M&M-Ssangyong synergy could bring down costs: Goenka
26 August 2010
India's biggest utility vehicles maker and tractors major Mahindra & Mahindra expects to complete the acquisition of South Korean automaker Ssangyong Motor Co by December, its president (automotive and farm equipment) Pawan Goenka said on Wednesday.
Mahindra will look at sharing vehicle platforms with Ssangyong, which will be retained as a separate unit and have a South Korean chief executive, Goenka told newspersons in Mumbai. "While we will maintain a distinct identity between Mahindra & Mahindra (M&M) and SsangYong vehicles, there is a potential for sharing platforms," he added.
Mahindra earlier this week signed a memorandum of understanding to buy a majority stake in the bankrupt Ssangyong after emerging as the preferred bidder.
"Products from SsangYong will take off from where Scorpio leaves, so there is a fit for us there," Goenka said. He however added that the Ssangyong deal will not have any bearing on the development cost of a SUV code named ''W201'' that is to be positioned above the Scorpio. He said a synergy between the two companies could help in bringing down the cost of vehicle developments in future.
''Korea is one of the world's leading centres of automotive excellence and Ssangyong brings with it a rich legacy of R&D and innovation ... the synergies between both the brands, which share a similar heritage, will make us a combined force to reckon with in the global SUV space,'' M&M vice-chairman and managing director Anand Mahindra said in a media statement after signing the MoU.
Analysts pegged the takeover cost at around $500 million. Ssangyong has debts of $640 million. M&M had earlier said that it would acquire a debt-free company when it completes the acquisition of Ssangyong by this year-end. M&M has cash reserves of more than $500 million. It has a debt-equity ratio of 0.3 per cent, among the lowest in the industry.
Ssangyong is South Korea's smallest carmaker, which makes low-priced but robust SUVs. Its portfolio includes brands such as Rexton, Kyron and Actyon. It also makes sedans. The company, which struggled to stay afloat since a violent strike over job cuts disrupted production for almost 80 days last year, has been undergoing a court-led restructuring from 2009.