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October 01, 2019 08:48 AM

Ford to create $275 million JV in India with Mahindra

Michael Martinez
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    DETROIT -- Ford on Tuesday said it would form a joint venture valued at $275 million with Mahindra & Mahindra Ltd. for its struggling business in India.

    Mahindra will own a 51 percent controlling stake and Ford will own a 49 percent stake, the two companies said Tuesday. Ford will transfer its India operations to the joint venture, including its personnel and assembly plants in Chennai and Sanand, according to a press release. Ford will retain the Ford engine plant operations in Sanand as well as the Global Business Services unit, Ford Credit and Ford Smart Mobility, the automaker said.

    Mahindra said the joint venture would have a combined 14 percent market share, up from Ford's market share of less than 3 percent.

    Bloomberg first reported the JV plans last week.

    “Mahindra and Ford coming together is a testament to the long history of cooperation and mutual respect between the two companies," Anand Mahindra, chairman of Mahindra Group, said in a statement. "Our combined strengths -- Mahindra’s expertise in value-focused engineering and its successful operating model, and Ford’s technical expertise, global reach and access to future technology -- are a potent recipe for success. At its core, the partnership will be driven by the shared values of both companies, which are focused on caring for our customers, associates and our communities." 

    As part of the deal, the two companies will develop three Ford-branded crossover vehicles, including a new midsize SUV that will have a common Mahindra product platform and powertrain, the company said. They also said they would collaborate on an electric vehicle, using a Ford platform and Mahindra electric powertrain.

    Mahindra said there will be no joint branding; each vehicle will either have a Ford or Mahindra badge. Each company will continue to sell its branded vehicles through its own dealer network in India, although they said Tuesday that Mahindra will use Ford’s global distribution network to expand its export efforts.

    "Rather than this being a parting, this is like two old friends deciding it makes sense to move into a new house together to pool our talents and share the benefits,” Mahindra said. “I believe this joint venture between two entities who’ve long been working together will turn out to be a testament to friendship and collaboration.”

    Bill Ford, Ford's executive chairman, called the link-up a "perfect win-win."

    The automaker is no stranger to partnerships, thanks to CEO Jim Hackett’s goal of improving Ford’s “operational fitness” around the globe.  It announced a global alliance earlier this year with Volkswagen Group to share costs and develop vehicles together. 

    Although it was one of the first global automakers to enter the country in 1995, Ford has struggled to gain traction in India. However, Hackett said India remained a “tremendous opportunity” and the creation of the joint venture did not represent a retreat.

    “I think we probably made some errors in thinking about what was a North American business model and sticking it in India,” he said. “That was probably not the way, in retrospect, we would have done it. It doesn’t mean at all we want to retreat. We design these businesses to be so fit that they can compete and win. It’s about winning in a bigger way.”

    He suggested the Mahindra deal could serve as a template for additional deals. 

    “We have other emerging markets where we need to apply the same understanding,” he said.

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