Tata Motors to acquire Ford's Sanand plant

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Tata Motors on Monday announced the signing of a tripartite pact with Ford and the Gujarat government to acquire the American auto major's vehicle manufacturing plant at Sanand.

A memorandum of understanding (MOU) was signed between Tata Passenger Electric Mobility Ltd (TPEML) -- a subsidiary of Tata Motors -- and Ford India Pvt Ltd (FIPL) with the Gujarat government for the potential acquisition of FIPL's Sanand facility, including land, buildings, vehicle manufacturing plant, machinery and equipment, Tata Motors said in a regulatory filing.

The MoU signed on Monday also includes the transfer of all eligible employees of FIPL Sanand's vehicle manufacturing operations, subject to the signing of definitive agreements and receipt of relevant approvals, it added.

"Tata Motors has a strong presence in Gujarat for more than a decade with its own manufacturing facility at Sanand. This MoU further reinforces our commitment to the state by creating more employment and business opportunities," Tata Motors Passenger Vehicles Ltd and TPEML MD Shailesh Chandra said.

Rising customer preference for passenger and electric vehicles made by Tata Motors has led to a multi-fold growth for the company over the past few years, he added.

"This potential transaction will support the expansion of capacity, thus securing future growth and opportunity to further strengthen our position in the passenger and electric vehicles space," Chandra said.

The MoU will be followed by the signing of the definitive transaction agreements between TPEML and FIPL over the next few weeks, the auto major stated. TPEML is planning to invest in new machinery and equipment, which is necessary to commission and make the unit ready to produce its vehicles.

With the proposed investments, it would establish an installed capacity of 3 lakh units per annum, which would be scalable to more than 4 lakh units.

"We anticipate this to take a few months. This MoU for a potential acquisition of this unit is a win-win for all stakeholders and helps Tata Motors accelerate the enhancement of its PV/EV manufacturing capacity. This unit is adjacent to the existing manufacturing facility of Tata Motors Passenger Vehicles Ltd at Sanand, which should help in a smooth transition," the Mumbai-based auto major stated.

Commenting on the development, Gujarat's Additional Chief Secretary Rajiv Kumar Gupta said the MoU is intended to catalyse a win-win for all the stakeholders and ensure a smooth transition.

"This effort reinforces Gujarat's image as a progressive, investment-friendly state and its resolve to further strengthen the state as a leading automotive hub in the country," he noted.

It will boost the confidence of the international investment community, reinforce Gujarat's position as the top investment destination in the country and further strengthen the Atmanirbhar vision, Gupta added.

Last year in September, after nearly three decades of struggling to make a mark in India, Ford Motor Co had announced that it would stop vehicle production at its two plants -- Sanand and Chennai -- in the country and stop selling all the locally produced vehicles. It had decided to sell only imported vehicles going ahead as part of a restructuring exercise that impacted around  4,000 employees.

However, the company said it would continue to manufacture engines from its Sanand plant, which will be exported to its global operations.

In a separate statement, the state government said the proposed takeover by TPEML of the Sanand plant has resolved the issue of possible job losses.

Following Ford India's announcement to shut its vehicle manufacturing plant in Sanand in September last year, "nearly 3,000 direct employees and 20,000 workers getting indirect employment were on the verge of losing their employment", it added.

Moreover, the plant closure also posed a threat to the employment of many others who were working for ancillary units providing parts to Ford. Ford India had started its plant in Sanand industrial area after signing a state support agreement (SSA) with the Gujarat government in 2011.

While the vehicle assembly plant is spread across 350 acres, the engine manufacturing plant is spread across 110 acres, said the government release.

Since Ford India has decided to continue its engine production at the Sanand facility, Tata Motors will provide that land to Ford on a lease, it added.

Moreover, both the companies have agreed to share common facilities, such as water, electricity and effluent treatment plant, the release said, adding that the Gujrat government will provide necessary clearances for a smooth transition.

Earlier this month, the US auto major also shelved plans to manufacture electric vehicles in India for exports despite getting approval from the government for production-linked incentives.