MUMBAI/NEW DELHI--Ford Motor Co and Mahindra & Mahindra said on Tuesday they would form a joint venture in India, in a move aimed at reducing risks for the U.S. automaker's local business and cutting the cost of developing and producing vehicles for emerging markets.
The venture, valued at $275 million, will see Ford enlist Mahindra as a partner for developing and selling vehicles in India and emerging markets using the U.S. automaker's production facilities in the country.
By shifting to a joint venture, Ford is also changing its strategy for India, where it has long run an independent operation. The South Asian nation, where auto sales are slumping, once promised growth for global carmakers, many of which are now frustrated after working hard to gain a foothold.
Ford's decision comes at a time when Indian Prime Minister Narendra Modi's administration is trying to boost local manufacturing by cutting corporate tax rates and offering cheap loans to push car sales.
Under pressure from shareholders to make profits, Ford has been globally restructuring its businesses with an aim to save $11 billion over the next few years. Ford President and CEO Jim Hackett said the partnership was "not only a fitness objective" but also gave the automaker a platform to expand in a market like India, where it wished it had done things differently.
"We have other emerging markets where we need to apply the same kind of understanding," Hackett told reporters in Mumbai over a video conference from Dearborn, Michigan.
Ford, which has invested more than $2 billion in India over two decades, will take an $800 million to $900 million non-cash charge to reflect the writedown of its Indian assets, it said in a separate exchange filing. By shelving efforts to go it alone in emerging markets, including India, Ford will save capital for more urgent and potentially profitable endeavours - such as defending its U.S. truck franchise or fixing its operations in China.
