M&M has said it would use its purchase of Ssangyong Motor to become a global player in the SUV market. Pawan Goenka, president of Mahindra’s automotive and farm sector, said the merger would help both companies expand in the global market.
He said, “We believe that Ssangyong and Mahindra make powerful companies to create a global SUV brand.” Ssangyong, South Korea’s smallest car maker is mainly a manufacturer of low-priced but robust SUVs such as Rexton, Kyron and Actyon that sell globally. It also makes sedans.
It was granted court protection from creditors in February 2009 after the global crisis hit SUV sales and former Chinese parent Shanghai Automotive Industry Corp declined to inject more funds. The violent strike over job cuts too disrupted production for almost 80 days last year. The Indian firm will keep Ssangyong’s current management after the acquisition and provide financial stability, said Goenka.
“We need to bring Ssangyong back to its glory. We believe it’s a very strong brand,” he said, adding M&M would bring in more people in R&D. He declined to reveal the takeover cost, which analysts say will be more than 500 billion won (423.3 million dollars), or the size of the stake Mahindra will buy.
M&M’s vice chairman and managing director, Anand Mahindra, said his company had cash reserves of more than 500 million dollars. “We intend to be here as a long-term player, so we are not looking to talk to any financiers for the purpose of financing this acquisition,” he said. The Indian firm’s debt-to-equity ratio stands at 0.3 percent, one of the lowest in the industry, he said. It plans to launch some of Ssangyong’s signature models to India.
“Ssangyong Motor will have a good chance in India, where demand for sport utility vehicles is fast rising,” said Anand Mahindra. Due diligence for the deal is expected to begin in September. An M&M executive said earlier this month that a definitive agreement was expected in November.