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The country’s third-largest auto player, the Rs 44,000-crore Mahindra & Mahindra Ltd is looking to rejig the structure of its auto business. For the first time, all vehicles — cars, utility vehicles, tractors, two-wheelers and commercial vehicles (CVs) — will be brought under one umbrella.
Confirming this, Pawan Goenka M&M’s president, automotive & farm equipment businesses, recently elevated as an executive director to the M&M board, added that the reporting structure will change with the two-wheeler unit now also reporting in. This business, together with the two CV arms, has piled up accumulated losses of close to Rs 2,000 crore.
The reorganisation begins with Rajan Wadhera, currently R&D head (CEO for technology, product development and sourcing), taking charge of Mahindra Trucks and Buses (MTBL). Rajesh Jejurikar, now CEO of M&M’s tractor & farm mechanisation vertical, will be given additional responsibility of Mahindra Two Wheelers (MTWL) from April 1, 2014. Both will report to Goenka.
Recent forays into the two-wheelers and heavy commercial vehicles segments, as also a string of joint ventures, have dented the firm’s bottom line but M&M believes some restructuring can help it save on taxes. Moreover, by integrating the back ends of the subsidiaries, the firm also hopes to cut costs and turn around the businesses more quickly.
“The two-wheeler business, which was earlier independent, will now be brought under the AFS (automotive & farm sector) umbrella. Rajan Wadhera, who has a background in commercial vehicles, will manage MTBL and Nalin Mehta (MTBL MD & CEO) will report to him. Two-wheelers will be looked after by Rajesh Jejurikar,” Goenka told FE.
The next stage of restructuring involves merging loss-making businesses into M&M. In February this year M&M bought out US-based Navistar International’s 49% stake in two eight-year-old joint ventures for CVs. M&M has announced plans to invest up to Rs 500 crore in the CV business and hopes to sell 50,000 units a year in the next three to four years. With truck demand on the decline due to slowing macroeconomic growth, MTBL’s FY13 volumes were down 14% at 11,902 units while April-October sales fell a further 31% to 4,848 units. M&M will now integrate MTBL into itself by the end of the fiscal, a move that is expected to lead to tax savings and lower costs across functions like logistics, HR/IT and raw material sourcing.
Navistar’s stake in Mahindra Navistar Automotives (now MTBL) and Mahindra Navistar Engines