Mahindra vows more investment

Anand Mahindra

By Choi Kyong-ae

Mahindra & Mahindra, India’s automotive giant, on Thursday reaffirmed its commitment in Korea as its chairman met Korea President Park Geun-hye visiting India.

“President Park called on Mahindra & Mahindra to make an additional investment in Korea and the Indian carmaker’s Chairman Anand Mahindra made sure that they will set up a business entity in Korea to seek investment opportunities” Chong Wa Dae said in a statement released in India.

Mahindra & Mahindra has said “if necessary,” it will financially support its Korean unit of Ssangyong Motor which plans to invest 1 trillion won ($943 million) to develop three to four vehicles through the year of 2017.

Ssangyong Motor didn’t specify what kinds of vehicles will be developed under the plan.

In September last year, the company signed an initial agreement to establish an auto finance company in partnership with Woori Financial Group to offer financial services for Korean customers who buy Ssangyong vehicles.

President Park expressed gratitude towards Mahindra & Mahindra’s investment to acquire Ssangyong which applied for a court-led debt rescheduling program in 2009, the statement said.

“Ssangyong Motor is nearly back on track after we acquired the company,” the Mahindra chairman said in the statement.

Park thanked Ssangyong’s decision last year to rehire some 450 workers who were on unpaid leave due to the company’s financial woes. She also asked the Pyeongtaek-based company to hire more Koreans including those who left the company against their will, according to the statement.

After its purchase of Ssangyong, Mahindra and Mahindra has faced speculations that it may transfer Ssangyong’s core technologies to its headquarters in India and leave the country in the end as SAIC Motor, Ssangyong’s previous owner, did to the Korean company.

SAIC Motor, China’s biggest automaker, refused to invest more in Ssangyong and walked away from the company in 2009 after making a $500 million investment and failing to turn it around.

But the chairman has dismissed such speculations in the past years saying they bought Ssangyong as strategic investor and they are planning to expand in Korea.

The statement didn’t elaborate further on the talks between the President and the chairman.

Under the 1 trillion won investment plans, Ssangyong plans to develop a sport-utility vehicle with the project name of the X100 by 2015.

In late November, 2010, Mahindra & Mahindra signed a final contract to acquire a controlling 70 percent stake in Ssangyong Motor for 522.5 billion won.

The Mumbai-based company currently owns a 72.85 percent stake in the maker of the Rexton SUV and the Chairman large-size sedan.

In February last year, Mahindra & Mahindra injected 80 billion won in Ssangyong when the Korean unit raised funds through rights issue.

Ssangyong swung to a net profit in the second quarter of 2013 after posting quarterly net losses over the previous six years that began in the fourth quarter of 2007.

The company posted 6.2 billion won in second-quarter net profit and continued to make a net profit of 1.5 billion won in the following quarter.

Ssangyong, Korea’s fourth-biggest carmaker by sales, sold a total 145,649 vehicles for the whole year of 2013, up 21 percent from 120,717. It is targeting to sell 160,000 autos globally this year.