Reporter's notebook Mahindra's 'miscommunication' mars Korea-India biz ties

By Nam Hyun-woo

With Mahindra & Mahindra clarifying its intention to unload its stake in the ailing SsangYong Motor, the Indian automaker is drawing criticism for how it has communicated its reasoning.

Earlier, Mahindra said it would seek new investors for the South Korean automaker in which it has a 75 percent stake.

While announcing this, Mahindra claimed “SsangYong and other international subsidiaries have driven a significant reduction in profits,” as SsangYong and Genze, an electric scooter unit of Mahindra, together constituted around 80 percent of the total losses from the company's international subsidiaries.

Though this has been interpreted as “blaming” SsangYong for failing to make profits despite Mahindra's previous investments, industry officials said the money wasn't enough for SsangYong to see sustainable growth.

Mahindra purchased its stake in SsangYong for 520 billion won in 2011, rescuing the company from near-insolvency. The company repeatedly said its investment in SsangYong represented a commitment to work together with the South Korean automaker in terms of mapping out future business strategies. Mahindra spent 130 billion won on the company through rights issuances up until April.

Given developing a new vehicle requires an average 200 billion won, according to industry officials, it's still questionable whether Mahindra acted “fully responsibly” as the largest stakeholder in SsangYong to help the company overcome its spiraling losses, industry officials said.

Mahindra's decision on SsangYong could deal a blow to the economic partnership between South Korea and India, as well, because the Indian government has been paying keen attention to the relationship between the two firms.

A ranking official in the Indian government also expressed his candid worries over Korea Times stories questioning Mahindra's intentions with SsangYong, which the official said “do no good for the two countries' economic partnership.”

Under the Moon Jae-in administration's initiatives to gradually diversify South Korea's diplomacy and trade beyond traditional partners, President Moon is moving toward India and ASEAN bloc countries in an effort to level up business ties there.

However, Mahindra's blaming of SsangYong and a drastic pull-out could hamper the efforts of Moon and Indian Prime Minister Narendra Modi to expand the two countries' economic partnerships.

“It is at Mahindra's full discretion to decide what to do with its subsidiary, but it is also true that many SsangYong employees are disappointed with Mahindra, given SsangYong has a painful history of controversial ownership by China's Shanghai Automotive Industry Corp.,” an industry official said.

In 2004, Shanghai Automotive Industry Corp., which is now SAIC Motor, acquired a 49 percent stake in SsangYong, but gave up on the stake just five years later.