Mahindra-Tata Motors Fdi Strategy

Today, Mahindra and Mahindra is the third largest tractor manufacturer in the world with sales of nearly 85,000 units annually in 10 countries. This places them ahead of John Deere & Kubota. In India, Mahindra has been the number one selling brand since 1983. Mahindra & Mahindra was set up as a steel trading company in 1945. It soon expanded into manufacturing general-purpose utility vehicles, starting with assembly under licence of the iconic Willys Jeep in India.

Mahindra & Mahindra began manufacturing tractors for the Indian market in the early 1960s. Today, it is one of the top three tractor companies in the world with annual sales totalling more than 150,000 tractors. It has expanded its offerings to include farm-support services via Mahindra AppliTrac (agri-mechanization solutions), Mahindra ShubhLabh (seeds, crop protection, and market linkages and distribution), and the Samriddhi Initiative (agri-support information and counselling. The Timeline:

|1962 |In 1962, M&M formed a joint venture with International Harvester to make tractors , developed its first tractor, the B-275 | |1963 |Incorporation of International Tractor Company of India (ITCI),formed as a Joint Venture between Mahindra & Mahindra Limited | | |(M&M), International Harvester Inc, and Voltas Limited sharing the responsibility of design, manufacturing & marketing | |1965 |Rolled out first batch of 225 Tractors in 35 H. P. Range – Model B275 Regular | |1981 |100,000th Tractor rolled out.

| |1983 |Market leader in domestic Tractor market – has maintained this position till date | |2004 |Announced a joint venture (80% stake) with Chinese automaker Jiangling Motor Corp contributing $8m (approx Rs 36 crore) of the | | |$10-m investment needed to buy the facilities of Jiangling’s tractor unit | |2008 |Bought an 80 per cent stake in Kinetic Motors’ two-wheeler business for Rs 110 crore. This is now run as a separate company – | | |Mahindra 2 Wheelers | |2010 |In May, bought a 55.

2 per cent stake in Reva Electric Car Co, most of it from Reva’s promoter thought that would benefit it in the| | |long run from Reva’s electric vehicle technology | | |Acquired a 70 per cent stake in South Korea’s Ssangyong Motor Co for about Rs 2,100 crore, including bonds. It is the largest | | |outbound deal by M&M | | |Acquired a stake of 43. 3% in Punjab Tractors Ltd (PTL) to increase its geographic presence and also enable the company to enter | | |new segments (various horsepower (hp) | |2011 |The acquisition of EPC Industries Ltd.

Micro Irrigation Systems (MIS), divided into drip and sprinkler irrigation, has helped to | | |enter into a market growing at 40% annually. This signifies Mahindra going up the value chain in the agri-business by becoming an | | |end to end supplier. | | | | |2012 |M&M has started producing LCV’s, UV’s and tractors under one roof at Zaheerabad, Andhra Pradesh. Integration of production, R&D, | | |sourcing, international operations while sales and marketing are different for tractors and UV’s. | History of alliances and acquisitions which helped them in the tractor space

Mahindra’s quest for technology and markets has made it the number 3 player globally in the tractor segment. In India they have consistently been the number one brand since the past many years. Apart from acquiring tractor makers the company has inconspicuously kept adding auto component and ancillary makers to their fold for the past few years. Among them: Schoneweiss (axle-beam manufacturer, Germany); Jeco Holding (forgings, Germany); DGP Hinoday Industries (castings and ferrites, India); Falkenroth (forgings, Germany); Stokes Group (forgings, Britain); Amforge Industries (forgings, India)

Why did they go in for Ssangyong 1) Good fit: Ssangyong and Mahindra are a good fit. Both companies got their start manufacturing Willys Jeeps in the forties, and both excel in utility vehicles (UVs). With sales volumes roughly balanced between domestic and foreign markets. 2) Market presence: Ssangyong adds presence in Europe and South Korea, as well as an entry point into other markets like Russia and Australia, exports to Russia, Europe, China, west Asia, Africa, North and South America and the Asia-Pacific. It also adds considerably to Mahindra’s product portfolio

3) Technology transfer: Mahindra and Ssangyong can build on collective best practices to leap forward in both product and process. Ssangyong has strong diesel technology in its stable which would be very useful to Mahindra. Over the next months, Indian and Korean R&D teams will visit each other’s facilities and share ideas Technology benefits which Ssangyong possesses Mahindra acquired Ssangyong at at time when they were interested in taking their brand global and needed strategic points of entry into the North and south Americas, Europe and Asia Pacific.

Apart from getting ready made market access Mahindra was interested in Ssangyong due to the technology advantage that Ssangyong possessed in Diesel engine technology. • Ssangyong is one of the few Korean automakers with proven Diesel engine technology. • The technology also complies with stringent Euro IV norms which Mahindra would have been interested in line with their global expansion plans. • Ssangyong has a deep root in making small quantities of vehicles at a competitive price Mahindra’s experience of the acquisition

Even the most audacious corporate acquirer would perhaps have shied away from purchasing a company that had been rocked by the kind of labour militancy that convulsed South Korean automaker Ssangyong Motor Co. in 2009, when striking workers armed with iron pipes and Molotov cocktails battled the police for almost three months at one of its factories. Mahindra and Mahindra Ltd, or M&M, which purchased Ssangyong in November the following year, wasn’t deterred by the trouble that had erupted over a management plan for mass sackings. • Cultural differences:

Ssangyong employees’ union initially perceived M&M as a manufacturer of low-cost vehicles that wanted to extract technology benefits from the transaction, says Pawan Goenka, president of the automotive and farm equipment sectors at M&M, who and other M&M executives had to learn how to bow Korean-style and punctuate conversations with common Korean phrases like kamsamida, or thank you! • Initial Reservations The primary concern of the Ssangyong trade union was how M&M intended to turn around the company, which has been owned by four entities in 12 years and had filed for bankruptcy.

Employees, fearful of a repeat of their unhappy past experience, were sceptical about the new owner’s commitment to Ssangyong and its willingness to invest for its growth. How Mahindra handled the situation 1) Due diligence: Preparing a blueprint on integration is one of the key elements of a successful acquisition. V. S Parthasarathy, group CIO insists on a 100-day plan for integration even before the team starts due diligence on an asset. 2) “In any business, aligning with people and their hearts and minds is as important as the profit and loss and balance sheet.

If you don’t do the former, the latter will never happen,” says Pawan Goenka, chairman Mahindra Ssangyong 3) Minimal interference: The diktat from the top was very clear. “We don’t want Mahindra to run Ssangyong. Our role will be confined to helping them manage and not manage,” says Goenka. This is a “Korean company in Korea, run by Koreans. ” We have appointed only six people from here in management roles in Korea, and the chief financial officer is the only top Indian executive,” says Goenka.

The idea is to get the Ssanyong employees to believe in themselves Successes of the acquisition • Post acquisition Ssangyong is to invest Rs 960 crore into product development and brand building whereas Research and Development are broadly to stay independent functions for the two companies unless sharing of platforms is required. M&M would be utilizing its IT systems for SMC and also setting up Mahindra Finance operations in Korea to enhance sales of SMC vehicles in Korea. • The Korean reservations seem to have been overcome.

Encouraging signs that the assimilation is gelling and M&M’s bet paying off were evident at the Auto Expo in New Delhi in early January, when M&M showed off a handful of concept utility vehicle models from Ssangyong’s stable. PART II TATA MOTORS CEO and MD: Carl-Peter Forster CFO: C Ramakrishnan Brief history of Tata Motors Tata Motors Limited formerly TELCO, is an Indian multinational automotive manufacturing company headquartered in Mumbai, India and a subsidiary of the Tata Group. Its products include passenger cars, trucks, vans and coaches.

It is the world’s eighteenth-largest motor vehicle manufacturing company, fourth-largest truck manufacturer and second-largest bus manufacturer by volume. Tata Motors has auto manufacturing and assembly plants in Jamshedpur, Pantnagar, Lucknow, Sanand, Dharwad and Pune, India, as well as in Argentina, South Africa, Thailand and the United Kingdom. Tata Motors has produced and sold over 6. 5 million vehicles in India since 1954. Originally a manufacturer of locomotives, the company manufactured its first commercial vehicle in 1954 in a collaboration with Daimler-Benz AG, which ended in 1969.