Mahindra to invest ‘hundreds of millions’ in US plant

Utility vehicle-specialist Mahindra & Mahindra (M&M) will invest multi-million dollars in the US for a new automotive plant even as it defers investment in India, where the auto sector is passing through a slump.

The Mumbai-based company’s subsidiary Mahindra Automotive North America (MANA) signed a letter of intent in the first week of August with the RACER Trust to set up a plant in Michigan.

As per industry estimates, M&M will have to pump in $1 billion for the greenfield plant. In contrast, at home M&M has deferred investments and slashed 1,500 temporary jobs since April.

This fiscal, the maker of Scorpio and Bolero has seen an 8 percent drop in total sales— domestic and exports—in volumes compared to the same period last year.

The US facility, likely to come up in Buick City, Flint, would manufacture a commercial truck, ROXOR off-road vehicle and a range of other Mahindra vehicles, Rich Ansell, Vice President (Marketing), Mahindra Automotive North America, told Moneycontrol recently.

About 2,000 new jobs would be created in the first phase followed by more in the successive rounds, the Indian automaker said in a recent statement.

“We are not disclosing specific investment at this time, though it’s reasonable to expect it will easily be in the hundreds of millions,” Ansell said.

The RACER Trust was created in March 2011 by the US bankruptcy court to clean up and offer for redevelopment properties and other facilities owned by the General Motors Corp before its 2009 bankruptcy.

“USPS delivery trucks would be made there were we to win the contract. We’ll likely produce a left-hand drive commercial truck off that same platform. ROXOR production would likely move there and we’d keep the Auburn Hills as a production “incubator” for new products we’re bringing to market,” Ansell said.

The Indian automaker is one of the five companies short-listed for the United States Postal Service truck supply contract expected to be awarded later this year.

Each of the 180,000 trucks will cost between $25,000-$35,000 (Rs 17.6 lakh and Rs 24.6 lakh), taking the contract size to $6.3 billion (Rs 44,400 crore). The contract will be executed over a period of five years.

To a question on when the Flint plant would start operations, Ansell said it was “somewhat dependent” on the USPS contract award but it was reasonable to expect that the production would begin “within the next 18–36 months”.

Indian auto giant already has a plant in Michigan’s Auburn Hills which is expected to see a “significant facility expansion” to support new products for the US market.

Last year, MANA launched the ROXOR off-road work and recreational vehicle at Auburn Hills facility, which also serves as its North American corporate headquarters.

The former Buick City is a large land parcel that used to have a mega complex producing vehicles under the Buick brand, a division of General Motors.