GM has a $1 bn plan for India, but Gujarat unit close down may affect 1100 staff

GM has a $1 bn plan for India, but Gujarat unit close down may affect 1100 staff

FP Staff July 30, 2015, 09:01:32 IST

The important thing was to consolidate and really focus on one strong manufacturing base, CEO Barra has been quoted as saying

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GM has a $1 bn plan for India, but Gujarat unit close down may affect 1100 staff

New Delhi - After struggling for nearly two decades in India, US auto major General Motors on Wednesday announced a turnaround plan entailing fresh investment of $1 billion (Rs 6,400 crore) and ceasing production at its Gujarat plant to consolidate manufacturing operations in Maharashtra.

The Detroit carmaker, which has the capacity to produce more than 280,000 cars a year in India, will reduce this to 220,000 a year by 2025 as it stops making cars at its Halol facility in Gujarat and modestly raises capacity at its second plant in Talegaon, Maharashtra.

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The move to shut the Gujarat plant will affect 1,100 employees. The unit, which has a total annual manufacturing capacity of 1.1 lakh units annually, will be shut by mid-2016.

General Motors CEO Mary Barra poses next to the company's

“The important thing was to consolidate and really focus on one strong manufacturing base and our Talegaon facility has not only assembly plant but (also has) powertrain plant,” General Motors CEO Mary Barra told PTI, explaining the rational behind the company’s decision to cease production at Halol.

“We want to have a sustainable, profitable business in India. So we had to really do it differently (from how it was done in the past)… I think we are making the necessary changes in India for the long term with a business that has sustained profit,” Barra told PTI.

The company also said it will roll out 10 locally produced models, including SUV Trailblazer and multi-purpose vehicle Spin, from the Chevrolet family in the next five years as part of the revival plan.

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Stressing that GM is in India for the long haul, she said: “The commitment we are making to have 10 new vehicles into the market place in the next five years, all focused on the customer I think speaks about the commitment we are making to the country.”

On the investment front, Barra said yesterday GM had announced a total investment of $5 billion to strengthen business in growth markets in India, China, Mexico and Brazil through the development of a new family of vehicles and “one-fifth of that investment will be in India”. However, she did not give a timeline for turning around Indian operations.

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The majority of the investment earmarked for India will go into strengthening of the Talegaon plant for localisation and capacity enhancement to meet additional products for domestic and export markets.

India’s automobile market has been sluggish for the past few years, with annual sales of less than 3 million cars. But by 2020 analysts expect India to become the world’s third-largest passenger vehicle market after China and the US.

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Even after two decades in India, GM’s sales are falling and it is still losing money. GM lost Rs 3,850 crore in India in the year to March, a company filing with the corporate affairs ministry showed.

General Motors’ focus is on generating superior returns to shareholders, Barra told PTI justifying further investments in India.

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“So as we are investing a significant amount of money in India, a billion dollars, we are committing that we are going to generate appropriate return for our shareholders and lay the foundation to participate in further growth in India because we believe India is a very important market that has substantial growth opportunities and it is very important for GM to be here and we are doing that.”

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Western carmakers such as GM, Volkswagen AG and Ford Motor Co have struggled to increase sales in India, which is dominated by Japanese and Korean auto makers such as Suzuki Motor Corp and Hyundai Motor Co that have a strong portfolio of low-priced, compact cars.

The recent Indian economic slowdown has left Western carmakers with excess production capacity.

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This has prompted some carmakers such as Ford and Volkswagen to boost exports from India to use their capacity and benefit from low labour costs and economies of scale, while at the same time working to increase domestic sales.

GM India’s investment is part of its plan to invest $5 billion over several years to develop a global family of Chevrolet vehicles with Shanghai Automotive Industry Corp (SAIC), the state-owned Chinese automaker.

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The Talegaon plant in Maharashtra has a capacity of 130,000 vehicles a year, which can go up to 170,000. GM plans to increase this to 220,000 vehicles a year by 2025 of which 30 percent will be for exports to Africa and the Middle East.

In 2014, GM sold 56,700 vehicles in India.

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“We are under-utilised right now and we need to clean up,” GM’s chief of international operations, Stefan Jacoby, who has been realigning global operations to squeeze out better profits, told Reuters.

“With this investment we plan to tap India’s potential as a market and as a low-cost manufacturing base for the future,” Jacoby said, adding that India will likely compensate for the slowdown in China.

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With inputs from agencies

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