Anand Mahindra , the vice-chairman and managing director of the company, says he will cash in on the goodwill generated by South Korean companies Samsung, LG and Hyundai. “Indians like Korean products,” says the 55-year-old Harvard alumnus.
Ssangyong once epitomised the strength of Korean entreprenurship. How do you see Koreans coming to terms with the change in ownership?Do you feel strong cultural differences coming in the way of transition?
One cannot be intimidated by cultural differences or differences in the ambience or the environment you operate. How can you be a global corporation if you are intimidated by the prospects of different cultures? One of the things that attracted us to this acquisition was that Ssangyong had already addressed the labour issues. The labour force has accepted this new reality. Our biggest bet is that the man (YL Lee) who made the turnaround is still at the helm of the company. Pawan is the chairman but Lee is the CEO.
Ssangyong’s original alliance with Mercedes-Benz gave it a reputation of being synonymous with quality. It got eroded in the last few years. What do you think has been missing in its brand equity? How do you plan to make a difference?
What has been missing in the Ssangyong brand equity in the past few years is the perception of stability. Naturally you wouldn’t want to buy a car if the company is unstable or its ownership is constantly changing. But it has registered the highest gain in sales in Korea in the last few months, because there is now a perception that there is a stable ownership which will get financial investment required to sustain these products. The Ssangyong brand was synonymous with high quality as originally it was an alliance with Mercedes Benz. Ssangyong also made the premium luxury Chairman sedan, a highly aspirational product. How do we return to leveraging that cache of luxury, quality, premiumness? My mission (during my last trip to Korea) has been to shore that up… to project we were there for a long term stay and that finally Ssangyong would be synonymous with stability and not just quality.
Will perception change make all the difference?
Korando is already getting great reviews. It is the right product at the right time. What we believe is that coupled with this renewal in pride there is a tremendous desire among Koreans to give Ssangyong a second chance and we will justify it with new products.
M&M is conscious of Ssangyong’s Korean heritage. How do you intend to preserve this and yet pursue global expansions?
More than 50% of Ssangyong outputs are exported. This year Korean sales have grown dramatically. That’s one of our rationale in investing in Ssangyong as it gives us a quantum leap in terms of footprint. Africa is a continent we want to be ahead of our curve. We believe that Ssangyong will be an addition to our portfolio in making that goal a reality. Ssangyong products are higher (in value chain) than Mahindra products today, but they still stand for great value for moneyand would complement our product range and allow us to get into emerging markets.
M&M is truly becoming a global federation and Ssangyong’s acquisition underscores this point. But M&M’s decision-making body, Group Executive Board, does not reflect this change. Will your global CEOs find their way into the 15-member board?
Right now we have no plans. But clearly it will not be representative of the group in future unless it includes some more people. At this point of time there is no immediate plan as the GEB was formed taking into account the key players in every sector and Ssangyong wasn’t even an acquisition at that point of time. We have the leadership in place. It is not something we want to force fit to symbolise a rainbow coalition. It will reflect the leadership of the group.
Investors are wary about investments that M&M needs to make in Ssangyong after its recent foray into commercial vehicles. Would there be a drain on cash flows?
Even after the Ssangyong acquisition we are ending the year with a 0.2:1 debt equity. We have been accused of being overly conservative. Even if we are seen as being a little aggressive, I don’t ever want to be seen as losing that DNA. We will never be adventurous at the cost of financial stability.
Ssangyong products are at least two development cycles ahead of M&M. Do you see the buy as a strategic fit to the existing product range?
I certainly think they have the benefit of the alliance. It would be an exaggeration to say that they are two cycles ahead of us in technology. With our imminent launches, we think the synergy comes in not playing catch up to that extent but from the expansion of the range and the price points they are addressing. Their positioning of products has been slightly higher than ours. It’s not due to a technology gap but due to brand positioning. Now this allows complementing and extending our entire range.