Mahindra completes acquisition of majority stake in SsangYong
Auto major Mahindra & Mahindra today said it has completed the acquisition of a majority stake in South Korea's SsangYong Motor Company (SMC).
With the new management taking control, SMC will invest over 240 KRW (nearly Rs 960 crore) this calendar year on product development and brand building. The firm will increase investment in product development by 70 per cent in 2011, as compared to last year, at over KRW 200 billion (over Rs 800 crore).
It will also invest over 40 billion KRW (about Rs 160 crore) for brand building in Korea -- a 60 per cent increase over 2010 -- and increase overseas brand investment by over four times in 2011.
"These investments will be funded by SMC's internal accruals. After the debt restructuring SMC's balance sheet is clean. Although it is unlikely that it will need debt for this investment, but if needed, it can raise," M&M President, Automotive and Farm Sector, Pawan Goenka told PTI from Seoul.
He said Yoo-il Lee has been appointed as the new CEO of SMC, while Dilip Sundaram from Mahindra will be the new CFO. Also a new board of directors with six members has been formed.
"There are three independent directors, along with one member from SMC and two from M&M," Goenka said.
From M&M, it will be Goenka himself and M&M Executive Director & Group CFO Bharat Doshi. The Korean firm will be represented by new SMC CEO Lee.
Asked if there will be a change of name of SMC, Goenka said: "No decision has been taken yet on the name change of the SMC and also on the branding side of products."
He said strategic plans such as the India project, which involves launching the Rexton and Korando-C in India, have already been kicked off.
Earlier, he had said that the two vehicles would be launched in India by the end of 2011.
Goenka also said discussions are on to explore opportunities for joint product and technology development and synergy in global operations and purchase.
"On the R&D front, SMC and M&M will remain independent but whenever there are possibilities of sharing platforms, it could be explored," he said.
Moreover, M&M is also reviewing utilisation if its IT systems for SsangYong, besides considering the possibility of Mahindra Finance setting up operations in Korea to enhance the sales of SsangYong vehicles.
"First, we have to understand the norms for such a venture (financing) in Korea and after understanding the market, we may decided to either go for the joint venture route or go solo," Doshi said.
For M&M, which had lost the race to acquire JLR in 2008 to homegrown rivals Tatas, the acquisition of SMC is a big step toward realising its ambition to be a global player in the utility and sports utilitiy vehicles segment.
"This is a landmark day for all of us at Mahindra as it marks the beginning of what I am sure will be an enduring partnership with SsangYong Motor Company... The synergies between the two companies in the areas of R&D, product development and platform sharing, will make the combined entity of Mahindra and SsangYong a force to reckon with in the global utility vehicle space," Goenka said.
M&M said a Synergy Council comprising senior management from both companies will be established to ensure focus and delivery of synergies between the two companies. The council will focus on various aspects such as global procurement, new car development and business strategy to penetrate international markets.
SMC had increased its sales considerably in 2010 to 81,800 units in 2010 compared to 35,300 units in 2009. The company was hit badly by the market meltdown in 2008-09 and had to undergo a court monitored restructuring and was put on the auction block.
M&M had beaten rivals, including the Kolkata-based PK Ruia Group to become the new owner of the Korean auto-maker.