Ford Motor Co is nearing a deal with Mahindra &amp; Mahindra to form a new joint-venture company in India, a move that will likely see the US automaker cease independent operations in the country, two sources with direct knowledge of the talks told Reuters.

The deal would make Ford the latest automaker to pare back its interests in India. At the end of 2017, General Motors Co downsized its Indian operations and stopped selling cars locally, dealing a blow to Prime Minister Narendra Modi's strategy to encourage domestic manufacturing.

Over two decades, Dearborn, Michigan-based Ford invested more than $2 billion in India but has consistently struggled - it currently has a market share of just three per cent in India, one of the world's fastest-growing car markets.

Under the terms of the deal being negotiated, Ford will form a new unit in India in which it will hold a 49 per cent stake, while Mahindra will own 51 per cent, the two sources said.

The US carmaker's Indian unit will transfer most of its current automotive business to the new entity, including its assets and employees, according to one of the sources.

"It's like a partial exit (for Ford from India)," the source said.

The deal is expected to close within 90 days, the sources said, adding the value of the transaction was not yet clear.

They spoke on condition of anonymity because of the sensitivity of the matter.

Ford said it does not comment on speculation, but added both companies continue to work together "to develop avenues of strategic cooperation that help us achieve commercial, manufacturing and business efficiencies".

Mahindra too said it does not comment on speculation. It said in a statement it was "working together in identified areas" with Ford after a 2017 partnership arrangement, and "will announce further definitive agreements as we progress on some of the other areas."

Currently, Ford manufactures and sells its cars in India through its wholly-owned subsidiary. In 2017, it formed a strategic alliance with Mahindra under which, among other things, they will build new cars together, including sport-utility vehicles and electric variants.

Ford has been globally restructuring its businesses with an aim to save $11 billion over the next few years. Last month, its Russian joint venture said it would close two assembly plants and an engine factory in Russia, exiting the country's passenger vehicle market.

TOUGH MARKET

India has been a major growth area for global car manufacturers but growth has slowed of late - car sales grew by three per cent to just over 3.3 million units in the last fiscal year to March 31, compared with eight per cent the previous year.

Even so, India is set to become the world's third-largest car market by 2023 with sales of over five million cars annually, according to forecasting firm IHS Markit.

Ford's decision is a stark reminder of how most foreign automakers have struggled to make major inroads in India, a market dominated by players such as Maruti Suzuki and Hyundai Motor Co.

Ford sold close to 93,000 vehicles in India last fiscal year, a far cry from market leader Maruti Suzuki which commands a 51 per cent market share and sold more than 1.7 million cars.

Automakers such as Maruti benefit in India from their vast dealership network and an autonomous local team that can quickly react to market changes.

One of the sources said the Ford-Mahindra deal would lead to more affordable Ford cars in the country, as the company would not need to pay any royalty to its global parent, as the Indian unit has to now.

The funds that accrue to Ford's India unit because of the deal will also be used to clear some of its accumulated losses, the two sources said.

Puneet Gupta, associate director at IHS Markit, said the deal would help Ford and Mahindra launch new models at a faster pace and lower development cost, which is critical to success in a price sensitive market like India.

"It's a win-win situation for both," Gupta said.

Ford Motor Co is nearing a deal with Mahindra & Mahindra to form a new joint-venture company in India, a move that will likely see the US automaker cease independent operations in the country, two sources with direct knowledge of the talks told Reuters.

Ford Motor Co is nearing a deal with Mahindra & Mahindra to form a new joint-venture company in India, a move that will likely see the US automaker cease independent operations in the country, two sources with direct knowledge of the talks told Reuters. The deal would make Ford the latest automaker to pare back its interests in India. At the end of 2017, General Motors Co downsized its Indian operations and stopped selling cars locally, dealing a blow to Prime Minister Narendra Modi's strategy to encourage domestic manufacturing. Over two decades, Dearborn, Michigan-based Ford invested more than $2 billion in India but has consistently struggled - it currently has a market share of just three per cent in India, one of the world's fastest-growing car markets. Under the terms of the deal being negotiated, Ford will form a new unit in India in which it will hold a 49 per cent stake, while Mahindra will own 51 per cent, the two sources said. The US carmaker's Indian unit will transfer most of its current automotive business to the new entity, including its assets and employees, according to one of the sources. "It's like a partial exit (for Ford from India)," the source said. The deal is expected to close within 90 days, the sources said, adding the value of the transaction was not yet clear. They spoke on condition of anonymity because of the sensitivity of the matter. Ford said it does not comment on speculation, but added both companies continue to work together "to develop avenues of strategic cooperation that help us achieve commercial, manufacturing and business efficiencies". Mahindra too said it does not comment on speculation. It said in a statement it was "working together in identified areas" with Ford after a 2017 partnership arrangement, and "will announce further definitive agreements as we progress on some of the other areas." Currently, Ford manufactures and sells its cars in India through its wholly-owned subsidiary. In 2017, it formed a strategic alliance with Mahindra under which, among other things, they will build new cars together, including sport-utility vehicles and electric variants. Ford has been globally restructuring its businesses with an aim to save $11 billion over the next few years. Last month, its Russian joint venture said it would close two assembly plants and an engine factory in Russia, exiting the country's passenger vehicle market. TOUGH MARKET India has been a major growth area for global car manufacturers but growth has slowed of late - car sales grew by three per cent to just over 3.3 million units in the last fiscal year to March 31, compared with eight per cent the previous year. Even so, India is set to become the world's third-largest car market by 2023 with sales of over five million cars annually, according to forecasting firm IHS Markit. Ford's decision is a stark reminder of how most foreign automakers have struggled to make major inroads in India, a market dominated by players such as Maruti Suzuki and Hyundai Motor Co. Ford sold close to 93,000 vehicles in India last fiscal year, a far cry from market leader Maruti Suzuki which commands a 51 per cent market share and sold more than 1.7 million cars. Automakers such as Maruti benefit in India from their vast dealership network and an autonomous local team that can quickly react to market changes. One of the sources said the Ford-Mahindra deal would lead to more affordable Ford cars in the country, as the company would not need to pay any royalty to its global parent, as the Indian unit has to now. The funds that accrue to Ford's India unit because of the deal will also be used to clear some of its accumulated losses, the two sources said. Puneet Gupta, associate director at IHS Markit, said the deal would help Ford and Mahindra launch new models at a faster pace and lower development cost, which is critical to success in a price sensitive market like India. "It's a win-win situation for both," Gupta said.

Ford likely to end independent India business with new Mahindra deal: Sources

Ford will be winding up operations in India after a 25-year stint. How did one of the world's largest car-makers fail in India? Did Ford under-estimate the Indian market? Palki Sharma tells you.

Gravitas: Ford's ignominious India exit

The management of Ford India Private Ltd is yet to come out with their plans for the workers who will be affected by the closure of its three plants — two in the southern state of Tamil Nadu's Chennai and one in the western state of Gujarat's Sanand, said a union official.

On September 9, Ford India announced that it will wind down vehicle assembly in Sanand by the fourth quarter of 2021 and vehicle and engine manufacturing in Chennai by the second quarter of 2022.

Ford India has four plants in the country — vehicle and engine plants in Chennai and Sanand.

Ford India has decided to continue operating the engine plant in Sanand while closing down the other three.

“On Monday, the Sanand plant management had a discussion with us. They wanted to know whether we have any questions on the company’s decision to close down the plants,” Sanand workers’ union General Secretary Nayan Kateshiya told IANS.

“We had asked them about the future of the engine plant workers and how long it would be operational. We also asked them about the future of the plants that are to be closed, whether they would be sold/leased out,” Kateshiya added.

According to him, the management had no answer and said they would revert.

“Work on completing the assembly of the cars that are remaining on the production lines is being done. The engine plant is running.”

Also read |&nbsp;<a href="https://www.wionews.com/india-news/ford-to-end-manufacturing-in-india-take-2-billion-hit-411902">Ford to end manufacturing in India, take $2 billion hit</a>

Meanwhile, the Chennai Ford Employees Union (CFEU) in a statement said it does not accept Ford India’s decision of closing down the plants.

The CFEU has requested the company management to ensure jobs for the workers at the Chennai plant with the proposed buyer of the factory.

The company management is having a meeting with CFEU officials on Tuesday.

Ford’s quit India decision will result in an uncertain future for about 5,300 employees – workers and staff, Union officials said.

According to Union officials, Ford India’s Chennai plant has about 2,700 associates (permanent workers) and about 600 staff.

“In Sanand, the number of workers will be about 2,000,” Kateshiya said.

Ford India had said more than 500 employees at the Sanand engine plant, which produces engines for export, and about 100 employees supporting parts distribution and customer service, also will continue to support Ford’s business in India.

According to Ford India, about 4,000 employees are expected to be affected by its decision.

The management of Ford India Private Ltd is yet to come out with their plans for the workers who will be affected by the closure of its three plants — two in the southern state of Tamil Nadu's Chennai and one in the western state of Gujarat's Sanand, said a union official.

The management of Ford India Private Ltd is yet to come out with their plans for the workers who will be affected by the closure of its three plants — two in the southern state of Tamil Nadu's Chennai and one in the western state of Gujarat's Sanand, said a union official. On September 9, Ford India announced that it will wind down vehicle assembly in Sanand by the fourth quarter of 2021 and vehicle and engine manufacturing in Chennai by the second quarter of 2022. Ford India has four plants in the country — vehicle and engine plants in Chennai and Sanand. Ford India has decided to continue operating the engine plant in Sanand while closing down the other three. “On Monday, the Sanand plant management had a discussion with us. They wanted to know whether we have any questions on the company’s decision to close down the plants,” Sanand workers’ union General Secretary Nayan Kateshiya told IANS. “We had asked them about the future of the engine plant workers and how long it would be operational. We also asked them about the future of the plants that are to be closed, whether they would be sold/leased out,” Kateshiya added. According to him, the management had no answer and said they would revert. “Work on completing the assembly of the cars that are remaining on the production lines is being done. The engine plant is running.” Also read | Ford to end manufacturing in India, take $2 billion hit Meanwhile, the Chennai Ford Employees Union (CFEU) in a statement said it does not accept Ford India’s decision of closing down the plants. The CFEU has requested the company management to ensure jobs for the workers at the Chennai plant with the proposed buyer of the factory. The company management is having a meeting with CFEU officials on Tuesday. Ford’s quit India decision will result in an uncertain future for about 5,300 employees – workers and staff, Union officials said. According to Union officials, Ford India’s Chennai plant has about 2,700 associates (permanent workers) and about 600 staff. “In Sanand, the number of workers will be about 2,000,” Kateshiya said. Ford India had said more than 500 employees at the Sanand engine plant, which produces engines for export, and about 100 employees supporting parts distribution and customer service, also will continue to support Ford’s business in India. According to Ford India, about 4,000 employees are expected to be affected by its decision.

Ford India yet to spell out plans for workers affected by closure

Suzuki Motor Corp said it was no longer gung-ho about India's auto market, the world's fourth-largest, where it has seen relentless growth in the past seven years.

Suzuki Motor Corp said it was no longer gung-ho about India's auto market, the world's fourth-largest, where it has seen relentless growth in the past seven years. And the parent of the country's biggest car maker is not alone. The Japanese automaker issued the warning after it reported a slump in quarterly profit this week on tumbling sales at its Indian unit, Maruti Suzuki, which accounts for half the number of cars sold in India. "We no longer think that growth in India will be an uninterrupted move upwards," Suzuki President Toshihiro Suzuki cautioned. Maruti's sales, which were growing till January, has slipped every month over February-September 2019. India's auto sector has gone into a tailspin this year as tight liquidity at shadow banks, high taxes and a weak rural economy have sapped consumers' buying power. Global players like Ford, Volkswagen and Fiat are already re-evaluating their strategy as they struggle to make inroads in a market dominated by small cars. "Car makers are getting very cautious regarding their future investments in India. Most of them are either deferring or just scrapping their India new model plans," said Puneet Gupta, an autos sector expert at IHS Markit. Auto executives and analysts point out that some car makers are focussing on their strengths in terms of products instead of chasing volumes with small cars. Some others are taking drastic steps to reduce their exposure. Ford has agreed to sell a majority stake in its India arm to Mahindra & Mahindra, ending its independent operations in the country after two decades and highlighting the challenges automakers face in growing profitably in Asia's third-largest economy. Dialing back A cocktail of higher taxes under a new goods and services tax regime, flip-flop over electric-vehicle policy, and a boom of ride-sharing firms such as Uber and Ola have all plagued global automakers in India. Not having the right cars and smaller sales network have also hurt, some executives say. "When you have policy instability it becomes very hard to convince headquarters to invest more in the country," an executive at a western automaker said. India is largely a small-car market and that is not a strength for most global automakers, who sell more SUVs and luxury cars elsewhere such as in China and the United States - the world's top two car markets, the executive added. Western automakers had to design products specifically for India which is an expensive exercise, said V.G. Ramakrishnan, managing partner at consultancy Avanteum Advisors. "Many chose a mass-market strategy instead of a niche one," and are dialing back to focus on specific segments, he said. Volkswagen has put its sister company Skoda in charge of India strategy and will focus on SUVs. Fiat too has put SUV-maker Jeep in charge of driving sales in the country. Demand for SUVs in India is growing faster than some small car segments, prompting even the likes of Maruti that dominates the small-car space to look at launching SUVs and crossovers. Honda is re-evaluating its India plans and may convert one of its two plants into a research centre, local media reported. Toyota and Suzuki have formed an alliance to share supply chain costs and develop new vehicle technologies together. "Automakers want to exploit their existing resources, minimize their costs and maximize their returns," Gupta said.

Suzuki rethinks promise of India's auto market, and it is not alone

ford-india

Ford India, News on Ford India, stories on Ford India, articles on Ford India, Ford India stories at Wion, Ford India news, Ford India latest news

ford india

Ford likely to end independent India business with new Mahindra deal: Sources

Gravitas: Ford's ignominious India exit

Ford India yet to spell out plans for workers affected by closure

Suzuki rethinks promise of India's auto market, and it is not alone