M&M to lose control in Ford JV

MUMBAI, March 23: Yet another automobile project is heading for a divorce. After the initial euphoria, Mahindra & Mahindra has decided t...

MUMBAI, March 23: Yet another automobile project is heading for a divorce. After the initial euphoria, Mahindra & Mahindra has decided to reduce its role in its joint venture with Ford Motors Company (FMC) of US. The Indian company will not contribute to the equity funding of its Chennai-based 50:50 joint venture, Mahindra Ford India Ltd (MFIL), thus giving Ford to assume control over the company.

The automobile industry was abuzz from quite some time that Ford and M&M would fall out. Similar automobile joint ventures in the country met with the same fate with most of the former partner fighting in the court. Premier Auto snapped its ties with Peugeot, while Mercedes increased its stake in its local joint venture with Telco to 74 per cent. Honda also increased its stake in the Indian venture. The fate of other car makers is also jinxed.

Analysts say the poor performance of Ford’s debut model in India, the Escort, was the main reason for the partners to fall apart. According to the All India Associationof Automobiles Manufacturers (AIAM), since October last year, the sales of Escort were falling continously with few takers in the market. Same scenario has been witnssed in the market with the General Motors’s Opel Astra model.

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The Ford-M&M joint venture was earlier planned to cost around Rs 1,500 crore, when it was conceived four years ago.

Both M&M and Ford had contributed equally to the equity of Rs 270 crore in two instalments of Rs 160 crore and Rs 110 crore. Ford is expected to bring in fresh funds shortly.

According to M&M, the decision to abstain from future funding by the company was taken in view of the fact that money was being earmarked for "Project Scorpio" the code name for the new IDAM (integrated design and manufacture) product. The new vehicle will be launched by the end of 2000 and the present cost estimate for the project is around Rs 600 crore.

In a separate press release, chairman of M&M, Keshub Mahindra, stated, "Ford has given us unstinted support which shows their abidingfaith in the growing markets of India. Their systems and technology are being implemented in our plants."

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“Our partnership with Ford is an enduring one and we will continue to support each other. We have learned a great deal from them and would like to feel that through their close partnership with us, they have added to their knowledge of doing business in India. In periods of need, we will lean on each other,” he added.