M&M,Ford walk together again for joint development, manufacturing UV/SUVs

Mahindra and Ford Motor on Tuesday (October 1) joined hands again for the second time in about 16 years with a 51:49 joint venture, creating the third-largest car/passenger vehicle maker with 14 percent of the domestic car market.

Though Fords association with India dates over eight decades, it formally entered the country with a manufacturing plant in Chennai in 1995. Since then India has grown to become the third by 2002, the American auto major had found the going tough and entered into a joint venture with Mahindra but did not last long.

Significantly, Ford is the second American auto company to practically leave or wind down India for the second time, after General Motors, which also exited India twice. The JV announcement is the culmination of the six agreements the companies had inked in September 2017, the chairmen of the companies Anand Mahindra and Bill Ford told reporters here this evening.

The partners expect to close begin working together by the middle of 2020, M&M managing director Pawan Goenka said. He further said the 51:49 JV has an enterprise valuation of ₹1,925 crore of which ₹647 crore of Ford India’s debt will be transferred to the new company and the rest of the equity of ₹1,278 crore will be put in by the partners according to the equity holding as per their equity.

Goenka said while the chairman of the board of the new JV will be a Mahindra nominee, the other members of the board will be equally split.

Addressing the press jointly, Mahindra group chairman Anand Mahindra and Ford Motor Co-chairman Bill Ford (through a video link from Dearborn, Michigan, US) described the JV as the reflection of “the shared values and mutual respect built on best friendship and synergies which will lead to scale and skill.”

Allaying rumors that his company was packing up from India as has been reported in the media, Ford said the American auto major “will keep making vehicles in India, for India and for the rest of the world” and that with 14,000 employees, India will continue to the third-largest base for the Detroit auto giant in terms of head-counts.

Joining Ford, Jim Farely, Fords global president for new business and technologies and strategy told PTI “in fact we will be doubling down on India and not winding down as this JV will enable us to scale up and increase our market share here as well as our already high exports from here.”

The JV already has approvals for two products-an SUV on the M&Ms C-platform which will be assembled at the Mahindra plant and sold by M&M and another for a UV on Fords D-platform which will be manufactured at Fords Sanand plant and sold by Ford. Stated differently, if the jointly developed model is on M&M platform, Ford will not sell it and vice versa. The JV will have an installed capacity of a little less than 1.3 million units per annum with M&Ms over 8 lakh and Fords a little over 2 lakh units at its two plants in Chennai and Sanand and will thus become the third largest PV maker in the country with 14 percent of the pie with M&M contributing a little over 10 percent and Ford the rest.

But, it can be noted that Ford has been the largest exporter of cars from the country for many years now and its Chennai made Ecosport and even shipped to the US and Western Europe. Its annual export volume has been trending over 1.3 lakh units. Both the chairmen said the partnership will help drive scale for domestically as well as in emerging markets where both companies are present now.

When asked about the rationale for the JV both Ford and Mahindra said the future of the auto industry is in partnerships and there is nothing in this as Ford has been into JV for the past half-century.

While Mahindra and Goenka refused to answer a question from PTI on their failed JV with the French major Renault and well as the past failed JV Ford, Farley of Ford said the past JV did not continue for long as the market paradigm had suddenly changed in India. “Both of us were not mature enough then, but today we are both mature enough to understand what we want and how we want,” he said.

Goenka chipped in saying “the past JV to some extent met its objective in the sense that we gained a lot from that JV to develop our Scorpio platform while they (Ford) to develop the Ikon platform in India with us.” The joint venture excludes sales, marketing and after sales service as well as Fords engine plant operations in Sanand and the global business services unit and Ford Credit and Ford Smart Mobility operations.

The JV expects to introduce three new utility vehicles under the Ford brand, beginning with a new midsize sports utility vehicle that will have a common Mahindra product platform and powertrain. The joint venture will use the Ford brand distribution network in emerging markets to extend support for export of Mahindra products, in addition to Ford, branded vehicles.

As part of the agreement, M&M will acquire 51 percent stake in a wholly-owned arm of Ford — Ardour Automotive, for around ₹657 crore. The balance 49 percent equity shareholding in Ardour will be held by Ford and/or any of its affiliates. Ford India’s had revenue of ₹26,324 crore in FY19, up from ₹25,010 crore in FY18 and ₹22,103 crore in FY17.