Navistar affiliate enters joint venture to build diesel engines in India

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A wholly owned affiliate of Navistar International Corp. has signed a joint venture agreement with Mahindra & Mahindra Ltd. of India to produce diesel engines for medium and heavy commercial trucks and buses in India. The joint venture, to be named Mahindra International Engines Ltd., will be 51 percent owned by Mahindra & Mahindra and 49 percent owned by Warrenville, Ill.-based Navistar. The combined investment of the two companies will be $90 million over the next five years.

This marks the second such joint venture with automotive manufacturer M&M following a 2005 joint venture that today makes light, medium and heavy commercial vehicles for India and export markets. The new company’s advanced diesel engines will power the full line of trucks and buses produced by the preceding joint venture beginning in 2009. Engine components will be sourced locally, going up to 85 percent within two years.

“This is another step in our global growth strategy to leverage our technologies, great products and manufacturing expertise worldwide to create scale and achieve a competitive cost structure,” says Daniel C. Ustian, Navistar chairman, president and chief executive officer. “With an experienced partner like Mahindra and Mahindra, this represents an opportunity to enter India and a regional export market with trucks and engines, as this region has tremendous growth potential for commercial vehicles and diesel power.”

“This joint venture marks a significant milestone in M&M’s quest to emerge as a leading customer-centric organization,” says Anand Mahindra, VC & MD, Mahindra Group. “Our state-of-the-art plant in India will produce world-class engine models for both the Indian and global export markets. The joint venture will not only extend our existing partnership with Navistar, but the resulting synergies will also see MIEL emerge as a force to reckon with in the global OEM market.”

Mahindra International Engines Ltd. will build a new plant in India, with production startup targeted for April 2009. Initial capacity of the greenfield site is projected to be 25,000 units per year, ramping up to 40,000 per year within five years. Engine models, certified to Euro III and Euro IV emissions standards, will be optimized for the Indian markets and for export to other global markets under this joint venture.

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“The signing of this agreement extends our relationship with an outstanding company, enabling us to participate in the growing India market by bringing advanced diesel technology that will support the growing environmental and commercial vehicle demands of India,” says Jack Allen, president of the International Engine Group. “India is a key to Navistar’s growth strategy as an emerging economy in which commercial truck sales are growing as the region’s road and business infrastructure expands.”

The joint venture company also will provide sourcing services and engineering services to International Truck and Engine Corp. Both M&M and the Navistar affiliate will have five directors each on the board of Mahindra International Engines Ltd. Mahindra will appoint the chairman of the board, and International will appoint the managing director.