Ist breakup of 2021: Ford, Mahindra end joint venture

Changes in global economic, business conditions to blame

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M&M to focus on SUVs, electric line-up

While Ford said it will continue its independent operations in India as it is, Mahindra and Mahindra (M&M) said the decision will not have any impact on its product plan but will enable it to focus on the core business of SUVs and also develop electric vehicles.

Quote: In the changed scenario, the investments would have been significantly higher than what was there when the definitive agreement was signed. Therefore, it just did not make business sense for either partner to go ahead with this JV — Pawan Goenka, md & ceo, mahindra and mahindra

New Delhi, January 1

US-based auto major Ford Motor Co and India’s Mahindra & Mahindra (M&M) on Friday said they have decided to scrap a previously announced automotive joint venture, citing changes in global economic and business conditions partly due to the coronavirus pandemic.

While Ford said it will continue its independent operations in India as it is, M&M said the decision will not have any impact on its product plan but will enable it to focus on the core business of SUVs and also develop electric vehicles.

The two companies determined they will not complete a previously announced automotive joint venture between their respective companies. The decision follows the passing of the December 31, 2020, “longstop”, or expiration, date of a definitive agreement the organisations entered into in October 2019, Ford Motor Company said.

The outcome was driven by fundamental changes in global economic and business conditions — caused, in part, by the global pandemic — over the past 15 months. Those changes influenced separate decisions by Ford and Mahindra to re-assess their respective capital allocation priorities, it added.

Ford further said its independent operations in India will continue as it is.

Ford’s plan calls for developing and delivering high-quality, high-value, connected vehicles — increasingly electric vehicles — and services that are affordable to an even broader range of customers and profitable for Ford, it added.

Addressing a video conference, M&M MD and CEO Pawan Goenka said both the companies were clear that given the current situation, this is “the most prudent decision for them to make and move on” and focus on the core business.

“This particular JV clearly got impacted by the significant upheaval that has happened in the whole world because of the pandemic,” he said.

Goenka added that all the assumptions and scenarios when we signed the definitive agreement (DA) and the current situation are different. “That’s what led to this one.” Goenka further said, “In the changed scenario, the investments would have been significantly higher than what was there when the DA was signed. Therefore, it just did not make business sense for either partner to go ahead with this JV.” M&M deputy MD and Group CFO Anish Shah said, “We had talked about investing Rs 1,400 crore of equity into the Ford JV and there would have been another Rs 1,400 crore to Rs 1,500 crore of debt. So, a total of about Rs 3,000 crore would have been investment. Now, what we are looking at today is the higher.” Shah said with the JV not being taken forward, effectively that would be the saving for M&M.