M&M lets Renault take majority stake in JV: report
27 March 2010
Utility vehicle and tractor maker Mahindra & Mahindra (M&M) is likely to freeze further investments in its troubled joint venture with French automaker Renault and allow the latter to take control in the company, newspaper reports said today.
Citing unidentified people close to the development, the Economic Times newspaper said all future investments in the joint venture would be by Renault, which will dilute M&M's 51 per cent stake as investments progress.
The report goes on to say that a capping of investment by
M&M was under discussion as also equity restructuring. The two companies are to make an announcement on the future of their relationship in the first week of April, according to the report.
The two companies are also in talks on the possibility of letting Renault use part of the 50,000-unit Logan Nashik facility for the manufacture of other vehicles as only 500 cars are currently being sold every month, which leaves much of the capacity idle, the report says.
The newspaper quoted Pawan Goenka, president-automotive of the Mahindra & Mahindra group, as saying that as regards Logan, though, the options are still open.
Over the past few months, signs of problems between the JV partners have been evident with M& M recalling a number of its key employees and Renault relocating its corporate office from Mumbai to Chennai.
The French company is also in the process of setting up its own distribution network in India to handle future product launches, according to the report.
It has also started work on re-engineering the Logan and has promised to come out with a statement on the future of the troubled joint venture - Mahindra Renault Private Limited or MRPL - later this month.
Renault has plans to launch the Fluence sedan and Koleos, a cross-over vehicle combining car and SUV features in 2011.
Meanwhile, the Logan is undergoing re-engineering to cut its price and, according to sources close to the development, its length would be reduced to less than four metres to make it eligible for an excise duty of 10 per cent against the current 18 per cent, the report says.