1. India’s Mahindra Buys Italy’s Car Design Firm Pininfarina

India’s Mahindra Buys Italy’s Car Design Firm Pininfarina

18th January 2016

In another signature move, the Indian Automobile major, Mahindra and Mahindra, has brought Pininfarina to its fold for $28 million. The rumor mills were busy about the buyout, but it took more than few months for the acquisition to bear fruits. The total value of this deal is more than $125 million (Mahindra will pay around $28 million for 76-percent, and will make offers for the remaining 24 percent). In addition to the cash payout, Mahindra has guaranteed the Italian design house's creditors more than $125 million and promises to invest a further $20-plus million into the company.

Mahindra has assured that there will be no change in the design house's long standing agreement with other auto makers, and there are no plans to relocate the company to India. Pininfarina will continue to remain an independent company, and will continue to be listed on the Milan Stock Exchange and Mr. Paolo Pininfarina will continue as the Chairman of its board.

"The legendary high-end design credentials of Pininfarina will significantly enhance the design capabilities of the entire Mahindra Group. Given the increasing design sensibilities of today's consumers, product design will greatly influence customer choice and experience, and hence our success," said Anand Mahindra, Chairman of the Mahindra Group, in the press statement.

Pininfarina is credited with shaping the entire Ferraris from mid-1950 to LaFerrari, but of late, it is not so profitable due to the less prominent roles design houses play since most of the companies rely on in-house talent than opting for design houses for the new models.

According to the sources, while there will be no changes to the way Pininfarina operates, what Mahindra is looking for will be to have design inputs for its home grown brand as well as the acquired brand – SsangYong. SsangYong has often been criticized for the looks and that will be one front Mahindra will leverage the power gained by this acquisition.

History of the House of Pininfarina

Pininfarina was founded by Battista "Pinin" Farina in 1930 at Cambiano, Italy. The company started its life as a coach builder and built bodies for Rolls Royce, Hispano Suiza, Alfa Romeo, Isotta-Fraschini, etc. By 1950, Pininfarina started designing Ferrari's and soon they became inseparable. Pininfarina has created countless masterpieces such as 250 GT, Daytona, Cisitalia 202, etc. Alfa Romeo followed Ferrari and entered into a partnership with Pininfarina. By this time, Pininfarina had invested heavily into automobile body production, research and development, manufacturing techniques, etc. It is a fact that the company had one of the first full sized wind tunnels for automotive research, back in 1972. The Alfa Giulietta Spider was the first mass produced car by Pininfarina.

The first foray of this Italian car designer to US was with Nash cars, and Nash heavily leveraged its connection with Pininfarina even though most of the Nash models were reworked to suit American tastes. Though the campaign did not yield the desired results for The Nash, the campaign made Pininfarina a household name in US by mid 1950s.

Pininfarina has not only designed cars for Ferrari, Maserati, Alfa Romeo, Rolls Royce, Lancia, Cadillac, etc. but has also designed rolling stocks, automated light rail cars, bullet trains, buses, trams, people movers, yachts, airplanes, and private jets and also provided consultation on industrial and interior design, architecture, and graphic design.

The Why and How of the Marriage

Mahindra is a conglomerate and operates companies in multiple sectors such as Aerospace and defense, automobiles, motorcycles and scooters, automotive aftermarket, farming equipment, financial services, hospitality, business partnerships, real estate and information technology. The Pininfarina acquisition is under a joint venture comprised of the parent company Mahindra Group, Mahindra & Mahindra (the automotive arm), and Tech Mahindra (the IT arm).

Over the years, Pininfarina has modeled almost 1000 cars and has become the synonym for jaw droopingly beautiful Italian supercar designs.

From an outset, the two companies do not share a lot of common ground, so it is natural for many to feel perplexed by this acquisition. But if one dives a bit deep, this makes perfect sense since it is no secret that Mahindra is eyeing the US market and is trying to get a foot hold there. The acquisition of SsangYong was a first step in this direction, but unfortunately, SsangYong have next to zero value in US, so while the acquisition worked in India, it did not bode well for the US dreams of Mahindra. What Mahindra needed was a name that has a pedigree and lineage and a name recognition, and Pininfarina has them in truckloads. Now with Pininfarina under its wings, Mahindra is in a unique position to enter the niche market with a clean slate, which if the rumors are anything to go by, will happen sooner than later. "Our clients want more from us, consistently. Adding Pininfarina's legendary design skills to our Integrated Engineering Solutions enables a strong entry into Automotive styling, design & development and reinforces our body engineering capabilities. Further, Pininfarina's 25-year design expertise in industries beyond Automotive will give us that winning edge in areas such as Aerospace, Consumer Electronics, Architecture & Interiors and Transportation where we already have a strong footprint," according to CP Gurnani, CEO & Managing Director, Tech Mahindra.

Paolo Pininfarina, Chairman Pininfarina S.p.A. added, "In a globalized world, entrepreneurship and capital do not need a passport. We are joining hands with a $3.9 Billion Technology & Global partner, and part of the $16.9 billion global Mahindra Group, which will not only strengthen our Italian identity but will open more doors. Tech Mahindra's global presence and global delivery model will allow us to compete for a larger pie of the business."

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