Mahindra and Renault on Friday announced the restructuring plans for their 51:49 joint venture — Mahindra Renault Pvt. Ltd. (MRPL) — through which the Logan car is manufactured.

Mahindra and Renault on Friday announced the restructuring plans for their 51:49 joint venture — Mahindra Renault Pvt. Ltd. (MRPL) — through which the Logan car is manufactured.

Under a framework agreement, the parties have in principle agreed that M&M will take over the operations of MRPL. Renault will continue to support M&M and the product through a license agreement and supply of key components, including the engine and transmission. The aim of the restructuring is to ensure continuity and build on the positive customer equity that exists for the Logan in India.

As part of the restructuring, M&M will buy Renault's equity stake in MRPL, resulting in MRPL becoming a 100 per cent Mahindra group-owned company. M&M will be responsible for the Logan in the Indian market and the Renault name and logo will continue to be used on the Logan till the end of this calendar year.

Also, over the transition period of about 18 months, M&M will rename the car to a Mahindra-owned brand and, thereafter, the car will only display the Mahindra logo, create a refresh and other modifications in line with customer expectations and execute additional localisation to reduce costs.

However, other vehicles built on the Logan platform by Renault globally, such as the Sandero, are not included in this new agreement.

M&M and Renault will continue to work together on an ongoing basis to explore areas of synergy for mutual benefit on several fronts.

“Renault is fully committed to the success of the Logan in India where it has achieved a high level of customer satisfaction. We will continue to extend our support to Mahindra to help it gain market share,” said Katsumi Nakamura, Executive Vice-President, Asia/Africa for Renault said in a statement.

“We reiterate our long term commitment to India through the recent inauguration of our manufacturing facility in Chennai and our plan to launch a range of Renault cars between 2011 and 2015.”

“The new agreement between Mahindra and Renault will give us the opportunity to chart out a new strategy to help drive the Logan brand in India which will also include engineering changes, in keeping with customer requirements,” said Pawan Goenka, President (Automotive and Farm Equipment Sector), M&M.

Addressing the media, Mr. Goenka said “if Renault has to make product changes, it has to think of a global platform while we need to respond to the Indian customer and so the sub-4 metre Logan is only for India and so we can derive the excise benefit.''

Mr. Goenka said discussions with Renault were on to enable M&M to build other vehicles on the Logan platform. “We have the rights for only the Logan sedan and in future, we want to do other Mahindra vehicles from the same platform.''

M&M would focus on the Logan and on turning it around.

“While many products are under development in our other product lines like utility vehicles and sports utility vehicles, our focus in passenger cars is the Logan.''

Rajesh Jejurikar, Chief Executive (Automotive Division & Member of the Group Executive Board), M&M, said Renault would bring in money to pay their share of debt for the 49 per cent stake in the joint venture. “The valuation will be on an impaired value of assets. The turnover of the joint venture is less than Rs.500 crore this year and it has not yet broken even. The total investment to date in the joint venture has been Rs.600 crore.''

Renault will continue to sell CKD (completely knocked down) kits to M&M and get royalty. “In the short-term we will bring about changes in product and styling and set realistic volume goals. The figure of 50,000 units was an outwardly driven expectation and was the expected capacity and target production,'' said Mr. Jejurikar.

The joint venture was established in 2005 and the Logan is manufactured at Mahindra's plant in Nashik and sold through more than 100 Mahindra dealers. It was commercially launched in India in July 2007 and has sold more than 44,000 units.

Over 2,600 units have been exported to South Africa and Nepal.

More In: Business | Companies