The ongoing global pandemic has been particularly hard for the economy. Small businesses are shutting down and big organizations are taking downsizing measures to keep afloat. Where some new partnerships are being formed, some are coming apart too. The Mahindra and Ssangyong partnership is a case like the latter.
Mahindra & Mahindra plans to give up control of struggling South Korean unit SsangYong Motor, the Indian automaker’s managing director said on Friday, as it looks to exit loss-making ventures amid the coronavirus pandemic. “SsangYong needs a new investor. We are working with the company to see if we can secure investment,” Pawan Goenka told reporters.
Why is it happening?
Mahindra earlier reported a consolidated net loss of 19.55 billion rupees ($258 million), compared with a net profit a year ago, as it booked a write-down on its investment in SsangYong and other international units. Mahindra, which owns a 75% stake in SsangYong, rescued the sport-utility vehicle (SUV) maker from near-insolvency in 2010 but has struggled to revive its fortunes. The company said in April it would not invest further in SsangYong.
“If a new investor comes on board, that automatically takes our stake down, or they may even buy our stake,” Mahindra’s deputy managing director, Anish Shah said. As part of a wider restructuring effort by the company to cut costs and prioritize capital expenditure as it rides out the coronavirus pandemic, Mahindra would review all its loss-making businesses over the next 12 months, Shah said.
Where there is no clear path to profitability, it would look for a partnership or close down those businesses, but in those that can clearly generate equity returns of 18% or those that are of strategic importance, Mahindra would continue to invest, Shah said. Mahindra, which entered into a joint venture with US automaker Ford Motor last year, said the pandemic had delayed the completion of merger formalities between the two companies but they continued to work together under the new alliance. We still have to see what Ford and Mahindra will pull off together but with Ssangyong, Mahindra has had a decent run.
They brought the Korean company to India and facilitated the launch of Ssangyong Rexton which went on to compete with established players like Ford Endeavour and Toyota Fortuner. It was a considerable option in its segment but was nowhere as successful as the other two giants. Eventually, Mahindra pulled the plug on it. But this was not the end because Mahindra later launched the Alturas G4 under its own brand name.
Mahindra & Mahindra is also shutting down its GenZe electric scooter subsidiary in the United States. Even as it shuts down GenZe, the company is not looking to exit the US market completely, where it also sells farm equipment and the Roxor SUV.