GM puts India investments on hold over sluggish sales

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NEW DELHI: General Motors has put investment plans in India “on hold” as the US auto major struggles to make a business case due to constantly declining sales, low production and a portfolio that will shrink to just one model from May.

As the company shuts down operations at its Halol factory in Gujarat from next month, speculation is rife that it may review operations at its Talegaon facility in Maharashtra and could give access of the factory to the PSA Group, the European car major that owns Peugeot and Citroen.

Sources said General Motors is carrying out a thorough review of its India business and a potential partnership with the PSA Group is being seen as one of the options. Talks around India come weeks after the PSA Group, a French auto major, bought out the loss-making Opel division from GM in Europe for $2.3 billion.

When contacted for a comment on talks with the PSA Group, a GM spokesperson said, “We do not respond to speculation. GM India continues to focus on consolidating manufacturing at our Talegaon plant.”

A questionnaire sent to a spokesperson of the PSA Group remained unanswered. The PSA Group has also entered into a partnership with the CK Birla Group as part of which it will consider manufacturing cars from Hindustan Motors’ plant in Tamil Nadu.

The operations of GM in India have been on a decline over the past few years. Asked to comment on the company’s thin product line-up and difficult operations, the GM India spokesperson said, “… global investments in India product programmes are on hold as we conduct complete review of our portfolio. It remains on hold.” The company said that even as the Beat Mini will be the only car that it will produce in India after the closure of the Halol plant, it has built up “enough supplies” of the Tavera MPV and the Cruze sedan (whose production will shut down soon) to ensure a diversified portfolio at retail points.

Asked whether the company is planning an exit from India “temporarily” as it works out a new strategy for the market, the spokesperson said, “We do not respond to speculation. As we have said many times, GM continues to believe in the growth potential of the Indian market and we are currently evaluating our future product portfolio.”

Sources, however, said that things are “not so rosy and (are) really difficult”. A headhunter said that several employees are seeking opportunities elsewhere.

Sales of General Motors India have been on a decline over the past few years, and remain a pale shadow of the robust 1.1 lakh units that the company sold in 2011-12. The company is expected to close this fiscal with just one-fourth of that number, and the future looks even more difficult as the shutting down of the Halol plant means the exit of Cruze sedan and Tavera MPV. The Beat mini, which is also being exported to Mexico in a left-hand drive version, will be the only car in the company’s portfolio for now, a grim picture when compared to the robust product portfolio that the company had just a few years back.

The spokesperson said that the company has a plan as the time progresses. “We are working with our dealers to ensure they have appropriate supply of vehicles ahead of the launch of the new Chevrolet Beat and Essentia.” The Essentia is a sub-4 meter compact sedan that the company has been planning for India, though sources say that “this may also be shelved”.

Dealers are worried, even as the Indian subsidiary’s top management met them as recently as last week to assuage their concerns. “It is not a healthy scenario right now at GM India. We are not satisfied with the meeting with the team here, and have sought a meeting with GM’s global management in the US,” one of the company’s top dealer said, requesting anonymity. “It is not possible to just survive with the Beat mini.”

Another dealer said that the future of so many families — those of employees, suppliers and dealers — is dependent on what the company decides to do with its operations. “We are not being compensated, and are sustaining operations only through servicing of cars,” another dealer said.

Company insiders said that at a recent meeting, the top management apprised senior functionaries of the current situation. “The meeting was held in Singapore, and the company tried to give an overview of its plans. But not many are convinced,” a senior executive said.