Ssangyong buy set to fuel M&Ms global SUV drive

Written by Ronojoy Banerjee | Ronojoy Banerjee | New Delhi | Updated: Aug 13 2010, 15:09pm hrs
With Mahindra & Mahindra (M&M) all set to add the beleaguered auto maker Ssangyong Motors to its long list of acquisitions, the utility major is getting closer to the realisation of its dream to become a global SUV player.

With direct access to markets in China, Russia, Western Europe and Korea through Ssangyong's network, M&M is well placed to push its brand across geographies, say analysts. M&M will now have access to Ssangyong's technology which it would look to use in its own products. Apart from that M&M will have easy market access to many countries where it is not present, said Surjit Arora, an auto analyst with Mumbai-based brokerage firm, Prabhudas Lilladher.

Arora added that M&M would take at least 18 months to turn around the Korean company. Ssangyong's market share in Korea is around only 2% and the company does not have the capacity to scale up production. For this purpose M&M would have to invest substantially, he said. M&M said on Thursday that it would be pumping in money in the companys product portfolio and added that Ssangyong would continue operating as an independent entity with Korean management. The company also said that the bid money would be used to settle Ssangyomg's debt position.

Though neither Ssangyong nor M&M shared the approximate deal size with the investors on Thursday, Arora said a penny more than $500 million would be like paying too much for too little. After losing out to its rivals Tata Motors in 2008 in the race to acquire the iconic British car maker Jaguar Land Rover from Ford Motor Company, M&M has acquired a slew of automotive companies from two-wheelers to passenger cars.

The Mahindras are working on a strategy to become an end-to-end automotive player. They want to be present across verticals without shifting focus from its utility vehicle business, an industry source privy to M&M's plans told FE on conditions of anonymity. The source said that what makes M&M tick is that it keeps its cards close to the chest without coming across as being too desperate.

M&M has never shown desperation when it comes to buying out a company. They are very conservative when it comes to pricing...they know exactly how much they are willing to fish out for a pie, the source added.

M&Ms strategy has always been very clear, which is that the core of the automotive business was, is and will remain the utility vehicles, Pawan Goenka president (automotive and farm equipment sector) M&M told FE in a recent interview.