In a big development, Mahindra & Mahindra and Ford Motor Company have called off their joint venture. Way back in October 2019, the two automakers had signed an agreement. As per the now-defunct JV, the two companies were to develop and sell cars in the Indian market. Furthermore, the definitive agreement signed between both the organizations in 2019 expired on December 31, 2020.
Talking about the agreement, the joint venture was designed to develop, market, and distribute Ford models in the Indian market. In the JV, Mahindra was to hold a 51 percent stake while Ford would own the remaining 49 percent stage. Also, Ford would transfer Indian operations to the JV. It would include workforce and manufacturing units in Sanand and Chennai. The American automaker would retain the engine plant operations, Global Business Services unit, Ford Credit, and Ford Smart Mobility. The JV cancellation comes in the wake of the economic downturn caused by the COVID-19 outbreak. Ford will continue to look at new opportunities and synergies if it’s economically feasible.
The planned joint venture was conceived to expand Ford’s presence in the lucrative Indian market as well as export products globally. The move to pursue mergers or alliances in the automotive industry is something that many manufacturers are looking at as cost reduction. France's PSA and Fiat Chrysler Automobiles NV are expected to close the proposed $38 billion mergers in the first quarter of 2021.
As per the statement released by Ford, it said: “actively evaluating its businesses around the world, including in India, making choices and allocating capital in ways that advance Ford’s plan to achieve an 8% company adjusted EBIT margin and generate consistently strong adjusted free cash flow.”. As per the manufacturer, the decision to call off the JV won’t affect the proposed launch of the upcoming Ford’s mid-size SUV (W605 codenamed). It was based on the new-gen Mahindra XUV500. Also, the Indian automaker was to supply the new 1.2-litre T-GDi turbo petrol engine to power the Ford EcoSport soon. All these projects are part of an agreement signed before the dissolved JV.
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