MUMBAI – On her second visit to India in less than a year, General Motors CEO Mary Barra announces extensive plans for a turnaround by the automaker’s Indian subsidiary.
The four-part strategy outlined recently comprises fresh investment, consolidation of business in a single plant, launching new models and focusing on exports.
One element of the plan is creation of a new family of low-priced Chevrolet vehicles on a single, versatile platform named M300 for the growth markets of India, China, Mexico and Brazil.
GM will invest $5 billion in this project, $1 billion of which is earmarked for GM India’s Talegaon plant. The investment will be used to increase annual capacity of the plant from 130,000 to 220,000 units in two stages and launch new models designed to transform India into a global export hub.
Starting with the Trailblazer SUV and Spin multipurpose vehicle, 10 new models will launch in India over the next five years. This would bring GM’s portfolio in line with the market preference for spacious, comfortable utility vehicles.
Manufacturing costs will be kept low by using 97% locally sourced parts and assemblies.
GM believes developing India as a low-cost manufacturing base complements its plans to refresh its business model in the country.
“Our plants are underutilized right now and we need to clean them up,” says Stefan Jacoby, GM Chief of International Operations, who accompanied Barra on her initial visit to India last year. He hints that improved productivity by GM India, which currently exports no vehicles, could pick up the slack from China, where the economy is cooling off.
Red Ink, Black Days
On the financial side, GM has not made a profit in any of its 20 years in India and has accumulated losses totaling Rs66 billion ($1.05 billion).
WardsAuto data shows, GM India sales peaked at 111,056 in 2011, only to fall by half – to 57,565 – in 2014, when deliveries tumbled 33.7% from the prior year.
The automaker’s 21,792 sales in first-half 2015 were down 34.2% from like-2014, perhaps reflecting the lingering effects of the 2013 scandal involving invalid emissions certifications that led to the recall of 114,000 Tavera MPVs built over the previous eight years.
“We want to have a sustainable and profitable business in India by managing it differently from the way it was done in the past two decades,” Barra says during her latest visit.
The investment in the Talegaon plant comes as GMI plans to shut down by mid-2016 its older, smaller facility in Halol in Gujarat state inherited from its defunct joint venture with Hindustan Motors.
An engine plant is located within the Talegaon facility in Maharashtra state’s Pune district, where more than half its suppliers operate. But by closing the Halol plant, GMI is withdrawing from an emerging automotive center in Gujarat, where companies including Maruti Suzuki, Hyundai, Tata, Ford, Honda are investing more than Rs400 billion ($6.3 billion) and are likely to produce 2.2 million passenger vehicles over the next five years.
Smaller players in India, such as Ford, Toyota, Nissan and Volkswagen, are developing their plants in the country as global export centers to take advantage of the new ports on the west coast of Gujarat.
Arvind Saxena, president and managing director, says GMI eventually plans to export 30% of its production.
The future of the Halol plant after its closing has not been decided. But Barra has indicated GMI may allow another enterprise to use it to generate income and employment for the 1,100 people currently working there.
Summarizing her goals for GMI, Barra says: “We have ensured that we come to the Indian market with a full portfolio of vehicles and to present to the Indian buyers what the Chevrolet brand means.
“We have the full commitment of the Indian plant leadership and the whole cooperation to execute the plan flawlessly.”
