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M&M inks SsangYong deal; buys 70% for $463 m

It was literally a big-bang event for Mahindra & Mahindra in Seoul on Tuesday. M&M said it would pay $463 million (around Rs 2,100 crore) for a 70 per cent stake in SsangYong.

Of this, $378 million would be in new stock and the balance $85 million in corporate bonds. After completing all the acquisition procedures and repayment of claims, the corporate rehabilitation process is likely to be finalised by March 2011.

“The coming together of M&M and SsangYong will result in a global UV (utility vehicle) player. With its financial capability, M&M offers competence in sourcing and marketing while SsangYong has strong capabilities in technology,” Dr Pawan Goenka, President of M&M's Automotive and Farm Equipment Sectors, said in a release.

He added that the companies would be committed to leveraging their combined synergies by investing in a new SsangYong product portfolio to gain momentum in global markets.

“There is also an opportunity to introduce a premium portfolio of SUVs (sports utility vehicles) in the Indian market, providing a new growth avenue for SsangYong and further strengthen our position in the UV segment,” Dr Goenka said.

To retain brand

Even though it is in the hands of a new owner, the Korean company will retain its brand in global markets. In a recent interview with Business Line, Dr Goenka reiterated there was no basic damage to the brand and that it had become weak owing to a host of reasons. “It is not difficult for us to bring it back on track,” he had said.

Also, according to the release today, SsangYong will continue to be an independent entity. M&M is expected to largely rely on a primarily Korean management for its daily operations. Dr Goenka had indicated earlier there would be ‘constant interactions' with teams from India who would work with SsangYong to leverage the new ownership structure.

From M&M's point of view, the top priority would be to address the cultural issue. Some years ago, Tata Motors had experienced a similar situation, again in Korea, when it had acquired Daewoo Commercial Vehicles. Dr Goenka had said the most important task on hand was to try and work together and “address sensitivities of employees of the acquired entity to the new owner”.

M&M will also pay careful attention to the issues of skills and human resource. In the recent past, some key employees had quit SsangYong when things got difficult and the future looked bleak. The comforting factor, according to Dr Goenka, is that the skills needed for the future are not in short supply in the market. Hence, drawing people back to SsangYong could be done “with the right focus and direction”.

The M&M top management also had meetings with the union and senior officials who were convinced of its commitment.

Source: Business Line

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