25.1 C
New Delhi
Friday, March 29, 2024
HomeAutoMahindra & Mahindra-SsangYong alliance comes to an end

Mahindra & Mahindra-SsangYong alliance comes to an end



The leadership team at Mahindra & Mahindra had reiterated that the SsangYong acquisition presented a good opportunity for the Indian company to go global.


It’s finally over for Mahindra & Mahindra and SsangYong Motor. With the Korean SUV maker now in the hands of a consortium led by Edison Motors, its 10-year innings with its Indian owner has officially come to an end.

M&M had already made it known a couple of years ago that it would cap investments in SsangYong since there was little coming by way of any return. While losses were piling up, sales were nothing to write home about. The only way out was to find a suitor and exit, which is precisely what has happened now with Edison Motors.

Mahindra & Mahindra-SsangYong: A special alliance

From M&M’s point of view, the future is now about focusing on its core strengths of SUVs which, ironically, was the reason why it chose to call it a day with Ford over two decades ago. This was the time it made the important decision of focusing on Project Scorpio instead of pumping in money into a joint venture where it had little to contribute in the car space.

Scorpio, of course, turned out to be a resounding success story and a bolder M&M emerged in the process, which was now keen on spreading its wings into the mobility space. It threw its hat into a host of new areas, like two-wheelers (buying out Kinetic’s business), trucks (through an alliance with Navistar of the US) and a comeback in cars by way of a joint venture with Renault to manufacture the Logan.

Yet, SsangYong was special because it marked an extension of its core business of SUVs and the fact that this was following a buyout of a global company made it even more attractive. Tata Motors had already done this twice with Daewoo Commercial Vehicles and a more glamorous buyout of Jaguar Land Rover from Ford.

Both Tata Motors and M&M represented legacy Indian companies which had braved the MNC onslaught and still managed to carve a niche for themselves – the former with its Indica and the latter with the Scorpio. This was happening at a time when two other Indian brands, Hindustan Motors and Premier Automobiles, had been relegated to the sidelines. There were, hence, a lot of hopes when M&M announced its acquisition of SsangYong way back in 2010-’11.

The company was clearly on a roll and upbeat about the prospects with its new Korean acquisition which had been through its share of upheavals with previous owners like Daewoo and China’s SAIC Motor Corp. It was admittedly a small player in South Korea compared to giants like Hyundai and Kia, but this reality did not deter M&M which was hopeful of creating new synergies and helping the brand grow.

Mahindra & Mahindra-SsangYong: Focus on strategy, financial viability

The leadership team had reiterated then that SsangYong presented a good opportunity for the Indian company to go global, though there was a lot of work that needed to be done. There would be special focus on issues relating to strategy, long-term financial viability and major HR initiatives. Another top priority for M&M after the buyout was to attract more talent into SsangYong and “create a whole lot of excitement”.

Some key people had quit the Korean company when it was going through a rough patch prior to the acquisition. Yet, M&M was confident that skills needed for the future were not in short supply in the market and drawing people back to SsangYong could be done with the right focus and direction. This confidence stemmed from the fact that there was “no basic damage” to the brand, or that it had become weak due to a host of factors.

This writer had visited Seoul in 2015 for the launch of the Tivoli which was expected to give SsangYong Motor the scale in markets like Western Europe and hopefully make it a strong entity. At that point in time, the leadership at M&M said that seeing the product take shape was like watching a baby grow.

There was also tremendous respect for the SsangYong team’s efficient timetable for the Tivoli given that the launch date of mid-January 2015 had been set way back in November 2011 when work on the project started. It was this level of Korean discipline and commitment which had been a phenomenal learning experience for M&M.

For a company that was literally in the wilderness for many years, the kind of information SsangYong had on product planning was truly mind-boggling to its Indian ally. “It is amazing how much it [SsangYong] has in its armour and the logic in its product planning impresses me a lot,” a senior member of the leadership team had commented.

Mahindra & Mahindra-SsangYong: Common sourcing

This conversation was happening four years into the buyout when the partnership was working well with each of the companies exercising the flexibility to adopt the other’s practice so long as it made business sense. SsangYong’s information technology system in Korea, for instance, was a replication of M&M’s and this was true for its human resource management model too. The Indian owner, in its turn, had a lot to learn from its Korean ally in the product planning process.

M&M also had expatriates for some key functions which helped immensely in cross-learning and adopting good practices. “The biggest sense of close working is in purchase because it is a clear win-win where we combine the lessons of India and Korea and reduce costs for both companies,” the senior executive had said.

This was thanks to common sourcing where in the Tivoli, for instance, the engine was taken out of the platform put in place for M&M. Nearly 30 percent of sourcing was common for the two engines leading to significant cost benefits. “We have kept the two companies independent and whatever we do is on a commercial basis,” he had reiterated.

Mahindra & Mahindra-SsangYong: Plans for India

The intent to create a strong SsangYong brand in India was in place, but this would have needed good numbers to make it a viable proposition. Further, the fact also remained that it was not a strong Korean entity unlike Hyundai, which had already established itself as the strongest challenger to Maruti Suzuki. (And Kia, of late, which has surged ahead of established players from the West despite being a late entrant to India.)

“What our association will bring to SsangYong is customer confidence and what we get from them is Korean quality and value,” the senior executive had said. When M&M subsequently decided to join hands with Ford all over again for a joint venture with a new list of priorities, SsangYong was also being considered as part of the product synergies planned then.

“The benefit between M&M and Ford is that they are serving almost identical markets whereas Korea is very different from India,” said the same executive mentioned earlier. Yet, the possibility of SsangYong joining M&M-Ford in terms of product synergy and platform commonalisation was “very much on the cards”.

Additionally, the thinking then was that SsangYong could have a product that Ford might have found interesting for its markets. “SsangYong is also in a similar situation as M&M in the sense that it has five or six very good products, but does not have a very strong brand and network outside Korea,” added the executive.

This would have paved the way for a whole lot of new permutations and combinations as in a SsangYong product being retailed under the Ford name and network if such an opportunity were to arise. Of course, M&M and Ford decided to shelve their joint venture (an announcement made on the New Year of 2021) owing largely to business priorities changing due to the pandemic and the imperatives of keeping costs in check.

Mahindra & Mahindra-SsangYong: No longer financially sustainable

Prior to this happening, M&M and SsangYong were still closely involved in a host of new initiatives even as the script was going awry and losses began piling up with no solution in sight. The Covid-19 outbreak did little to improve issues and M&M finally made it known in early 2020 that it would no longer be sustainable to hang on to SsangYong. With the Ford divorce also imminent, the company had clearly made known that it would now be focusing on a strong balance sheet and business expansions could wait for now.

Former managing director of M&M Pawan Goenka played a big role through the SsangYong alliance, spearheading a series of initiatives. In an interview with our sister publication Autocar Professional last year, just prior to his retirement, Goenka had said: “I have no doubt that SsangYong was a right decision even after seeing what has happened. The XUV300 is a successful product that came under a licence from SsangYong. The Alturas is another example and more would have followed had we continued.”

In his view, there was a lot of technology development done together… it was not a one-way street and there was a lot Mahindra could do as well as SsangYong. “Unfortunately, too many things did not work right at the same time. If I had to do it all over again, I would still do it,” he emphasised.

Undoubtedly, the financial performance was not up to expectations in recent years, but “lots of things were taken care of” during this time. “I take pride in the fact that Mahindra was able to make SsangYong strong enough to hire back people who were laid off before we came in,” said Goenka. He was also candid enough to admit that the fact SsangYong did not succeed would count as the biggest regret in his career at M&M.

“It was very unfortunate and would have meant a lot to India since a company here rescued a Korean company. Till the time we decided to exit SsangYong, Mahindra was highly respected for what we did. As a result, Indian management was highly respected too,” said Goenka.

More importantly, this was a two-way learning process where the partners complemented each other in skills.

There were many joint projects and a lot of competencies were built along the way. It was just unfortunate that things didn’t quite go according to plan and the M&M of today is clear about staying in those businesses where it makes economic sense. What the future holds for SsangYong in its new ownership structure will become clearer in the coming years. 

What are your thoughts on Mahindra letting go of Ssangyong after a partnership of 10 years? Let us know in the comments below.

Also See: 

Mahindra XUV700, Thar, Scorpio prices hiked by up to Rs 81,000 this month





Source link

- Advertisment -

YOU MAY ALSO LIKE..

Our Archieves