Industry

Nissan exits ventures with Ashok Leyland

Japanese auto major Nissan Motor Company has decided to end its over eight-year-old joint venture arrangement with the commercial vehicle maker Ashok Leyland. The duo has three running joint ventures.

The Nissan move comes in the wake of an ugly row between the two companies which saw the Japanese company serving on Ashok Leyland a letter of intent to terminate one of the joint ventures and the Hinduja flagship firm hitting back by issuing a legal notice.

Under an agreement penned by the two companies on Wednesday, Nissan will sell its entire share in the three joint ventures to Ashok Leyland. These joint ventures were formed in 2008. The ventures will become wholly-owned Ashok Leyland subsidiaries once requisite regulatory approvals are in place. The price details of the share buy-back are yet to be worked out.

Sources are hopeful that the entire process would be formalised later this year.

In May 2008, the two companies formed three JVs - Ashok Leyland Nissan Vehicles Ltd. (ALNVL), a vehicle JV; Nissan Ashok Leyland Powertrain Ltd. (NALPT), a power train alliance; and Nissan Ashok Leyland Technologies Ltd. (NALT), a technology partnership. Between them, the two partners have invested close to Rs. 1,000 crore in equity in these ventures.

Interaction continues

The disengagement is expected to help both companies enter a new phase in their business interaction. “The new phase of business interaction will begin immediately,” a statement issued by them said. As per the agreement, Ashok Leyland would continue to build, under a licensing agreement, the Dost and Partner light commercial vehicles, which are based on Nissan’s design, engineering and technology. “Servicing and parts availability for customers will be ensured by a technical support arrangement. In addition, the two companies have agreed to continue a deal to procure made-in-India parts to Nissan.”

“We are pleased to be moving forward into a new phase of our business with Ashok Leyland,” said Philippe Guérin-Boutaud, Nissan corporate vice-president in-charge of the global light commercial vehicle business unit. “Nissan is committed to India and has invested substantially in manufacturing, research and development and sales networks in the country. Under the licensing arrangement with Ashok Leyland, Indian commercial vehicle customers can continue to benefit from Nissan’s engineering, with servicing and parts availability also ensured,” he added.

Vinod Dasari, Managing Director, Ashok Leyland, said, “we have decided to acquire Nissan’s stake in the three joint venture companies, and this will help focus our efforts to concentrate on our core business initiatives and our customers.”Expressing a sense of relief over the development, sources in Ashok Leyland indicated that the new arrangement would ensure product continuity. Also, it would provide possibilities for expansion as well, they added.

The much talked about Nissan-Ashok Leyland marriage turned sour with the Japanese company serving a notice for the termination licence on NALT reportedly due to delay in a bill payment of Rs.2.3 crore.

The other joint venture NALPT allegedly also held back supply of engines over trade dues. Problems continued for the alliance when Ashok Leyland took a Nissan venture to a district court in Tamil Nadu for using the manufacturing assets of a joint venture company in order to produce Nissan brand of cars instead of passenger vehicles developed and produced out of the joint venture.

Provided for

Ashok Leyland has provided for the impairment of its investments in these joint ventures. “The balance sheet is completely cleaned up of these impaired assets,” sources in Ashok Leyland said. Similarly, many summers ago, Suzuki of Japan had to quit its JV with Venu Srinivasan-led two-wheeler company of the TVS Group to set up its own independent venture in India.

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Printable version | Nov 24, 2020 9:28:51 AM | https://www.thehindu.com/business/Industry/Nissan-exits-ventures-with-Ashok-Leyland/article14626687.ece

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