Business is a cut-throat industry, none more so than the auto industry and whenever car manufacturers end up signing a strategic alliance, quite often it doesn’t end so well. Think VW and Suzuki, think BMW and Rover, think Ford and Volvo, think Ford and Aston Martin, Think General Motors and Vauxhall, although the latter wasn’t technically a strategic alliance. All of these examples are classic cautionary tales, often repeated with few lessons learned.
Strategic alliances are signed to give a competitor access to another competitor’s markets, on the surface, it’s all smiles.
Behind closed doors, both sets of management are already plotting behind the others back. So why has Ford recently signed such a strategic alliance with India’s Mahindra?
The answer? to gain access to the far-east compact/midsize SUV markets, basically to sell more cars and increase net profits by essentially piggy-backing off Mahindra’s manufacturing efforts.
The partnership, not yet revealed in full detail, allows Ford to sell a midsize model developed from a Mahindra platform which will be resold and badged as a Ford.
In other words, Ford has signed a deal with Mahindra that allows them to put a Ford Badge on a Mahindra made vehicle.
The overall idea is to market Ford idealism into the far-eastern buyer’s consciousness by appealing to their local buying habits and in turn hoping such a buyer will go full-on Ford.
Think of it as a form of modern-day corporate missionary work.
We do know some details, Ford could end up reselling Mahindra powertrains back to the US market, although the protectionist President Trump may well veto such a deal from “shit-hole” countries.
It’s highly unlikely Ford will use and or resell Indian made engines back to the US markets. It’s more likely Ford will establish an engine manufacturing production facility in India.
Because of the lower wage bill, Ford could get a favorable ROI on each engine made and sold, however, the Indian government would probably move to protect their automotive industry.
Ford doesn’t normally do strategic alliances, they prefer to increase their product portfolio through external acquisition. But those days are over, for now.
The Ford/Mahindra strategic alliance has set goals for the next seven years. Prediction, it will not last that long and if does Mahindra will find that Ford has been screwing them over from the beginning.