M&M Korean arm draws up ₹3,000 cr. turnaround plan

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Korean automaker SsangYong Motor Company, a subsidiary of Mahindra & Mahindra, which is currently facing steep headwinds and losses in its domestic market and worsened by the coronavirus syndrome now, has drawn up a three-year turnaround plan to get back to profitability by 2022.

The plan includes ways to reduce capex, considering synergies between SsangYong Motor Company and Ford Motors and developing new markets in Russia and Vietnam to increase export volumes, Pawan Goenka, MD of Mahindra & Mahindra and Chairman of SsangYong Motor Company said.

He said the company expected a funding of 450 to 500 billion Korean Won (up to ₹3,000 crore), through a combination of equity and borrowing for a full recovery.

“We do hope that this funding would be arranged by March end. The three-year recovery plan has been approved by the company board,” Dr. Goenka said.

SsangYong is in talks with the Korea Development Bank (KDB) to raise the funds. However, a clear picture on the approval of the funding is yet to emerge. Mr. Goenka said considering the current market situation it would be untenable for a full recovery for SsangYong during calendar year 2020, but a full recovery could be expected in 2022.

SsangYong has been hit hard by its diesel heavy portfolio as well as geopolitical factors, which impacted key markets such as Iran and Egypt. The company is now looking at markets such as Russia and Vietnam to boost exports in addition to rationalising capex.

“Material cost reduction would fetch the company 80-90 billion Won in two years which should help achieve an improvement of 2-3% in SsangYong’s operating margins,” Mr. Goenka said.

Going forward, SsangYong is also expected to work closely as part of the alliance with Ford to develop two SUVs — codenamed CSUV and the BSUV — on all new platforms. The Mahindra-Ford partnership has just received the Competition Commission of India’s (CCI) clearance for the joint venture.

On the domestic market, Mr. Goenka said the spread of coronavirus may have some impact since some parts are imported from China.

For faster and cost effective roll-out of electric vehicles in India, Mr. Goenka has offered all Indian OEMs, namely Tata Motors and Ashok Leyland, to ‘co-own’ Mahindra Electric, which has acquired considerable expertise in this field.

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