Ford, Mahindra scrap joint venture to co-develop vehicles, citing pandemic
Ford Motor Co. and Indian automaker Mahindra & Mahindra Limited — citing a change in economic conditions caused in part by the coronavirus pandemic — have scrapped plans for a joint venture under which the two companies would have co-developed vehicles, they said Thursday.
The decision "was driven by fundamental changes in global economic and business conditions — caused, in part, by the global pandemic — over the past 15 months," according to a news release from Ford. "Those changes influenced separate decisions by Ford and Mahindra to reassess their respective capital allocation priorities."
Under the agreement, forged under former CEO Jim Hackett and inked in Oct. 2019, Ford announced it would transfer its India operations to the joint venture. In a move aimed at helping Ford expand its presence in a growing market that had proven difficult for it to penetrate, and at helping Mahidra expand its presence globally, the two automakers had planned to co-develop several vehicles together.
Mahindra owned a controlling stake in the venture. Ford said Thursday that its independent operations in India "will continue as is."
The deal was one of several partnerships formed under Hackett as the Blue Oval sought to reduce costs and increase scale as it marches toward a future it and other automakers are betting will be dominated by electric and autonomous vehicles, a transition that comes with massive investments but little payoff in the near term.
The decision comes as the automakers reached the deadline by which the automakers essentially had to decided whether they wished to finalize the deal or discontinue it. It also comes just months into the leadership of new CEO Jim Farley, who replaced Hackett in October.
In announcing the end of the joint venture, Ford noted some of the goals and strategies that Farley spelled out upon stepping up as CEO.
"The company is actively evaluating its businesses around the world, including in India, making choices and allocating capital in ways that advance Ford’s plan to achieve an 8% company adjusted EBIT margin and generate consistently strong adjusted free cash flow," the company said.
Farley has emphasized the need for the Dearborn automaker to turn around its automotive operations by improving quality, cutting costs and moving more quickly to restructure underperforming parts of the business. As part of his plan to achieve that aim, he's said the company will funnel more of its resources to its strongest businesses and vehicles.