Ford Motor Company (NYSE: F), which has not made much of a headway by going solo in India, has decided to scale back its ambitions.
One of the earliest foreign companies to enter the Indian market, the auto giant has opted to pare back ownership in its Indian operations.
Recently, Moody's lowered the debt rating for Ford from Baa3 to Ba1, citing operational and marketing challenges, weak earnings growth and cash generation.
Ford said Tuesday it has signed a definitive agreement with India's Mahindra & Mahindra Limited to create a joint venture to which it will transfer its Indian operations, including its personnel and assembly plants in Chennai and Sanand.
The agreement provides for Mahindra picking up a 51% controlling stake and Ford the remaining 49% stake.
Ford will retain its engine plant operations in Sanand as well as its global business services unit, Ford Credit and Ford Smart Mobility.
The joint venture is expected to be operational by the middle of 2020 contingent upon regulatory approval.
Operational control is likely to be held by Mahindra, while governance will be shared by representatives of both companies, according to the Tuesday press release.
Each of the joint venture partners will continue with their own brands and operate their own independent dealer network in India.
Incidentally, Mahindra has three Detroit-area facilities with a combined manufacturing footprint of 400,000 square feet.
The companies said the joint venture is being set up with an objective of distributing Ford vehicles in India and Mahindra vehicles in high-growth emerging markets around the world.
"The joint venture will be responsible for growing the Ford brand in India and exporting its products to Ford entities globally," the companies said in a statement.
The companies have had an ongoing strategic alliance since September 2017.
"Strong alliances like this play a crucial role in assuring we continue to achieve our vision while at the same time staying competitive and delivering value to our global stakeholders," said Ford CEO and President Jim Hackett.
New Offerings Planned
Through the joint venture, the companies aim to introduce three new utility vehicles under the Ford brand, beginning with a midsize utility vehicle that would have a common Mahindra product platform and powertrain.
The companies also plan to collaborate to develop electric vehicles.
Ford and Mahindra see the partnership as catalyzing each other's brands in emerging markets.
Ford also said it will take an impairment charge of $800 million to $900 million related to the value of its Indian assets in the third quarter.
Ford shares were trading 0.49% higher at $9.20 at the time of publication.
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Photo by Ask27 via Wikimedia.
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