Mahindra & Mahindra and Ford Motor Company are likely to sign a deal next week to form a joint venture in India, according to sources. The move will make the US automobile company end most of its independent ventures in the country. For months, the two companies have been structuring the deal to create a new organization in which Ford will hold a 49% stake, while Indian rival Mahindra will own 51%, according to a news agency report.
Under the deal, Ford will transfer most of its automotive assets and employees in India to the new company, but the car manufacturer will retain an engine plant in Sanand in the state of Gujarat, according to the sources. A Ford spokeswoman refused to comment directly on the deal but said the company was engaged with Mahindra 'to develop avenues of strategic cooperation that help us achieve commercial, manufacturing and business efficiencies'.
By shifting to a joint venture, Ford is changing its decades-old strategy focused on running an independent operation in India. Mahindra has not responded on the developments. Under pressure from the shareholders to make profits, Ford has been globally restructuring its business with an aim to save $11 billion over the next few years.
Ford was one of the first automobile companies to enter India when it liberalised the economy in the early 1990s. Ford first entered India in 1926 but shut down that operation in the 1950s. Back in 2012, Ford had aimed to make the South Asian nation one of its three largest markets by 2020. Most global carmakers have failed to win over buyers in the notoriously price-conscious market led by Suzuki’s local unit, Maruti Suzuki India Ltd., with its strong network of dealers and ubiquitous repair shops. Ford and Mahindra are jointly developing a mid-sized sport-utility vehicle for India. Mahindra shares fell as much as 4.3% to ₹535 at the BSE on Wednesday.