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M&M better partner for Aston Martin: UK Labour Union

by ET Posted on 03 Dec 20125,611 Views Comments

Mahindra and Mahindra is a better partner for iconic carmaker Aston Martin: UK Labour Union


Aston Martin range



Auto analysts may still argue about the strategic fit between Mahindra and Mahindra's (M&M) tractors, its boxy utility vehicles and the sleek two door coupes of Aston Martin, but as the talks between the two sides over a strategic stake in the iconic UK car maker gets into top gear, M&M has received a strategic endorsement from Unite - UK's biggest labour union. Even in Aston Martin's sole plant in Gaydon, England, Unite is the sole union for a workforce of 1800, including contract and agency workers. 


Unite's support - though not mandatory to close the deal - will be a shot in the arm for Anand Mahindra, M&M's charismatic group chairman, especially at a time when worker's unions are again taking centre stage in Europe's industrial relations. But for his swelling support base, Mahindra may have to thank his business rival Ratan Tata, who had earlier edged him out to buy Jaguar Land Rover. 


In an exclusive interview to ET, Roger Maddison, national officer for the automotive industry at Unite - the leading union voice for the sector -- said M&M is a better partner for Aston Martin compared to Invest industrial, an Italian buyout fund which is the other strong contender. 


Last Wednesday, Aston Martin's spokesperson confirmed that it, with the support of its shareholders, was in advanced discussions "to secure a capital increase" which will ensure it can deliver its medium- and long-term growth plans. 


"We would support Mahindras as they are a much more promising partner. We will be happier if they come on board compared to an investment company who would be more focussed on profits than on making cars," Maddison said. 


Automotive businesses need continuous capital investments with long term planning, something that only a carmaker can provide, felt Maddison. "In the UK, we are always a bit suspicious of private equity players getting into the car industry. Instead of a 10-year outlook, most of them are thinking of making a quick buck in 10 months." 


Unite faced a similar situation four years ago when both Mahindras and Tata Motors competed with bulge bracket fund One Equity Partners -- known for its leverage buyouts -- to be on the driver's seat for Jaguar Land Rover (JLR). Ford Motors, the then owners of JLR, had proactively engaged with Unite to select the final winner. 


Maddison admits that he now has the benefit of hindsight. "We made the right choice supporting the Tata bid for JLR. They have kept their word and have turned JLR around and expanded the business. They have shown that if you make good cars, you make good profits," admits Maddison. In contrast, he said, "during the financial crisis that followed 2008, we saw how many private equity firms dealt with their portfolio companies by downsizing operations and manpower." 


So with Eurozone once again in a volatile state, Maddison felt "a stabler partner will get the union vote." 


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