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Old 4th April 2020, 13:59   #1
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Default Mahindra says no to big investments in SsangYong

Mahindra has announced that it will not inject fresh equity into SsangYong and has urged the company to find alternate sources of funding.

Mahindra says no to big investments in SsangYong-alturas-g4.jpg

The decision was taken during a special meeting of the Board of Directors convened to review investment in the Korean brand, after taking into consideration the effect of the outbreak of the Covid-19 pandemic on the global economy.

However, Mahindra could consider a special one-time infusion of up to US$ 32 million over the next 3 months.

Earlier, the management and labour union of SsangYong had requested for fresh injection of equity to help fund US$ 406 million over the next 3 years.

Mahindra would continue to support all non-fund initiatives like capex-free access to Mahindra’s new platforms such as W601, support technology programs which would help reduce SsangYong’s capex, support the material cost reduction program that is currently underway and support SsangYong's management to find new investors.

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Old 4th April 2020, 20:52   #2
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Default Re: Mahindra says no to big investments in SsangYong

Not surprising.
Both JLR and Ssangyong will require periodic top up of capital that I always knew would be beyond the affordability of both Tata and Mahindra.
So far the only Indian OEM that has executed a sustainable acquisition strategy is Bajaj with KTM and Husqvarna.
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Old 4th April 2020, 21:52   #3
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Default Re: Mahindra says no to big investments in SsangYong

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Originally Posted by arjab View Post
Not surprising.
Both JLR and Ssangyong will require periodic top up of capital that I always knew would be beyond the affordability of both Tata and Mahindra.
So far the only Indian OEM that has executed a sustainable acquisition strategy is Bajaj with KTM and Husqvarna.
Tata acquired JLR because of its brand value and to get technical help from them for Tata's new projects. But Ssangyong is a small player even in Korea. Don't understand what Mahindra will finally gain from them.
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Old 5th April 2020, 10:31   #4
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Default Re: Mahindra says no to big investments in SsangYong

Asking SsangYong to stand on its own two feet could be Mahindra's way of looking for a way out. The marriage was never about access to new markets. SsangYong simply does not have the brand value or penetration in big markets. Now that the tech transfer has happened, Mahindra knows that SsangYong needs it more than the reverse. Actually, it might be in the Korean company's interest to keep it going, in order to tap into the platform sharing and low cost development model that it's Indian partner offers. A lucrative offer from a Chinese firm might just tempt Mahindra.
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Old 5th April 2020, 10:54   #5
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Default Re: Mahindra says no to big investments in SsangYong

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Originally Posted by NICHE View Post
Tata acquired JLR because of its brand value and to get technical help from them for Tata's new projects. But Ssangyong is a small player even in Korea. Don't understand what Mahindra will finally gain from them.
They got the XUV300 (Tivoli) platform & Alturas (Rexton) Platform already.

It is rumored that the Next Gen XUV500 would also be based on an existing Ssangyong platform.

All the above platforms are 'modern', 'safety complaint' platforms, which Mahindra received, ready-to-use.
There is no doubt here that, Mahindra would have saved big bucks, just by re-using these platforms.
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Old 5th April 2020, 11:30   #6
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Default Re: Mahindra says no to big investments in SsangYong

JLR has the technology and desirability as well as the branding. It bailed Tata out during bad times and it has a future although the Jaguar side might diminish.

Ssyangyong - A consolation prize from Mahindra not getting JLR (they bid too late and were perhaps not very clear in what they could do with JLR!). Ssangyong has never really paid its way for Mahindra.

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Old 6th April 2020, 10:00   #7
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Default Re: Mahindra says no to big investments in SsangYong

I honestly cannot think of too many Mahindra acquisitions that went well. They bought Reva and could have had a first-mover advantage in the EV space. See how that's bungled up. In fact, they spoiled the image of EVs with their slow, impractical & overpriced EVs (a jugaad Logan electric at 12 lakhs? LOL).

They thought they'll launch Ssangyong in India and it'll get customers. But they forgot about customer service. The last-gen Rexton had mediocre reliability; what was worse was the after-sales service, lack of knowledge among technicians and poor part availability. Net result, Ssangyong became a bad word and had to be dropped for the next gen Rexton (aka Alturas).

Now, Mahindra has challenges of its own and cannot blindly support another brand in another country. This disaster was just waiting to happen.

This is a company that simply acquires more than it can handle. BSA Motorcycles, Peugeot Motorcycles, Carnation, Reva, Ssangyong and what not. Don't bite off more than you can chew, Mahindra. Instead, FOCUS only on the good acquisitions (e.g. Jawa, Pininfarina, how you got Ford India at a throwaway price ).
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Old 6th April 2020, 11:12   #8
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Default Re: Mahindra says no to big investments in SsangYong

Here's how the Koreans are looking at Mahindra's decision to stop funding Ssangyong:
http://m.koreatimes.co.kr/pages/arti...newsIdx=287375
Quote:
Mahindra hurls SsangYong ultimatum at Moon gov't

Mahindra & Mahindra said it cannot deliver promised aid to its cash-strapped unit SsangYong Motor, in what is seen as an ultimatum to the government, demanding it to provide aid from the state coffers.

Mahindra's move is interpreted as a demand for the Moon Jae-in administration to choose between a bailout from state-run lenders or the collapse of SsangYong, which is a conundrum for the government and the ruling party wanting to avoid any job-related dent in their campaign ahead of the April 15 general election.

According to Mahindra, it held a special board meeting Friday night and decided not to inject "any fresh equity into SsangYong," urging the company to find "alternate sources of funding."

"India is under an unprecedented 21-day complete lockdown, and only emergency services are operating while, everything else is closed," Mahindra said in a statement, citing the economic fallout of the COVID-19 pandemic. "The board hopes that the employees and management at SsangYong understand the magnitude of the unfortunate and unforeseen crisis created by the COVID-19 virus, which has compelled it to take the difficult decision."

In January, SsangYong Motor Board Chairman and Mahindra Managing Director Pawan Goenka told the SsangYong union the company would need 500 billion won over three years for normalization, and Mahindra had the intention to inject 230 billion won ($186 million).

Citing this, Mahindra requested at least 170 billion won in aid from the state-run Korea Development Bank (KDB), adding SsangYong will secure 100 billion won by unloading assets and downsizing. The KDB has been tepid about this, saying Mahindra should fulfill its responsibility first.

While closing the window for SsangYong, however, Mahindra said it will "consider a one-time special infusion" of up to 40 billion won to SsangYong over the next three months to "help the company to continue its operation while exploring alternate sources of funding."

This is interpreted as Mahindra setting a three-month deadline, as the KDB did not show the desired response to its January request for government aid as the cost for the Moon administration's apparent intervention on the rehiring of laid-off SsangYong workers.

SsangYong launched a mass layoff in 2009 and 119 workers have staged a protest demanding their rehiring over the past 10 years. In July 2018, President Moon met Mahindra Chairman Anand Mahindra and mentioned these workers, which was soon followed by the Presidential Economic, Social and Labor Council's pledge of support for SsangYong after the company rehired them.

Stranded SsangYong
SsangYong Motor is making efforts to brush off concerns over its collapse after the decision and anticipation that Mahindra, which has a 74.5 percent stake in SsangYong, may abandon its subsidiary.

"Despite the setback in aid from the largest stakeholder, SsangYong will continue to make efforts to revamp its operations to secure future competitiveness and job security," SsangYong said in a statement on Sunday. "With its 40 billion won infusion, Mahindra has cleared up any suspicions of a withdrawal and has pledged its continued support for SsangYong."

The company said that it is continuing to secure cash by unloading non-core assets including its logistics center in Busan, as well as stressing it needs the 500 billion won normalization fund over the next three years, not this year.

Despite such statements, the numbers show that the company is facing daunting problems.

According to an earnings report, SsangYong's short-term debt, which is expected to be paid off within a year, stood at 254.1 billion won, while long-term debt amounted to 158.7 billion won at the end of last year. Its debt-to-equity ratio rose to 400.1 percent in 2019, up from 218.1 percent a year earlier.

The company posted a 281.9 billion won operating loss last year, up from 64.18 billion won the year before, due to weakening sales. SsangYong sold 135,235 vehicles last year, down 5.6 percent from 2018.

Along with the absence of new models, the company's exports face a grim outlook due to the global outbreak of the coronavirus. Exports for March declined 4.6 percent from a year earlier.

As various difficulties corner the carmaker, anticipations are growing that Mahindra may drop its stake in SsangYong, replicating the precedent of Shanghai Automotive Industry Corp., which is now SAIC Motor.

In 2004, SAIC acquired a 49 percent stake in SsangYong, but gave up on the stake just five years later after transferring sensitive technologies ― mostly related to SsangYong's specialty SUVs ― to launch its own SUV brand. During its control, SAIC promised a series of liquidity injections to support the cash-strapped SsangYong, but filed for court receivership, as the Korean government demanded SAIC's responsible investment into SsangYong as a prerequisite for aid.

The situation looks similar this time. Mahindra, which acquired SsangYong's controlling stake in 2011, had light commercial vehicles and agricultural tractors as the main products of its portfolio, but quickly expanded it to include SUVs since 2009.

Since its acquisition, Mahindra has injected 130 billion won into SsangYong, a relatively small amount given the development cost for a new car generally stands at between 200 billion won and 500 billion won.

"With its headquarters facing daunting difficulties, it is uncertain whether Mahindra will give the 40 billion won aid to SsangYong," an industry official said. "While SsangYong is loaded with mounting debt, there is the possibility of Mahindra abandoning its stake in SsangYong in order to avoid liability, given SsangYong's market cap remains at 220 billion won."
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Old 10th April 2020, 17:55   #9
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Default Re: Mahindra says no to big investments in SsangYong

Ssangyong looking to sell minority stake to raise funds

According to a media report, Ssangyong could be in talks with Korean carmakers to raise funds by selling a minority stake.

Mahindra says no to big investments in SsangYong-2019ssangyongkorando.jpg

It has been reported that the company has been on the lookout for an investor for the last 3-4 months. Initially, there were rumours of Ford as well as some European brands that were interested in purchasing stake in the Korean carmaker. However, it is believed that Ssangyong would prefer a Korean investor.

If Ssangyong fails to secure funds from private parties, it could ask for state-run lenders for a bailout. Without financial support, the company could go bankrupt in 3 months.

Earlier this month, Mahindra, which owns a majority stake in Ssangyong had announced that it would not inject fresh equity into the brand. The decision was taken after taking into consideration the effect of the outbreak of the Covid-19 pandemic on the global economy. Mahindra had also urged Ssangyong to find alternate sources of funding.

Source

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Old 10th April 2020, 19:49   #10
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Default Re: Mahindra says no to big investments in SsangYong

The acquisition of Ssangyong was clearly a mistake from Mahindra. Mahindra has enough problems at home now with the economic slowdown. It is time to hold your savings and protect what you have at home. There is a big chance that Mahindra is thinking about offloading the shares and walk away.
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Old 11th April 2020, 02:17   #11
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Default Re: Mahindra says no to big investments in SsangYong

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Originally Posted by abhishek46 View Post
They got the XUV300 (Tivoli) platform & Alturas (Rexton) Platform already.

It is rumored that the Next Gen XUV500 would also be based on an existing Ssangyong platform.

All the above platforms are 'modern', 'safety complaint' platforms, which Mahindra received, ready-to-use.
There is no doubt here that, Mahindra would have saved big bucks, just by re-using these platforms.
They have a far better option in joining efforts with Ford. The American giant has better engineered platforms and global presence. Mahindra provides Ford economies of volume, managing their Indian interests and revenue from licensing technologies and components. Mahindra gets world class technology with much reduced capital exposure. Consolidation is the need of the hour.
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Old 11th April 2020, 06:19   #12
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Default Re: Mahindra says no to big investments in SsangYong

Someone within Mahindra: Stop

The big-guys in Mahindra: Stop what?

That someone: Stop buying companies and stakes in other businesses like a kid wanting to buy every other toy at the store.

Those big-guys: Damn, why didn't that occur to this thus far? Let's try that by screwing that Korean company who's name we still can't pronounce correctly.
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Old 11th April 2020, 13:45   #13
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Default Re: Mahindra says no to big investments in SsangYong

Hyundai and kia (now a group) have managed to takeover the world with their sales. Ssangyong Still has that potential if executed properly as a Korean brand.

The world is turning to UV's of all shapes and sizes. Ssangyong owners have not really complained about the cars quality or ability. That was the reason Mahindra decided to purchase Ssangyong and Make it big. But clearly the execution has been flawed.

Where is the platform sharing and parts sharing between Mahindra and Ssangyong and that help from Ford? Why has Pininfarina not provided their design services to Ssangyong cars which look edgy at best? The only car rebadging I have seen till date is the XUV300. Which Mahindra has been rebadged a Ssangyong? and why not?

Ssangyong could have been that shining star for Mahindra as a mid-range marquee sold globally. Ssangyong sells in more countries (with better purchasing power) than Mahindra even today. So, Mahindra has also missed the opportunity to leverage Ssangyongs sales channel.

A lot has gone wrong and Mahindra has failed at multiple points. There is still time to turn it around and its not all about money. But if Mahindra doesnt have the skills to turn it around, they better sell the stake or let it go down.
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Old 11th April 2020, 18:12   #14
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Default Re: Mahindra says no to big investments in SsangYong

Amid the looming credit crunch at Ssangyong, it's looking for a stake sale. Ford and a few European companies have shown interest but the company says it prefers a homegrown player to invest, thereby ensuring a cultural fit.

https://auto.economictimes.indiatime...-sale/75080872

A very questionable, unwanted, avoidable and hare-brained act of hasty purchase by the then healthy Mahindra Group. Other than a few Rextons being sold here and there, we could see no other activity by Ssangyong in India, the fifth largest automobile market in the world.

In Marathi they say "bheek nako pan kutra avar" which is a beggar's prayer saying "I do not want alms, but don't unleash your dog on me." It's like the Ssangyong's dog getting unleashed on Mahindra.

Now looking for a home partner as a cultural fit is like looking for a suitable, culturally matching spouse in a matrimonial advertisement. Europeans and others "keep safe distance."

Last edited by anjan_c2007 : 11th April 2020 at 18:18.
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Old 12th April 2020, 13:46   #15
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Default Re: Mahindra says no to big investments in SsangYong

https://www.moneycontrol.com/news/te...a-5135831.html

a small relief for Ssangyong. It is high time we see complete parts and technology sharing, unifying global sales network and cost rationalizing throughout Mahindra group.

at the moment all I can conclude is Mahindra never really tried with Ssangyong.
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