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Mahindra acquires SsangYong! A step to creating an international presence?

With more than 12 different verticals from real estate to retail to defence, Mahindra has been there done that in almost every field. But at its core even today lies the automotive sector. By core I don’t really mean their success is defined only by this sector. But instead it’s seen one of their ‘best’ R & D spending over the years in developing new models. Mahindra was founded on the premise of building utility vehicles.

And today, Mahindra seems to have taken one of their biggest steps in building themselves as a global brand. They have acquired a 70% controlling stake in SsangYong, the South Korean auto maker for US $ 463 million.

Mahindra-LogoSsangyong

So what is SsangYong?

SsangYong Motor Company was a part of the SsangYong Group, a multibillion dollar conglomerate in South Korea. The group was broken apart because of the problems during the South East Asian Crisis of 1997.

SsangYong Motor Company initially became a part of Daewoo in 1998 and is now controlled by the Shanghai Automotive Industry Corporation (SAIC). The group’s product portfolio comprises of a luxury sedan, four sport utility vehicles and a multipurpose vehicle.

What does Mahindra gain from this stake?

M & M will be able to strongly utilise the strong R & D capabilities of SsangYong. The fact that they have not been very good since 2003 in developing new models because of poor management is a problem. The fact that Mahindra is planning to launch 3-5 models in the next couple of years shows that they mean BUSINESS! They aim to improve on this by improving the entire management of the organization.

One of the biggest gains for them would be the 98 countries strong dealer network of SsangYong which would help them to market M & M as well as SsangYong models in an amazing manner. SsangYong also has an edge in premium segment vehicles and this could help Mahindra to expand its profile into this particular segment.

Mahindra therefore aims to combine its strength in sourcing and marketing with SsangYong’s strong capabilities in technology.

Things looking good?

Mahindra has been performing fantastically over the last couple of quarters which has increased its liquid assets massively. Therefore it would be easily able to fund the acquisition with its internal accruals.

Even SsangYong has been making operating profits since the beginning of 2010 and has even decreased costs as well as its workforce.

This sentence in Business Standard seemed really interesting to me!

The labour union of SYMC, M&M and SYMC have also signed a tripartite agreement with provisions for employment protection, long-term investment and a commitment for no labour disputes.

Now all companies think of doing this right? Going by M & M’s reputation, I am sure they would follow this with all fairness.

One step by M & M – Another giant leap for Indian Industry!


About Aseem Rastogi

Aseem Rastogi is a keen social media enthusiast, an aspiring novelist and an avid blogger. You can follow him on  his blog or twitter.

6 comments

  1. I simply cannot tolerate Ignorance. The Tatas has completely transformed Jaguar and Landlover into profit making just years after acquisition.Saying that it is a white elephant is simply factually incorrect. Ssang yong is a well known brand just like JLR and it has huge Intellectual property portfolio just like JLR. M&M can use that IPR to create more advanced cars here in India,cause thats why these Indian companies are looking in acquiring these well known brands – easy transfer of technology and exports market.Already Jaguars are going to be manufactured in India as it will save costs and only the designing is done in UK.If thats not going to make business sense then what else will.

  2. I still feel that in near term, Ssang Yong will be a white elephant for Mahindras just like Tatas were obsessed with Jaguar. Mahindra in order to utilize the Ssang Yong’s presence in 98 countries has to do the same. 1) Mahindra guarantee all the dealers that it stands guarantee for all the previously sold Ssang Yong vehicles. This will bring immediate OEM business to Mahindra. 2) Mahindra has to aggressively push the dealers who are sleeping till now as Ssang Yong came to a halt all these years and push both Mahindra and Ssang Yong vehicles. This will give Ssang Yong Korean employees the confidence of business, Initially Mahindra may make loss on SsangYong business but in the long run it may be good exposure in 98 countries. But overall I still think this is a White Elephant just like Jaguar to Tata Motors, Corus to Tata Steel and Novelis to Hindalco.

    • Jaguar and Corus is making money for the Tatas and so is Novelis. It has taken Tata and Hindalco both to an altogether new level. Ssang Yong has a few good models of SUVs and am sure they will do well in India too. The company has been lacking fresh funds and M&M’s infusion of funds should do a world of good to them.

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