Mahindras To Cede Control Of Joint Venture To Ford

Mahindra & Mahindra, the tractor and utility vehicles giant, has decided to cede control of Mahindra Ford India to Ford Motor, its US partner and the worlds second largest company.

Managing director Anand Mahindra yesterday said in Mumbai M&M has decided to limit its investment in the joint venture at the present level of Rs 135 crore. M&Ms stake will, therefore, dip from 50 per cent to 20 per cent once all of Fords proposed investments materialise. Ford Motors stake, which amounts to 50 per cent at present, will increase correspondingly.

M&M has decided to redirect its resources to its integrated design and manufacture (IDAM) project, expected to cost at least Rs 600 crore. The entire M&M board met yesterday to approve the move.

 

As our IDAM project developed into a viable and significant one, involving an investment of around Rs 600 crore, we decided to redirect our investments to this project, said Mahindra, who was instrumental in roping Ford into the venture three years ago.

The project proposes to develop a brand new vehicle, the Scorpio, for which we have had our teams interacting with AVL of Austria for engines, design studios in the UK and US and Fuji Dyes and Tools, said M&M executive director Alan Durante.

M&M has, thus, become the latest Indian auto company to dilute its stake in a joint venture with a foreign partner. Last year, Telco allowed German partner Daimler-Benz to hike its stake in Mercedes Benz India to 76 per cent from 51 per cent. Telco now holds 24 per cent in the company.

M&Ms decision is based on the schedule of proposed investments in Mahindra Fords Maraimalainagar project, which is being set up to roll out models based on the Ford Fiesta platform.

The Maraimalainagar-based venture entails a total investment of Rs 1,975 crore. Both partners have invested Rs 135 crore each and the remaining amount was scheduled to be invested over the next few years.

However, M&M is keeping its options open on the issue and may hike its stake in Mahindra Ford to the original levels. It is also working out the modalities of cooperating with Ford on the proposed Scorpio project.

The two companies insisted they continue to be friends and partners despite the proposed change in shareholding pattern. Our partnership with Ford is an enduring one and we will continue to support each other, said Keshub Mahindra, M&M chairman.

Wayne Booker, vice-chairman, Ford Motor Company praised M&M and said it had been critical to Fords success and continues to be an outstanding partner.

Ford will be helping us with our IDAM project, and lending us engineering and component support. We are discussing possibilities of Ford exporting our Scorpio models abroad, thereby broadening the areas of our long-term alliance with Ford, Mahindra added.

Mahindra Ford managing director John Parker said, While an M&M-led team is working on the Scorpio project, a Ford-led team is likewise working on the Fiesta-based passenger car project. We could explore synergies in component sourcing and other areas and the Scorpio team will also use the Ford testing facilities abroad.