Following the massive executive reshuffle at Mahindra & Mahindra, an Indian auto giant that acquired SsangYong Motor in 2010, market insiders are speculating whether it will hamper investments in its ailing South Korean subsidiary.
According to the Indian company, current Chairman Anand Mahindra will complete his term and take over a non-executive role as a chairman of the board of M&M from April 1.
The group said that he will serve as a mentor and the board’s managing director to manage issues that involve strategic planning, risk mitigation and external interface.
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Mahindra & Mahindra Chairman Anand Mahindra (Mahindra & Mahindra) |
Pawan Goenka, who currently serves as chairman of SsangYong Motor’s board, has been redesignated as CEO and managing director of M&M to fully oversee the group’s entire business from April 1, for a one-year term.
From April 2, 2021, Anish Shah will take over as CEO and managing director of the group. He has been appointed to join the M&M board as CFO and deputy managing director from April 1, for a year.
Market insiders are closely watching Indian conglomerate’s leadership transition and speculating whether additional investments will be make in the Korean automaker that it acquired for 522.5 billion won ($450.7 million) 10 years ago.
Since the acquisition, M&M injected 80 billion won in 2013 and 50 billion earlier this year, raising the Indian company’s stake in SsangYong Motor to 74.65 percent.
M&M said in a statement that the new executives will maintain the group’s values and culture “while ensuring rapid and profitable growth.”
Meanwhile, SsangYong Motor’s unionized workers said in a statement Friday that M&M has promised 230 billion won of direct investment in the company, but based on preconditions of the investment from the Korean government and the automaker’s main creditor Korea Development Bank.
But company officials refuted such claims, saying that M&M has made no such commitment.
“Both M&M and SsangYong Motor have made it clear that a self-rescue plan, such as reducing welfare benefits of employees, should come first before asking for help from the largest shareholder,” an official told The Korea Herald, adding that the labor union will seek an agreement from its members on its self-rescue plan next week.
“But M&M’s investment amount, if confirmed, will be above 200 billion won, considering that it costs up to 400 billion won to develop a new vehicle model over the three-year period,” he added.
SsangYong Motor aims to develop electric vehicles next year by working with a Chinese firms to launch them by 2021. Industry insiders say at least 500 billion will be required for the automaker to stay afloat until then.
In recent years, the automaker has been seeking financial aid from the government and the state-run bank as its earnings have been in a free fall.
The automaker has been recording operating losses for 11 consecutive quarters. In the third quarter this year, its operating loss came at 105.2 billion won, almost sixfold jump from a year ago.
In September, SsangYong Motor and its labor union agreed on a self-rescue plan by cutting welfare programs for employees. It has slashed the number of executives by 20 percent and sold its facilities and real estate to save a total of 300 billion won in capital.
By Kim Da-sol (
ddd@heraldcorp.com)
