[nmenon]

Originally Posted by GTO

With the XUV500, Mahindra has already proven that it knows how to build a good premium SUV.

GTO sir, I whole heartedly agree that the XUV 500 is without doubt an excellent and capable vehicle.

All I meant was that Mahindra could always get a bit more expertise and know how to go and make a really world class product that would be accepted anywhere in the world as a top shelf product.

With all due respect, I think they are yet to build themselves and international reputation beyond their usual strengths of Value for Money and Robustness.

If I am misinformed regarding Mahindra's international reputation, my apologies at the outset.

[Captain Haddock]

Good thread. Mitsubishi is almost down and out in the Indian market. But in the past they created industry benchmarks.

Lancer's old diesel mill is the absolute benchmark in terms of reliability. Introduced in the late 90s this car is still going and has earned people's trust. It was the most reliable diesel and even today cars with 3 lakhs Kilometres can be found. The quality of the engine took the game to a new level. In Kerala it's a very trusted engine along with Toyota's engines.

Pajero is the best SUV in it's segment if luxury and off roading ability are considered together.

Having said that later updated like Cedia, outlander failed to click.

Mitsubishi is quite strong in it's engineering. If it brings relevant models to the Indian market then they can turn the tables. The logo of three diamonds is still trusted by Indians.

I think sooner or later they will improve their market share by bringing better models.

[shortbread]

Originally Posted by GTO

Agreed 100% with Doge. Mitsubishi is too weak and has nothing to offer to Tata or Mahindra. They keep discontinuing product lines because they have no money to develop new ones. Heck, the Montero is now 20 years old!

I completely disagree GTO. I fully understand your standing on the Mitsubishi brand, but I look at it differently.

I am not talking about taking over Mitsubishi because its a very strong car maker, but I am saying so because it has a LOT of potential. The same way Skoda was to VW or Chrysler to Fiat.

1) Mitsubishi is a global brand and has an established service and sales network. It will take Tata and Mahindra decades to reach the same stature and reach.

2) Tata needs a mid priced brand to compliment its existing line up and Mahindra needs a global brand period, SsangYong is simply too weak. Imagine the potential of a Xenon that is well built and competitively priced when badged a Mitsubishi, it is HUGE!! Even selling 20k of the same globally can change the fortunes of either company. The same product at the same price will never sell as much when called a Tata or Mahindra, and with nowhere near the same profit margins.

eg. Great Wall sells a good quality, very competitively priced pick up called the Steed in the UK. I think they have been doing it for 5 odd years now. Common sense would mean its a better buy than a low spec'd L200 or Navara. But no one really wants them, simply because they do not know the Brand.

3) Mitsubishi might have a poor line up but they have very strong brands. Lancer, Galant, Colt, Pajero, Evo.....they are all strong brands simply lacking a good product. The moment the two combine they will sell. Imagine what simply an Evo brand can be turned into....Sports saloons, coupes, lifestyle SUVs etc...etc..

Originally Posted by GTO

Tata is very, very proud of its name. There is no way they'll rebrand a Bolt or Zest as a Mitsubishi. Not like Mitsubishi has any real brand value in the mass market either.

Tata is very proud of its name but this is a business at the end of the day. Indicas used to be rebadged and sold as Rovers. There were discussions to rebadge Xenons as Fiats before the Italians decided to go at it on their own.

I sat in the Mitsubishi hatchback Mirage recently. Its such a plain and overpriced car. Imagine if a well spec'd Bolt or Tiago that cost 15-20% cheaper than the Mirage!! They would sell well in almost all markets Mitsubishi were present in.

The cost in marketing the models in Western markets and creating the sales/service network under their own brands will be huge for Tata and Mahindra. Break even would not happen in the near future and the financial risks are big. Even before all this understanding the regulations, tax/duty structure, homogolating their cars for each markets, all these are very challenging for new entrants.

Originally Posted by GTO

EV technology can be bought; why buy an entire company for that? Also, EVs are no longer rocket science. Mahindra has its own EV division (E2O anybody?).

It can be but it is not easy or cheap. Secondly mass manufacturing electric cars/hybrids is not as simple as we think it is. While nowhere near the league of the Prius, the Outlander PHEV is a very successful hybrid (sell more than 40k globally).

How expensive will it be for Tata or Mahindra to develop their own mainstream electric or hybrid car (please not the E20, its not classified as a car in many markets let alone mainstream). Once they spend all this money how will they recover it. How many Indians will buy a 20+ lakh Hybrid XUV500, that Mahindra would have spent millions to develop.

Originally Posted by GTO

With the XUV500, Mahindra has already proven that it knows how to build a good premium SUV.

Mahindra and Tata can design and develop any type of car they want, absolutely ANY. They have the expertise and if not, skills can be easily bought.

My point is can they sell it?! Especially in developed markets under their own brand.

It took VW a decade to turn Skoda into a considerable global carmaker. With all the financial resources, readily available platforms, cost savings, market reach, a DECADE!!

Originally Posted by GTO

Mitsubishi might be there in the USA, but their position is awful. They sell less than 10,000 cars a month in the largest market of the world, and most people buying a Mitsubishi do so because of discounts or bad credit -

I agree completely, Mitsubishi is not a very successful brand in the US, but atleast it is present in the market. Even Suzuki failed at this.

Mahindra tried very hard to enter the market with the Scorpio pick up. Years they were at it, to no avail. I have no idea at the money they threw into that attempt.

Mitsubishi's struggles are because of a poor model line up, This can be fixed with investments. Money is where Mitsubishi struggles. Tata and Mahindra struggle with local expertise and poor brand recall. The chances of an American buying a Mitsubishi might be low, but the chances of him buying a Tata or Mahindra is almost zilch.

Originally Posted by GTO

Mahindra is in the business of making & selling its own cars, not merely selling someone else's cars (Rexton doesn't apply as they own SsangYong). Also, why would they sell an SUV that potential customers of the XUV500 might be tempted to upgrade to in the same showroom?

Good question as to Why?!

If the Outlander Sport (smaller variant) which is more expensive and nowhere near as great value as a XUV500 sold nearly 40k cars in America alone. Now if the Mahindra XUV500 sold cheaper than the Outlander Sport, how many will Mahindra sell. 30k, 20k even 10k?! Now imagine if it was rebranded Mitsubishi Outlander Plus or something, sold at an attractive price, as I mentioned before the potential is HUGE!!

Mitsubishi is not an instant money maker for Tata or Mahindra, but it can be turned into one. Far easier and potentially at a much lower cost than turning their own brands into globally relevant car manufacturers.

[Captain Haddock]

Originally Posted by shortbread

Mahindra and Tata can design and develop any type of car they want, absolutely ANY. They have the expertise and if not, skills can be easily bought.

My point is can they sell it?! Especially in developed markets under their own brand.

The chances of an American buying a Mitsubishi might be low, but the chances of him buying a Tata or Mahindra is almost zilch.

Brilliant market analysis. It is true that TATA and Mahindra can benefit from owning the Mitsubishi brand in terms of marketing their products overseas.

But the engineering superiority enjoyed by Mitsubishi cannot be ignored. Mahindra and Tata are on a learning curve. They cannot design, built high end cars on their own from scratch. Tata's estate was heavily inspired by Benz's estate, Mahindra created Scorpio after heavy out sourcing.

Tata owning Jaguar & LandRover only gives them access to high end technology but it takes time for them to assimilate that into Tata motors, till then they will remain separate entities.

XUV is a great product but can Mahindra's production lines ensure the same consistency as that of Mitsubishi's ?

Mitsubishi when it manufactured lower end cars like Lancer and Cedia, they had far better quality control than Tata & Mahindra.

Mitsubishi's experience in manufacturing high end cars is absolutely several notches above Tata & M&M's.

I think if Mitsubishi is bought, which is hypothetical then the engineering part would be the ace up the sleeve rather than just rebadging.

[anjan_c2007]

Yes, its true that Mitsubishi is sinking and acquisition by cash rich companies on the prowl cannot be ruled out. Corporate predators with gameplans may already be flexing their muscles around the world.

Like Late Mr R.P. Goenka, the patriarch of the RPG empire, hardly built any industry from the land and foundation upwards. The RPG Group always bought sick and ailing companies with brand equity, nursed them, revived them and made their fortunes. HMV was sinking due to piracy of recorded music with companies like T series and illegal music cassettes having a field day and the RPG group bought HMV, revived it and has made a fortune. Dunlop India was bought by RPG from its British management as an ailing company that was well revived, but later predator and liquor king Mr Manu Chabbria spoiled the RPG gameplan having bought a majority stake, mismanaging the company, leading it into losses and then abandoning it soon after.

Purchase of Japanese company shares/ equity stakes are guided by their protective domestic corporate laws, but not so tough to acquire. Renault has bought into Nissan Motors, when the latter was making losses. GM has shares of Suzuki Motor Corporation that helped it get our "Esteem's" Japanese hatch and market it as the Geo Metro in the US.

I am not able to comment as to whether Mahindra or Tata will make moves to acquire stakes in Mitsubishi Motors as their priorities are very focused and wherever there is a vacuum in any sphere of their business they make predatory moves. Mahindra acquiring a majority stake in Pininfarina, Italy was to get a stronghold in their own hitherto weak design faculties. Their acquisition of a majority stake in Peugeot's two wheeler business was to strengthen their own two wheeler company, that's going nowhere despite the "O's" in the Gusto, Mojo, Rodeo, Duro and so on.

About Tata, there are doubts as they are already under fire with their once very profit making, British steel business. Licking their major wounds, they may not venture so quickly into another acquisition. With JLR doing so well under their umbrella, they are much better off and hardly may bother to bring in a weak global brand into their fold.

[IshaanIan]

Originally Posted by GTO

Mitsubishi is too weak and has nothing to offer to Tata or Mahindra.

I agree that the company is not doing very lucratively in the market as of now, and just because they have discontinued the Evo line that us enthusiasts worship, does not mean that they have no expertise to offer. Their electric hybrid research is far ahead of anything Mahindra can concort as of now and their reliability and S-AWC system is at the top of the game even today. There is a very good reason why Pajeros hold their value exceptionally well considering the company's unsavory position in India.

That said, like other members have pointed out, buying controlling stake in a Japanese company is extremely far-fetched. Heck even the giant VW could not hold on to a 20% stake in a relatively small family-run Japanese company; Suzuki. So I'd say the chances of Mahindra or Tata getting their hands on majority shares in Mitsubishi, are non-existent.

[Hells Bells]

Cyrus Mistry is very clear that the growth lies in India, irrespective of how JLR has delivered. Hence, a lot of his decisions (including but not restricted to Corus sell off) are to shed foreign assets and focus inwards on India business. The uncertainty around steel prices makes it even more tough to manage a global production base. I think Tata will like to hunker down and consolidate gains on the current TM launches before it looks to expand it's brand portfolio.

[LordSharan]

Off topic:

Originally Posted by manoj_joseph78

Tata group is still reeling from the Corus acquisition. Not sure if they can add more debt to the pile.

I'm currently a student and I think I've done enough research on Tata-Corus Deal (Because my Profs love Tatas). To clarify this, Tata as a business house, has separate entities like TCS, Tata Steel, Tata Motors etc. held by Tata Sons. The transfer of wealth or liabilities (for the lack of better words) does not happen between two entities naturally. If it would have, TCS's profits would have long ago rescued Tata Steel from its woes. Additionally, Steel market is globally facing a down turn, with China flooding the market with cheap steel. Over which Tata has little control and they could not have possibly foreseen this at the time of Corus acquisition.

So in essence, Tata Corus Deal debt has nothing to do with any acquisitions that Tata Motors may do in future. Also, if I'm not wrong, the various entities are listed separately on stock exchanges and would have their own credit ratings. This shows their debt capacity would be independent of each other's fortunes and solely dependent on their own organization.

Additionally, Tata Corus deal was structured in such a way that a different company holds Corus Steel Plc.



Here's a slide from the presentation I made, on the holding structure. So the debt Tata's took for taking over Corus, is essentially on books of Corus, guaranteed by the assets and collateral from Corus, which is held by a different firm. Now, Tata just has to sell of Corus to get rid of the debt. and this process has already initiated.

It was a very interesting deal, wherein Tata took over a firm which was a lot larger than Tata itself, and only few such deals have happened in Merger & Acquisition history. I'll be more than happy to explain further if people are interested.

[cbatrody]

It doesn’t look like they are doing badly if you look at their “Full Year Fiscal 2015 Operating Results”, announced on the 27th of April for the year ending 31st Mar 2016.
There seems to be an extraordinary loss in its non-consolidated financial results due to terminating the production in the US. Also, they have kept the “full-year FY2016 (April 1, 2016 through March 31, 2017)” forecast on hold as they are in the process of assessing the ‘Mileage Scandal’ impact on their sales.

• Sales in North America has gone up by 16% vs FY 2014
• The Middle East & African Markets have grown by 17.75%
• YoY total sales in down by -4%

Press Release:

Tokyo, April 27, 2016

Mitsubishi Motors Corporation Announces Full-year Fiscal 2015 Operating Results


Tokyo, April 27, 2016 - Mitsubishi Motors Corporation (MMC) today announced its sales and financial results for the full 2015 fiscal year (FY2015) ending March 31, 2016.

1. Full-year fiscal 2015 operating results

1. Performance overview

MMC posted consolidated net sales of 2,267.8 billion yen over the full term of FY2015 (April 1, 2015 through March 31, 2016), a 4% or 87.1 billion yen increase over the same period last fiscal year.

MMC posted an operating income of 138.4 billion yen, a 2% or 2.5 billion yen increase year-on-year. Despite negative factors such as worsening in foreign exchange rate and increase in costs on quality measures in the market, positive factors such as cost reductions and improvements in volume/model mix, among others contributed to the increase.

MMC posted an ordinary income of 141.0 billion yen, a 7% or 10.6 billion yen decrease year-on-year. Net income attributable to owners of the parent came to 89.1 billion yen, a 25% or 29.1 billion yen decrease year-on-year.

2. Sales volume (Retail)

Global retail sales volume for the full 2015 year totaled 1,048,000 units, a decrease of 4% or 42,000 units over the same period in FY2014. Sales volumes by regions were as follows.

Japan: Despite sales volume increased with registered vehicles, decrease in minicars negatively affected totaling 102,000 units, a decrease of 13,000 units or 11% over the same period last year.

North America: Sales volume totaled 135,000 units, an increase of 18,000 units or 16% over the same period last year. The increase was driven by an increase in sales of the Outlander and Outlander Sport.

Europe: Sales volume in Western European area totaled 173,000 units, a year-on-year increase of 11% or 19,000 units, contributed mainly by sales increases in Germany and the United Kingdom. However, this increase could not offset the drop in sales volume in Russia where the economic environment worsened and prices rose due to a worsening currency situation, resulting in total of 206,000 units, a decrease of 9% or 21,000 units over the same period last year for the whole region.

Asia: Sales volume totaled 322,000 units, a year-on-year decrease of 6% or 22,000 units. Although sales increased in Thailand over the same period last year, led by the firm sales of the Pajero Sport which debuted in October, 2015, sales decrease in China and Indonesia negatively affected the total sales of the region.

Other Regions: Sales volume totaled 283,000 units, a decrease of 1% or 4,000 units over the same period last year.

2. Full-year fiscal 2016 forecasts

The full-year FY2016 (April1, 2016 through March 31, 2017) operating results forecasts will be put on hold at this time as MMC is now in the process of carefully assessing the future impact from "the improper conduct in fuel consumption testing on products manufactured by MMC" we announced on April 20, 2016. MMC will disclose information on the consolidated earnings forecast for fiscal 2016 as soon as it is available.

Source:
http://www.mitsubishi-motors.com/pub...etail1002.html

[rrsteer]

This would be a marriage made in hell, if ever Tata or a Mahindra did manage to circumvent all the crossholdings to pick up a majority stake in Mitsubishi Motors.

Cultural fit is a very big challenge in M&As. Companies operating in same countries, in same industries will have vastly different cultures. Think -IBM vs Google. And here we are imagining an integration between a Japanese auto maker and an Indian auto maker. Even if there are many technical synergies present, the day I hear M&M is even pursuing such a transaction I will offload all my M&M shares. Even before I look at any other aspect, I feel the cultural challenges will be insurmountable.

This is not to generalize that M&As can't happen between Indian and Japanese companies. But specific to this case where a traditional Japanese corporation with its own history of producing cars/SUVs is being suggested to be brought over by relatively novice Indian auto makers. I can't harp more on the word 'traditional' and 'own history' especially in the context of Japan.

[rsm97]

Originally Posted by shortbread

Hello,

My case is this, Tata or M&M should buy a majority stake in Mitsubishi, when the shares are down. The reasoning is as follows:

I understand Mitsubishi is no Honda, but they are on a far better footing than Tata. A revamped Sales and Service network under the Mitsubishi brand might be the domestic rebirth Tata was looking for.

Interesting thought, and see good possibility of its having been discussed in few Boardrooms, atleast as an idea.

By the way, the price of Mitsubishi Motors stock has jumped up today at Tokyo Exchange, perhaps on inspiration from this post

Mitsubishi is certainty not Honda, but still a formidable and respected auto-mobile brand globally. If I am right, the market can of Mitsubishi Motors is less than one tenth of Honda and a strategic investor may see value.

[veyron_head]

Does Tata or Mahindra really need to buy Mitsubishi? I dont think so. The costs (both money and otherwise) of buying a company like Mitsu would far outweigh the benefits that M&M or Tata would derive out of the acquisition. In the case of M&M, they both know how to build good SUVs and Electric Cars. In the case of Tata, they have the JLR to ask if they need expertise in making good cars. Hence I dont think both have a real need to buy a failing company like Mitsubishi.

BTW, good luck with the buying if they ever choose to that! As I see on the internet, Mitsubishi motors is part of a conglomerate of about 40 companies who all hold a stake in Mitsubishi motors and in each other, and none of them hold a controlling stake! So I guess Tata and M&M will need the go-ahead of these 40 guys to be able to lay their hands on Mitsu.

[Mithrandir]

You have got a point. Hypothetically speaking, the brand Mitsubishi suits M&M more than TATA. Mitsubishi is known for their off-roaders which is also Mahindra's forte. TATA already have their hands full with JLR. If they can turn JLR around, then that would be great. Global economy isn't really favorable now for luxury car makers. Mitsubishi could be one fish too many for them to bite.

[Doge]

Originally Posted by Mithrandir

You have got a point. Hypothetically speaking, the brand Mitsubishi suits M&M more than TATA. Mitsubishi is known for their off-roaders which is also Mahindra's forte. TATA already have their hands full with JLR. If they can turn JLR around, then that would be great. Global economy isn't really favorable now for luxury car makers. Mitsubishi could be one fish too many for them to bite.

They have turned JLR around, i can't figure out what are you referring to here?
While we may throw bricks at Tata, the fact remains that they managed to do something which the brits,BMW and ford couldn't have dreamt of, made JLR profitable and back in game. I am confident that Jag just might overtake one of the German trio in the future judging by the direction they're heading.

[Captain Haddock]

Originally Posted by veyron_head

Does Tata or Mahindra really need to buy Mitsubishi? I dont think so. . In the case of M&M, they both know how to build good SUVs and Electric Cars. In the case of Tata, they have the JLR to ask if they need expertise in making good cars. Hence I dont think both have a real need to buy a failing company like Mitsubishi.

The discussions are purely hypothetical but Does M&M have the in house capability to build an upmarket car for the West ? Considering that they outsourced almost fully the design, the specs of their once flagship scorpio it is highly doubtful.

M&Ms current flagship the XUV would be an entry level MUV in the west(Well below US spec Outlander sport).

Even if they manage to design and manufacture a car similar to a pajero it would be from a virtually unknown brand (Tata is better off as far as global brand perception is concerned, because of the enormous size of the conglomerate and the fact that the Nano and JLR acquisition created a lot of buzz).

Mitsubishi is reeling under financial crisis but is leagues ahead of brands like M&M as far as engineering and brand perception is concerned. They are pretty resilient and have survived atom bombs and world wars.

It would be nearly impossible to rip Mitsubishi motors off from the larger consortium, but if a firm like M&M can do that, then it would give them a big push in engineering and global brand perception.

Based on my limited knowledge I cannot agree to the view that M&M's engineering and global presence is so advanced that acquiring a firm like Mitsubishi would be just a liability.