Ford to transfer struggling India business to joint venture with Mahindra

Ford to transfer struggling India business to joint venture with Mahindra

Ford Motor Co. is set to transfer most of its assets in India to a joint venture with Mahindra & Mahindra Ltd. after failing to make meaningful inroads for more than two decades in the world’s fourth-largest automobile market, people with knowledge of the matter said.

Mahindra, one of India’s largest automakers, will own 51 per cent of the new entity, said the people, who asked not to be identified discussing the confidential plan. Ford will get equal voting rights and board representation, one of the people said. The venture, to be announced as soon as next week, doesn’t include Ford’s global business services division or an export-focused engine plant in Sanand.

Ford’s compensation is likely to be far below the $2 billion it’s poured into India, only to achieve market share of less than 3 per cent. The deal keeps Ford in the heavily populated market while letting it share the financial burden with Mahindra. Ford Chief Executive Officer Jim Hackett is leading an $11 billion restructuring and paring money-losing overseas operations.

Ford is “insulating themselves a little bit,” said Deepesh Rathore, an independent automobile analyst based in Bengaluru. “For Mahindra, it makes sense, because they are increasingly looking at the urban market.”

Global carmakers have had a tough time making inroads into India, which is dominated by Suzuki Motor Corp.’s cheap, fuel efficient vehicles. General Motors Co. scrapped a $1 billion investment in India two years ago and stopped selling Chevrolet models there. The market as a whole faces challenges, with sales contracting for the past 10 months, forcing the industry to cut production and jobs.

A final agreement hasn’t been reached and the discussions could still fall apart, the people said. Reuters reported some elements of the venture in April.

Mahindra shares fell as much as 4.3 per cent to Rs 535 Wednesday in Mumbai. Ford shares closed 0.6 per cent down on Tuesday.