International Truck to source $1 bn spares

JV with M&M to manufacture high tonnage trucks and buses in India.

The US-based International Truck and Engine Corporation plans to source components worth $1 billion over five to six years from its joint venture with Mahindra & Mahindra. The foreign company would source components worth $100 million in the first year of the venture.

In addition, the joint venture Mahindra International (MIL) would manufacture high tonnage trucks and buses. M&M would hold a 51 per cent stake in venture, while the foreign company would hold the balance stake. Anand Mahindra, vice-chairman and managing director of M&M, would be the chairman of the company.

"The JV would look at a 15 per cent market share of the commercial vehicle segment in five years," said Arun Pande, managing director, MIL.

The commercial vehicle market is largely dominated by Tata Motors. According to the joint venture agreement, which was signed today, Mahindra Engineering Service (MES) would supply engineering services to International's truck development and technology centre. MES is setting up a centre employing 300 engineers.

M&M has transferred its light commercial vehicles business to the joint venture for Rs 48 crore last week. The transfer included production capacity of 20,000 light commercial vehicles (LCV) Zahirabad, near Hyderabad.

"The joint venture is expected to invest $80 million (Rs 360 crore) initially. The amount would be utilised in reengineering and upgradation of plants at Zahirabad. The capacity of the plants will be expanded to 50,000 medium and heavy commercial vehicles (M&HCV)," said Pawan Goenka, COO, automotive sector, M&M.

MIL's expansion plans include development of buses and trucks of 7 to 35 tonne starting by 2007 at one of M&M's automotive plants. The factory would have a capacity to produce a range of commercial vehicles, and will include cab assembly, vehicle assembly and a paint shop.

The vehicles will be 90 per cent localised owing to availability of quality materials from Indian suppliers.Mahindra International will use M&M's distribution network in India.

"International's plan to enter Indian market constitutes a major step in its global growth strategy," said Daniel Ustian, chief executive officer, Navistar International Corp, parent company of International Truck.

The joint venture's product range and technology will also be focussed on serving various export markets in Asia, Middle East, Africa, Russia and central europe as well as providing International with appropriate low cost products and aggregate technologies for the Americas.