Mahindra cancels bid for $6.3 billion deal to supply trucks to US Postal Service

Mahindra & Mahindra has bailed out from the bid to manufacture small delivery trucks for the United States Postal Service that is worth $6.3 billion. The company has written off the investment it had made towards this project, a top official of the company said.

Mahindra Automotive North America (MANA), a subsidiary of Mahindra & Mahindra, was looking to set up a plant in Michigan in the US and had even signed a letter of intent with the RACER Trust, the Indian automaker had said in August 2019.

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.

Anish Shah, deputy managing director and Group CFO, M&M said: “The $500 million investment by us in MANA was subject to us winning the US postal services bid. We chose not to participate in that bid. We were shortlisted as the final four. What had been invested so far was a very small amount which was essentially in preparation of the bid and all of that has been written off."

The company claims that the investment in MANA would not have met the return on equity of 18 percent targeted by it. This move comes less than a quarter after M&M decided to stop fresh investments in its loss-making subsidiary SsangYong Motor Company and the shutdown of Genze, an electric two-wheeler manufacturing business in the US.

The MANA facility, which was likely to come up in Flint, would have manufactured small delivery trucks, 180,000 units, for the United States Postal Service (USPS), had M&M won the contract.

The cost of one such truck is estimated between $25,000 and $35,000 (Rs 18.75 lakh and Rs 26.25 lakh). The truck-supply contract was spread over five years.