hankyoreh

　 Indian automaker Mahindra & Mahindra Limited has been selected as a potential new owner for Ssangyong Motors.

　 Ssangyong and its sales advisors Samjong KMPG and Macquarie Securities announced Thursday that following a comprehensive assessment of three companies that submitted final bidding proposals, India’s Mahindra was selected as the final candidate for priority negotiations. Ssangyong explained that it has made the decision based on a comprehensive comparative assessment of factors such as bidding price, soundness of financing documentation, and capability of managing and developing the company.

　　 Mahindra has shown an active desire to acquire Ssangyong. It recently sent a 25-person inspection team to South Korea, and Vice Chairman Anand Mahindra made a visit himself. India’s largest sports utility vehicle (SUV) company, Mahindra has sought ways of expanding overseas but has repeatedly been stymied by technology limitations. Experts say this appears to be the factor behind its entry into the bidding race, with an eye toward Ssangyong’s advanced SUV technology.

　　Ssangyong and its sale advisors plan to sign a memorandum of understanding (MOU) by the end of this month after receiving a guarantee of roughly 5 percent the bidding amount. Afterwards, it plans to carry out a priority negotiating partner verification and examination in September, nail down the acquisition price in October, and sign the main contract in November to complete the sale process.

　　Analysts say that the selection of Mahindra as a priority negotiating partner represents something of a “last ditch measure” by Ssangyong. While some speculated at one point that the bidding might be redone when Renault Samsung and Nissan Motor Company dropped out after initially being seen as the most likely candidate, the prevailing view is that going through the procedure all over again would not produce a favorable result.

　　 Mahindra is seen as having relatively solid capital strength. The sum of 560 billion Won ($480 million) that it reportedly placed on its proposal is very close to the 600 billion Won needed to repay all of Ssangyong’s current debts. It is also far greater than the 300 to 400 billion Won the market had been expecting.

　　Sources within and outside the securities sector reported that it was far greater than the bids of other final bidding candidates, India’s Ruia Group and the Young An Hat Company, the only South Korean company in the bidding.

　　“Mahindra’s managers all studied in the U.S. and their thinking is globalized, so I understand them to be quite reasonable,” said Kim Ki-chan, business professor of the Catholic University of Korea. “They appear to have sufficient management ability and capital strength to bring Ssangyong back.”

　Mahindra, however, possesses a major weakness, namely the “shadow of Shanghai Auto.” The Chinese automaker announced ostentatious investment plans at the time of its acquisition of Ssangyong, but its promises remained broken, and it has been swept up in a furor as critics have charged it with “taking core technology and running.”

　The conditions of Mahindra are similar, in that it is an emerging economy automaker lacking in fully developed technological ability. This means there is no guarantee that Ssangyong will not see a repeat of the “eat and run” controversy.

　“This type of situation presents sufficient cause for concern about technology going over once again to a foreign business lacking solidity,” said Kim Pil-su, automotive engineering professor of Daelim University.

　Some analysts are saying the deal would be more favorable for Ssangyong than had been the case with Shanghai Auto. While Shanghai Auto eyed Ssangyong’s technology with the goal of developing cars for the domestic market in China, these analysts say, Mahindra has completely different goals for its acquisition, viewing Ssangyong as a foothold for entering the global market.

　Mahindra has made previous attempts to export SUVs to the U.S. and Europe, but repeatedly found itself hamstrung by technical factors, such as the inability to meet emission standards. For this reason, it would have to depend entirely on Ssangyong’s engine technology, which already satisfied the Euro 4 standards. In contrast, Shanghai Auto had to use a completely different approach to its acquisition of Ssangyong, collaborating with global companies such as General Motors (GM) and Volkswagen.

　“The selection of Mahindra also likely took into account the fact that Tata, another Indian company, has been doing a good job of management since acquiring Daewoo Commercial Vehicle,” said Ahn Su-ung, head of the LIG Investment & Securities research center.

　Two difficult tasks remain in the way of Ssangyong‘s normalization, namely the development of new models and exploration of new markets. This is why it requires bold investment from the acquiring company. Some analysts contend that this makes discussions prior to the main contract all the more important following the selection of a priority negotiating partner.

　“They signed a contract with naive, vague expectations at the time of the Shanghai Auto acquisition, but this time they must reflect the investment plan in the contract in more detail,” said Kim Ki-chan. “Since Mahindra recently acquired REVA, an electric car company, it would be icing on the cake if plans emerged for finding a new avenue of escape in things like electric cars.”

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