Ford Sets Up Joint Venture With Mahindra -- Update
October 01 2019 - 9:32AM
Dow Jones News
By Patrick Thomas and Mike Colias
Ford Motor Co. said it will transfer most of its operations in
India to Mahindra & Mahindra Ltd. as part of a joint venture
with the Indian auto maker.
Mahindra, one of India's largest auto makers, will own 51% of
the venture and Ford 49%. The companies value the venture at about
$275 million.
Ford expects to book an $800 million to $900 million noncash
charge related to the establishment of the joint venture in the
third quarter, the company said in a regulatory filing Tuesday.
Ford said the joint venture will develop and build vehicles for
Ford in India and serve as an export hub. Each company will
continue to sell vehicles under their respective brands in India,
where they have a combined 14% market share, the companies
said.
The move will allow Ford to remain in a market that has growth
potential but where it is difficult to make money because pricing
pressure keeps profit margins thin. Ford said it will add scale by
gaining access to Mahindra's Indian supply base and leveraging its
expertise in low-cost engineering.
Ford Chief Executive Jim Hackett has been overhauling Ford's
overseas operations, part of a broader plan to boost overall
profitability by steering investment toward more-profitable parts
of the auto maker's business, such as its North American truck
portfolio.
In markets where Ford has struggled to turn a profit or build
sizeable market share, it has reduced its presence or exited
entirely. Last spring, Ford ended production and sales in Russia.
The company also is in the midst of selling or closing several
plants in Western Europe, narrowing its focus mostly to larger
vehicles for commercial buyers.
The moves are similar to ones rival General Motors Co. has made
over the past several years under Chief Executive Mary Barra. GM
has left Russia and several Asian markets, and ended sales in
India. It also sold its European business in 2017.
The Detroit car giants and their global rivals spent decades
building out manufacturing footprints and sales forces across the
globe to build economies of scale in a capital-intensive industry.
But many have scaled back in recent years amid pressures to invest
in burgeoning technologies like electric cars and in-vehicle
connectivity.
Ford's said its decision to remain in India through the joint
venture was based on growth expectations for the market and its
strategic importance as an export hub.
"The creation of our joint venture today places India at the
very center of Ford's strategy for international markets," Jim
Farley, Ford's president of new business, technology and strategy,
said at a press conference Tuesday.
Under Mr. Hackett's turnaround plan, Ford has been forging more
partnerships to spread costs and access technology. This year, it
forged an alliance with Volkswagen AG to co-develop commercial and
electric vehicles and to partner on autonomous cars. Ford also is
working on an electric vehicle with Rivian Automotive, a
Detroit-area electric truck startup.
Ford said it will transfer most of its operations in India,
including its personnel and assembly plants in Chennai and Sanand.
The deal is expected to close by mid-2020, the companies said.
Ford said it will retain its engine plant operations in Sanand
as well as the global business services unit, Ford Credit and Ford
Smart Mobility.
The Dearborn, Mich., company said the joint venture is the next
step in its alliance with Mahindra and said the venture is expected
to be operational by mid-2020.
Ford and Mahindra agreed to a three-year partnership in 2017 to
explore potential areas of collaboration on new technologies and
retail sales.
Write to Patrick Thomas at Patrick.Thomas@wsj.com and Mike
Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
October 01, 2019 09:17 ET (13:17 GMT)
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