Companies

M&M forms JV to pick up 51% in Ford’s India unit; plans to launch 3 utility vehicles

Our Bureau Mumbai | Updated on October 01, 2019 Published on October 01, 2019

(from left) Pawan Goenka, MD, Mahindra & Mahindra; Jim Farley, President of Ford New Businesses, Technology & Strategy; and Anand Mahindra, Chairman, Mahindra Group, at a press conference in Mumbai, on Tuesday   -  PAUL NORONHA

Mahindra & Mahindra will enter into a 51:49 joint venture with Ford as part of an initiative to jointly develop and retail products both in India and across the world.

The two companies are familiar with each other given that they were allies in the mid-1990s when Ford first entered India. Subsequently, they went their own ways with varying degrees of success. Clearly, Ford has not had an easy time over the last two decades and will now attempt to reboot its India innings with M&M holding a majority stake.

Transfer of plants

Tuesday’s announcement on the new joint venture, with an enterprise value of ₹1,925 crore, follows the decision to form a strategic alliance two years ago. Ford will transfer its India operations to the new entity comprising its assembly plants in Chennai and Sanand, Gujarat. However, it will retain the engine plant at Sanand as well as its Global Business Services unit in Chennai.

The coming years will see a focus on utility vehicles as well as electric mobility where the strengths of both partners will be leveraged for the India and overseas markets. More specifically, there will be three new utility vehicles under the Ford brand that will have a Mahindra platform and powertrain.

From Ford’s point of view, the biggest plus will be leveraging M&M’s strengths in frugal engineering, while it will offer the latter access to technology and new markets.

A ‘win-win formula’

Bill Ford, Executive Chairman of Ford, and Jim Hackett, President & CEO, joined the press meet through a direct video conferencing from Dearborn, Michigan. The M&M side also had its top leadership present including Anand Mahindra, Chairman of the Mahindra Group, and Pawan Goenka, MD. Also present was Jim Farley, President of Ford New Businesses. “Partnerships help us become competitive in an era of rapid change,” said Bill Ford while reiterating that the alliance with M&M marked a new era of collaboration. He said this was a perfect win-win formula and that the company remained “deeply committed” to India.

Ford added that this was an “increasingly complex world” where no automaker could hope to survive on its own. Yet, the partnerships concerned would have to be perfect as in the case of M&M or the recent one with Volkswagen where the two have teamed up for commercial vehicles and to explore opportunities in electric mobility.

From Anand Mahindra’s point of view, the new joint venture was built on the “best foundation of friendship and synergy”. The reference here was to the scale of combined sourcing which, in M&M’s case, worked out to 1.3 times its present level and three times in the case of Ford.

In manufacturing scale, this could translate into common platforms for the two companies even while factoring in SsangYong Motor, the South Korean SUV maker, which M&M had acquired in 2011. According to Mahindra,. the combination of frugal engineering and knowledge of India would blend perfectly with Ford’s strengths in technology.

Pawan Goenka said Ford brought to the table its strengths in global sourcing/marketing while M&M’s expertise lay in its strong local sourcing competencies, integrated product development infrastructure and its know-how of the Indian market.

The underlying message was that Ford was not abandoning India (unlike GM, which stopped retailing cars a couple of years ago and is only focussing on exports from its Pune plant).

On the contrary, the creation of this new joint venture was akin to “two old friends moving into a new house together”. It was, in Mahindra’s words, also testament to the power of friendship and collaboration.

The partners also made clear that while synergies would be optimised at the back end, both M&M and Ford with their “commonality of values” would retain their individual brand identities on the retail side.

Published on October 01, 2019
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