Thursday August 12, 2010

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By Sam Devraj  ( Assistant Editor )

Overseas ventures: Mahindra and Mahindra fulfils its dream

INDIA’S top utility vehicle maker Mahindra and Mahindra has been chosen as the preferred bidder to take over South Korea’s bankrupt Ssangyong Motor, creditors said today.

Ssangyong said it would sign a memorandum of understanding with the Indian carmaker by the end of this month before due diligence begins in September.

Mahindra was chosen over Indian tyre maker Ruia Group and Young An Hat, a local headgear company that also owns bus maker Daewoo Bus Co.

Three other suitors, including an alliance between France’s Renault and Nissan of Japan, had withdrawn at an earlier stager apparently because of the high costs.

Ssangyong, South Korea’s smallest carmaker, said it would receive deposits worth five per cent of the bidding price from the Indian company this month.

The selection was made after studying bid prices, funding capabilities and willingness to develop the company, it said in a statement.

Mahindra, which seeks to go global, has been eyeing Ssangyong to gain access to new technologies for sport utility vehicles (SUVs) and expand its overseas presence.

Ssangyong is mainly a manufacturer of low-priced but robust SUVs such as “Rexton,” “Kyron” and “Actyon” that are sold globally. It also makes sedans.

If the deal goes through, Mahindra is expected to become the second Indian carmaker to enter the South Korean market after Tata Motors, which bought truck maker Daewoo Commercial Vehicle in 2004.

The creditors did not say how much Mahindra had bid but analysts said the cost of more than 50 per cent of Ssangyong would be up to $418m (£267m).

Ssangyong was granted court protection from creditors in February 2009 after rising oil prices and slowing demand due to the global recession hit SUV sales and former Chinese parent Shanghai Automotive Industry Corp declined to pump in more funds.

It has since struggled to stay afloat, though a violent strike over job cuts disrupted production for almost 80 days.

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