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After taking control of troubled sports utility vehicle manufacturer SsangYong Motor Company (SYMC) nearly five years ago, Mahindra & Mahindra (M&M) is yet to see a financial turnaround in the South Korean company.
A combination of factors such as a critical slowdown in exports markets from Korea, a court-led directive on wage payments and adverse currency movements has taken a toll on M&M's plans to bring about a break-even in SsangYong. The court ruling in Korea pushed SYMC wages by 10-13 per cent.
V S Parthasarathy, group chief financial officer, Mahindra & Mahindra, said, “The difficult part for SsangYong right now is what is happening in two of its very important markets, Russia and China. Russia, which accounted for almost half of SsangYong’s total export nearly collapsed to no volume, because of the current situation we have in Russia. And China also slowed down significantly, at least for CBU (completely built unit) import.”
M&M paid $463 million (Rs 2,100 crore) for a 70-per cent stake in SYMC in 2010 and gradually raised the stake to 73 per cent. Speaking to media, company officials have said that a break-even for SsangYong is still two years away.
On the sidelines of announcing its final quarter results Pawan Goenka, executive director M&M said, “Because of the (currency) exchange and some of the wage increases that had happened last year, right now SsangYong is in losses”.
In the quarter ended March 31, 2015, SsangYong recorded a net loss of 31.2 billion Won (Rs 178 crore). Though its Korea volumes grew by 26 per cent in the same quarter, exports plunged by 40 per cent. Exports play a pivotal role for SYMC generating more than half of its volumes. In 2014, SYMC recorded sales of 141,047 units, a fall of three per cent over the 145,649 units sold in 2013.
M&M is banking on the newly launched Tivoli SUV to spruce up sales. The company is presently selling the stylish compact SUV in China and Turkey apart from Korea but Goenka has ruled out launching the vehicle in India.
“So the focus right now is how do we get our export market back on track. How do we compensate for losing market in Russia, slowing market in China. There are efforts going on right now specific in Western Europe to bring it back,” added Parthasarathy.
After the initial excitement, SaangYong sales in India too have taken a hit. In 2014-15, M&M sold 1,010 units of the premium SUV Rexton, the only SsangYong product in India, marking a dip of 45 per cent against 1,843 units sold in 2013-14.
Despite the challenges, M&M has not slowed down its plans for SYMC. SsangYong will continue to make investments in product development and market expansion.
"Our programmes for new product have not slowed down, we are doing everything that we had planned. We had announced that Ssangyong will be investing roughly $900 million over a period of four to five years and that programme is on," added Parthasarathy.
Both companies are jointly working on a variety of projects involving development of new products, engines and transmissions that will be used in SsangYong and Mahindra products.
A combination of factors such as a critical slowdown in exports markets from Korea, a court-led directive on wage payments and adverse currency movements has taken a toll on M&M's plans to bring about a break-even in SsangYong. The court ruling in Korea pushed SYMC wages by 10-13 per cent.
V S Parthasarathy, group chief financial officer, Mahindra & Mahindra, said, “The difficult part for SsangYong right now is what is happening in two of its very important markets, Russia and China. Russia, which accounted for almost half of SsangYong’s total export nearly collapsed to no volume, because of the current situation we have in Russia. And China also slowed down significantly, at least for CBU (completely built unit) import.”
M&M paid $463 million (Rs 2,100 crore) for a 70-per cent stake in SYMC in 2010 and gradually raised the stake to 73 per cent. Speaking to media, company officials have said that a break-even for SsangYong is still two years away.
On the sidelines of announcing its final quarter results Pawan Goenka, executive director M&M said, “Because of the (currency) exchange and some of the wage increases that had happened last year, right now SsangYong is in losses”.
In the quarter ended March 31, 2015, SsangYong recorded a net loss of 31.2 billion Won (Rs 178 crore). Though its Korea volumes grew by 26 per cent in the same quarter, exports plunged by 40 per cent. Exports play a pivotal role for SYMC generating more than half of its volumes. In 2014, SYMC recorded sales of 141,047 units, a fall of three per cent over the 145,649 units sold in 2013.
M&M is banking on the newly launched Tivoli SUV to spruce up sales. The company is presently selling the stylish compact SUV in China and Turkey apart from Korea but Goenka has ruled out launching the vehicle in India.
“So the focus right now is how do we get our export market back on track. How do we compensate for losing market in Russia, slowing market in China. There are efforts going on right now specific in Western Europe to bring it back,” added Parthasarathy.
After the initial excitement, SaangYong sales in India too have taken a hit. In 2014-15, M&M sold 1,010 units of the premium SUV Rexton, the only SsangYong product in India, marking a dip of 45 per cent against 1,843 units sold in 2013-14.
Despite the challenges, M&M has not slowed down its plans for SYMC. SsangYong will continue to make investments in product development and market expansion.
"Our programmes for new product have not slowed down, we are doing everything that we had planned. We had announced that Ssangyong will be investing roughly $900 million over a period of four to five years and that programme is on," added Parthasarathy.
Both companies are jointly working on a variety of projects involving development of new products, engines and transmissions that will be used in SsangYong and Mahindra products.
