billion KRW (about Rs 160 crore) for brand-building in Korea - a 60 per cent increase over 2010 - and increase its overseas brand investment by over four times in 2011.
"These investments will be funded by SsangYong Motor Co internal accruals. After the debt restructuring, its balance sheet is clean. Although it is unlikely that it will need debt for this investment, but if needed, it can raise,'' the M&M President, Automotive and Farm Sector, Mr Pawan Goenka, told PTI from Seoul.
He said Mr Yoo-il Lee has been appointed as the new CEO of SsangYong Motor Co, while Mr Dilip Sundaram from Mahindra will be the new CFO. Also, a new board of directors with six members has been formed.
"There are three independent directors, along with one member from SsangYong Motor and two from M&M,'' Mr Goenka said.
From M&M, it will be Mr Goenka himself and the M&M Executive Director & Group CFO Mr Bharat Doshi. The Korean firm will be represented by the new CEO Mr Lee.
Asked if there will be a change of name of SsangYong Motor Co, Mr Goenka said: "No decision has been taken yet on the name change of the SMC and also on the branding side of products.''
He said strategic plans such as the India project, which involves launching the Rexton and Korando-C in India, have already been kicked off.
Earlier, he had said that the two vehicles would be launched in India by the end of 2011.
Mr Goenka also said discussions are on to explore opportunities for joint product and technology development and synergy in global operations and purchase.
"On the R&D front, SsangYong Motor and M&M will remain independent but whenever there are possibilities of sharing platforms, it could be explored,'' he said.
Moreover, M&M is also reviewing the utilisation of its IT systems for SsangYong, besides considering the possibility of Mahindra Finance setting up operations in Korea to enhance the sales of SsangYong vehicles.
"First, we have to understand the norms for such a venture (financing) in Korea and after understanding the market, we may decided to either go for the joint venture route or go solo,'' Mr Doshi said.
For M&M, which had lost the race to acquire JLR in 2008 to homegrown rivals Tatas, the acquisition of SsangYong Motor Company is a big step towards realising its ambition to be a global player in the utility and sports utility vehicles segment.
"This is a landmark day for all of us at Mahindra as it marks the beginning of what I am sure will be an enduring partnership with SsangYong Motor Company... The synergies between the two companies in the areas of R&D, product development and platform sharing, will make the combined entity of Mahindra and SsangYong a force to reckon with in the global utility vehicle space,'' Mr Goenka said.
M&M said a Synergy Council comprising senior management from both the companies will be established to ensure focus and delivery of synergies between the two companies. The council will focus on various aspects such as global procurement, new car development and business strategy to penetrate international markets.
In 2010, SsangYong Motor Company had increased its sales considerably to 81,800 units compared with 35,300 units in 2009. The company was hit badly by the market meltdown in 2008-09 and had to undergo a court monitored restructuring and was put on the auction block.
M&M had beaten rivals, including the Kolkata-based PK Ruia Group to become the new owner of the Korean auto maker.
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