Published On:October 1 2008
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Ashok Leyland forms jt venture with US firm
Chennai: Ashok Leyland announced the setting up of a joint venture with the US-based John Deere to make construction equipment.
The Managing Director of Ashok Leyland, Mr R. Seshasayee, said the joint venture Ashok Leyland John Deere Construction Equipment Company would set up a greenfield plant to produce backhoe loaders initially, followed by front loaders and four-wheel drive loaders.
Production would commence in 2010 and the products would be co-branded and sold in domestic and overseas markets, he said. The joint venture will be owned equally.
Mr Seshasayee disclosed neither the proposed investments nor the location of the plant, but said that the plant would need about 60 acres.
“No matter which political party is ruling at the State or Centre, no matter what happens at the international level (financial chaos), infrastructure will be given top-most priority,” he said.
Quoting a study, he said the boom in the construction industry would continue to see robust growth for some more time. The current market size of backhoe loaders in India is estimated at 23,000 units annually and is set to grow at 20 per cent CAGR in the coming years. “For Ashok Leyland, it is very natural to enter this segment as we have been selling tippers and powerpacks for the construction industry,” he said.
The President (Worldwide construction & Forestry Division and John Deere Power Systems), Mr Samuel R Allen, said, “This action enhances Deere’s growth of the construction equipment business outside of North America.” The products to be introduced in India would be tailor-made for local applications. Towards this, already few engineers from John Deere are working with users on the specific requirements.
Ashok Leyland has been on the joint venture signing spree for sometime. Seeking the strategy behind, Mr Seshasayee said there is no one facilitating route to go about business. On the investments required for the joint ventures, he said, “we have enough headroom for borrowing as we are very conservative in debt-equity ratio.”
The $ 24-billion John Deere is present in India through a 100 per cent subsidiary in Pune, which manufactures tractors primarily for exports. It is currently the largest tractor exporter from India and sells the India-made tractors in over 60 countries.