If an informal agreement, entered between Ashok Leyland (AL) and Nissan Motor top management officials to resolve the issues related to their LCV Joint Venture (JV), was put up for execution, the big fight between the partners could have been avoided, according to sources close to the development.
The directions included an option of AL buying out Nissan's stake in the Light Commercial Vehicle (LCV) business JV.
AL was also ready to infuse further money into the LCV business, which contributes nearly 8-8.5 per cent of revenue for the company.
Sources however said that the "unofficial" directions were not taken forward.
An informal paper was signed by AL's Managing Director Vinod K Dasari and Philippe Guerin-Boutaud, Corporate Vice President Global LCV Business Unit of Nissan on this behalf, a copy of which was reviewed by Business Standard, says that both have agreed to bring in a solution to the issues faced by JV through certain actions.
It was signed on January 19th at Singapore, according to an affidavit filed by AL in a court recently.
This correspondent sought replies from both the companies on why the directions were not taken forward.
AL's spokesperson said "since the matter is sub judice, we have no comment to offer".
"Our growth worldwide has been has built on long-term partnerships. In the case of Ashok Leyland, we are disappointed they walked away from negotiations and took the most serious option of legal action, which we maintain, is unwarranted. Nissan wants an amicable solution so we can concentrate on building great vehicles for our customers, " said Nissan India Spokesperson.
While on one side, sources close to AL said, it was Nissan which backed off from the plan, sources close to the Japanese automajor said it was AL which did not act according to the plan.
One of the major points of dispute is related to infusion of money towards clearing the tax and other dues including Rs 550 crore of debt, Rs 150 crore EPCG liability and Rs 100 crore over duty and capex. All together comes to around Rs 800-1,000 crore.
Ashok Leyland was ready to infuse around Rs 700-800 crore and it wanted Nissan to infuse another Rs 200-250 crore, added sources close close to the JV.
While sources from Nissan argued that the fund infusion would only support the AL badged products as the Nissan products were "impaired", they also questioned on payment dues to the suppliers by manufacturing JV, in which AL holds majority stake.
They argued that both the companies need to pay the dues to the suppliers taking the models into account.
However, sources close to AL said that the money is not for any future requirements, but to come out from the problems it has met in the past.
The dispute over payment of dues to the technology JV was another point which strained the relationship.
While a source from AL said that the company feels that even though it has paid the dues, Nissan decided to terminate the technology JV, which restrained it from using Nissan's technology to manufacture the LCVs.
However, Nissan sources said that it was after the termination only the due, which was about Rs 2.4 crore was cleared.
Sources said since the JV was terminated AL may not be able to access Nissan's IP to produce LCVs, however AL in the recent press conference has said that LCVs continue to be manufactured and sold under its brand.
While things are turning ugly between the two partners, sources said that there are questions for which answers are still not clear.
These include why did AL decided to go to court after signing the paper, (the injunction would have halted the entire production, including cars, of Renault-Nissan), whether the JV agreed to clear the dues for suppliers, who went back after agreeing to go on a particular direction, why did Nissan terminate technology JV due to payment delay of two months while in the past same JV delayed for four months and last but not the least, whether both Ashok Leyland and Nissan are ready to sit across the table and sort out things.
In 2007, Ashok Leyland and Nissan announced a JV to develop and manufacture LCVs, in the 2.5-7.5 tonne segment. The JV was named as Ashok Leyland Nissan Vehicles, in which Ashok Leyland holds 51 per cent. However the JV had a rough ride in the Indian market.
The partners have formed three companies include Ashok Leyland Nissan Vehicles Pvt Ltd, the vehicle manufacturing company in which Ashok Leyland has 51 per cent Nissan has 49 per cent stake in, Nissan Ashok Leyland Powertrain Pvt Ltd, the powertrain manufacturing company owned 51 per cent by Nissan and 49 per cent by Ashok Leyland and Nissan Ashok Leyland Technologies Pvt Ltd, the technology development company owned 50:50 by the two partners
In November last year, Nissan Ashok Leyland Technologies (NALT) has filed an application with the Bureau of Industrial and Financial Regulation (BIFR). Nissan has confirmed the development and said it as per the Indian statutory process. The technology development company is owned 50:50 by the two partners.
According to the document filed with BIFR, the company was engaged in manufacture of automobile (LCVs). The company, which as per Form A, employed 57 workers, was established on May 22, 2008 and owns a factory located in Kanchipuram district. The company's Audited Balance Sheet (ABS) for Fiscal ended March 31, 2014 showed its networth (NW) as Rs 52.05 crore consisting of paid up share capital Rs 52.05 crore and free reserves Rs nil.
The entire net worth was claimed to have been fully eroded due to the accumulated losses which stood at Rs 172.37 crore. The company's investment in plant and machinery was Rs 9.29 crore.