Companies

M&M, Ford come together once again

Murali Gopalan Mumbai | Updated on January 10, 2018

Pooling strengths The Mahindra Scorpio and Ford Figo

Mahindra & Mahindra Managing Director Pawan Goenka (file pic)

The automakers hope to gain from Ford’s global reach and expertise, and Mahindra’s scale in India

Former allies team up to meet new mobility challenges

It was in 1995 that Mahindra & Mahindra joined hands with Ford Motor Company in a 50:50 joint venture, christened Mahindra Ford. This began with assembling the Escort at the Indian company’s Nashik facility.

The partners decided to go their own ways three years later, with M&M kick-starting Project Scorpio, which resulted in the creation of an SUV that redefined the company. Ford India, the standalone entity, expanded with a new plant in Chennai and tasted success with the Ikon before meandering along and staging a short-lived comeback with the Figo.

On Monday, the two former allies announced their intent to work together all over again as part of a “strategic alliance, designed to leverage the benefits of Ford’s global reach and expertise and Mahindra’s scale in India and successful operating model”.

The two will also “leverage their mutual strengths during a period of unprecedented transformation”, where the focus areas will be mobility programmes, connected vehicle projects, electrification, product development, sourcing, improving Ford’s reach within India and M&M’s reach outside (of India). The collaboration effort will last three years before deciding on the next course of action.

Since the time it decided to move on its own two decades ago, M&M’s auto business has grown substantially even while it has been facing headwinds lately. The success of the Scorpio and the durability of its more rugged sibling, Bolero, kept sales numbers ticking.

A confident M&M

In fact, it was a far more confident M&M that decided to revisit the car space through a joint venture with Renault in 2005. The goal was to produce the Logan entry-level sedan at Nashik though the sales script went completely awry. The partners split five years later and, like Ford, Renault opted for Chennai to start a new innings with global ally Nissan.

By 2010, M&M had made known its intent to acquire SsangYong Motor of South Korea, which desperately needed a lifeline to stay afloat. The deal was struck a year later and the turnaround exercise began in right earnest. The two companies decided to take their alliance to the next level in forms of sourcing and a joint platform strategy. This would would help with product development and keeping costs in check.

M&M had also articulated its vision of being a provider of mobility solutions which saw it buy out Kinetic’s ailing two-wheeler business in 2008, followed by the move to acquire Peugeot scooters six years later. More recently, it acquired the rights for two vintage two-wheeler brands, BSA and Jawa.

Beyond two-wheelers, M&M entered the heavy commercial vehicle space with Navistar of the US in 2010 before buying out the latter’s stake in 2013. The truck business is up against established brands like Tata Motors and Ashok Leyland with a host of aggressive rivals like VE Commercial Vehicles and Bharat-Benz.

M&M’s core SUV business, meanwhile, has also been facing enormous competitive pressure from the likes of Maruti, Hyundai, Renault, Tata Motors and, more recently, FCA India’s Jeep Compass.

It is in this backdrop that the collaboration with Ford has been announced and it will be interesting to see how this pans out in the coming years. The American automaker has also had little to show in terms of market share even after over decades of operating in India.

Small car hub

Ford has identified India as a small car hub but optimising capacity across its two plants in Chennai and Sanand, Gujarat, remains its biggest challenge. Its Executive Chairman, Bill Ford, was in India last year to announce the setting up of a global tech centre in Chennai to look at product development and mobility solutions worldwide.

Both M&M and Ford recognise that the time has come to meet these new challenges and it, therefore, makes sense to pool in skills. The Indian SUV maker has a sprawling R&D facility in Chennai which will perhaps have more on its plate now with the Ford alliance.

The good news is that Ford and M&M have worked together in the past, which means that there is a degree of familiarity already in place. The tougher task on hand is to fill the obvious gaps in products and capacity before embarking upon the mobility challenges of tomorrow. How they manage this is the million dollar question.

Published on September 18, 2017

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