Pawan Goenka, the managing director of Mahindra & Mahindra and chairman of the board of Ssangyong Motor, speaks during an interview in Seoul, Feb. 15. / Courtesy of M&M
By Kim Ji-soo
One of the best scenarios for a corporate leader would be to come out of a board meeting in a good mood. That’s exactly what happened to Pawan Goenka, managing director of Mahindra & Mahindra and chairman of the board of Ssangyong Motor, Feb. 15. Ssangyong Motor finally announced a profit for the first time in nine years, six years after its acquisition by top Indian automaker Mahindra & Mahindra (M&M) in 2011.
“Today at the board meeting, we announced the results — 58.1 billion won in profit last year, from a loss of almost 61.9 billion won (the year before),” Goenka said as he sat down for an interview at Mahindra Korea’s office in southern Seoul.
In February, Ssangyong announced it posted around 3.6 trillion won in sales, 28 billion won in operating profit and 58.1 billion in net profit in 2016, which were due to the 7 percent increase in sales over the previous year.
But more than anything, the people of Ssangyong Motor now have confidence in their future, Goenka said, not the hopelessness of six years ago. It is a change from 2011 when M&M, the flagship of the India-based Mahindra Group, acquired it after a marriage between Shanghai Automotive Industry Corp (SAIC)and Ssangyong fell through.
Ssangyong Motor, Korea’s smallest automotive company known for its SUVs, has a tough corporate history, going through different owners over the decades, including with the Chinese car manufacturer SAIC (2004-2009). Ssangyong then filed for court receivership in early 2009, and that same year its union staged one of the longest sit-ins — 77 days — in protest of the company’s plan tolay off more than 2,600 workers during its restructuring.Then, in 2011, a Seoul district court approved M&M’s acquisition of a 72 percent stake in the company.
“Without a doubt, it was because of the success of Tivoli. Last year, we sold about 85,000 Tivoli and Tivoli Air, which accounted for 55 percent of the total sales of Ssangyong,” Goenka said. He added that owing to the company’s synergy with Mahindra Group, the company’s purchasing department was able to reduce costs for materials, investments and new product development. Further, by licensing to and purchasing from the group, it also increased revenue.
“We also tried not to be in a hurry and be impatient about a turnaround,” Goenka said, adding that the company knew that with its near bankruptcy, it cannot expect a turnaround in two or three years. As one of most acquisitive companies, M&M has one important premise.
“We started on a premise that to manage a company in a country and culture different from ours, we have to, by and large, let local management run the company,” he said. While M&M gives input and approves investment decisions, it leaves much, including labor relations, to local management. “Also, we believe a strong product pipeline is very important, so we have invested and approved large investments and new products.”
Ssangyong will soon unveil a new product, known only as the Y400, a high-end SUV that Goenka and the company hope will complete the company’s turnaround. Pressed for the vehicle model’s name and specific launch date, he said he wanted to leave it up to his marketing team.
“I am very pleased with the way the product has come out. It looks good, feels good, drives well, and very soon, we will be launching it,” he said. “I hope the Korean public will like it.”
He did add that unlike Tivoli, which was for young people, the Y400 will be Ssangyong’s highest-end vehicle.
“Here, we are attracting professionals who have done well in life and those who want to enjoy their life both at work and outside of work. We are, again, looking at the well-to-do customer, but with a different profile than that of the customers of our older products — a more dynamic and outdoor-oriented customer,” he said.
Goenka said as a small automotive company in Korea, Ssangyong faces certain constraints to introducing new products, but nevertheless, has more products in its pipeline, including an electric vehicle (EV). He said Y400 was approved at the same time the Tivoli was released in 2015, and the Q200 will be released in early 2018 and the C300 in mid-2019. Ssangyong is in the process of deciding on product launches for 2020 and 2021, he added.
The SUV market is one of the main reasons M&M acquired Ssangyong, Goenka said. They saw a good company that had temporarily lost its way, and it decided to come in and help the company recover. Avoiding the negative image of foreign conglomerates that “eat and run” was one of M&M’s challenges when it acquired Ssangyong, Goenka said. That Korea had a developed automotive market while India was an emerging one may well have fueled the fear as well as Ssangyong’s turbulent past with different owners.
“We had to work very hard to erase that perception … (to convey) that Mahindra is not here to steal technology from Ssangyong but that Mahindra is here for the long term,” he said, elaborating that he no longer sees the term “eat and run” attached to M&M. “This is one thing I feel very good about.”
Since the acquisition, M&M has invested 600 billion won in Ssangyong. In the next three years, Ssangyong plans to invest 1 trillion won, and if it needs money for that investment, Mahindra will be there to help.
On Ssangyong’s union, Goenka said he can only comment on it after 2011. He said the union became an internal one, and after realizing that the company was in the midst of a turnaround, the union president became pragmatic and worked together with the company. To date, about 500 workers have been hired back, and the company is in the process of either rehiring or hiring more, he said.
“Mahindra, as a major shareholder, would have the say in long-term financing, but it does not force anything on Ssangyong’s management. “For example, Mahindra has a very formal performance evaluation system, which we offered to Ssangyong and (the management) decided to adopt it,” he said.
Goenka joined M&M as a general manager for R&D in 1993, after working for General Motors in Detroit for 14 years. Holding a doctorate in mechanical engineering from Cornell University, he was instrumental in growing M&M’s R&D capacity and launching its flagship model, Scorpio. He was promoted to managing director in 2016.
On M&M’s recognition as a Time India Awards Innovator of the Year, Goenka attributed it to the company’s philosophy for success, which is accepting no limits, alternative thinking and driving positive change. “This alternative thinking, it is nothing but innovation, that we will look at how we can do things differently than in the past or from what others are doing,” he said.