M&M may slam brakes on investments in Renault JV.

MUMBAI/NEW DELHI: Mahindra & Mahindra (M&M) is likely to freeze investments in its troubled joint venture with Renault, ceding a majority
 
stake and management control to the French company. Future investments will be by Renault, resulting in a fall in M&M’s 51% stake over a period of time, according to a number of persons close to the development.

A top official close to the development said that a capping of investment by M&M is “being discussed and an equity restructuring is also right now on the table”. The two companies will make an announcement on the future of their relationship in the first week of April.

ET NOW, this paper’s business channel, broke the story on Friday.

The two companies are also discussing the possibility of letting Renault use part of the 50,000-unit Logan facility in Nashik to make other vehicles, because only 500 cars are being sold every month, leaving much of the capacity idle.

When contacted, a Renault India spokesperson said: “We are in the final stages of the discussions and will be in a position to make a joint statement very soon. Hence, we would not like to comment on any rumours and speculations.” An email query sent to M&M did not elicit any response.

Pawan Goenka, president, automotive of the Mahindra & Mahindra group, said: “While there are many possibilities for the Logan, nothing has been finalised as yet.” Mr Goenka declined to comment on the new version of the joint venture agreement.

Over the past few months, tell-tale signs of the problems between the two JV partners have become apparent. M&M has recalled several of its key employees to the parent company and Renault has been charting out its plan for India, one that doesn’t involve M&M.

It has moved its corporate office from Mumbai to Chennai, is setting up its own distribution network in India to handle future product launches, has started re-engineering the Logan and has also promised a statement on the future of the troubled joint venture — known as Mahindra Renault Private or MRPL — later this month. However, the Renault design studio will continue to be housed in Mumbai.

Renault plans to launch the Fluence sedan and Koleos, a cross-over vehicle that combines the features of a car and a sports utility vehicle in India in ’11. The Logan is being re-engineered to reduce its price. Sources close to the development said that the length is being reduced to under four metres to make it eligible for an excise duty of 10% against 18% currently.

Logan sales continue to plunge

At the recent inauguration of a new factory by Renault-Nissan alliance in Chennai, Carlos Ghosn, CEO of the company, had said: “It is mutually agreed by both the partners that the market response to the Logan has been below expectations. There are discussions at this point for the repositioning and further simplification of the car. As soon as these discussions reach a conclusion, they will be announced. Until then, the Logan will stay on roads and will continue its regular life cycle in the country.”

Source : The Economic Times