General motors to shut shop in india; to only focus on exports

American auto major General Motors will stop selling its vehicles in India by the end of this year, unable to turnaround its fortunes here after struggling for over two decades to make a mark. The company will now focus on exporting vehicles from its manufacturing plant at Talegaon in Maharashtra after it stopped production at its first plant at Halol in Gujarat last month.

The decision will impact around 400 employees of GM India engaged in domestic sales and after sales activities. GM said the step follows a comprehensive review of future product plans for GM India and is part of a series of actions taken by it to address the performance of its operations worldwide. GM has also exited four other international markets, including Russia and Europe.

GM Executive Vice President and President of GM International Stefan Jacoby said that after exploring many options the company determined that the increased investment originally planned for India would “not deliver the returns of other significant global opportunities”.

“It would also not help us achieve a leadership position or compelling, long-term profitability in the domestic market,” he said. GM’s sales in India were down nearly 21 per cent in 2016 -17 to 25,823 units. Its production however grew about 16 per cent to 83,368 units most of which were exported. In 2015, GM had announced plans to invest USD 1 billion to enhance manufacturing operations and roll out 10 locally produced models in India while deciding to stop production at its first plant at Halol in Gujarat. However, struggling to make a turnaround in India, the company put on hold the plan and undertook a full review of its future product portfolio here.

GM India has been incurring losses over the years but it managed to cut net loss to Rs 1,003.39 crore in 2014-15 from Rs 3,812.46 crore in 2013-14. “Difficult as it has been to reach this decision, it is the right outcome to support our global strategy and deliver appropriate returns for our shareholders,” Jacoby said.

The company had informed employees of General Motors India about the decision. GM India President and Managing Director Kaher Kazem said at a conference call that the development will impact 400 employees associated with sales and after sales service. “This decision will impact around 400 employees, which is just about 8 per cent of total GM India employees,” he said. Kazem, however, said as the company has to continue its support for existing customers in India, “only half of them are expected to move on by the end of 2017” while the rest would be involved in after sales support.

Currently, General Motors India employs around 2,500 at its Talegaon plant and an equal number at its GM Technical Centre-India (GMTC-I) in Bengaluru. Talegaon production capacity currently stands at around 1.3 lakh vehicles a year which can be further expanded to 1.7 lakh units. Kazem said GMTC-I performs global work for GM and is not impacted by today’s announcement. The company has 150 dealers across India with 200 service outlets. It will engage with them to support existing customers and supply spare parts besides honouring product warranties, Kazem said. He also ruled out GM coming back to India with either Chevrolet or any other brand from the company’s stable.

“Exports will remain our focus going forward as we continue to leverage India’s strong supply base,” Kazem added. Recently, GM India began exporting new Chevrolet Beat hatchback to Mexico, Central and South American markets and will launch Chevrolet Beat sedan later this year for those markets, he said. Last month the company had stopped production at the Halol plant, a move that affected around 1,100 employees. The Halol unit, which had a total annual manufacturing capacity of 1.1 lakh units, was originally planned to be shut by mid-2016.

GM has been in talks with China’s SAIC Motor Corporation to sell the plant. A term sheet was signed a few months back to evaluate a possible deal but the Chinese firm stated that a final takeover would be subject to government approvals, settlement of labour and all other pending issues by the American auto major. General Motors has a checkered history in India. Its first stint in India dates back to 1928 when it assembled cars, buses and trucks under the Chevrolet brand. It was discontinued in 1954. Years later, in 1995, it returned to India via an equal joint venture with Hindustan Motors and sold cars under Opel brand.

In late 90s it went solo to sell Chevrolet brand of vehicles. In 2009, GM turned its Indian operation into a 50-50 venture with its main partner in China, Shanghai Automotive Industry Corporation (SAIC). However, the US auto major became majority partner by buying 43 per cent from SAIC in 2012. In 2013, GM India recalled 1.14 lakh units of its multi- utility vehicle Tavera in one of the largest vehicles recalls in India to address emissions and specification issues. MUNISH SHEKHAVAT

Leave a Reply