Bankrupt GM pins high hopes on India for turnaround

 
EVEN as General Motors (GM) struggles to emerge from bankruptcy, the auto giant is rolling out new cars in India whose vast market it sees as key to fuelling future growth.
 
The once-mighty auto company is pinning high hopes on emerging economic powers such as India and China to reverse its decline.
 
While thousands of GM’s US employees are getting pink slips, GM India says it has no plans to trim the more than 4,000 workers at its two plants and engineer research and design centre in India.
 
“It’s business as usual," said GM India president Karl Slym last week in New Delhi, where he unveiled GM’s latest offering for India – a clean-burning liquefied natural gas model of its popular Chevrolet Spark minicar.
 
“We’re here for the long haul,” Slym said in an interview.
 
“While the home US market is certainly the most important, China is equally important. India is also key as opportunities here are similar,” he said.
 
Slym has several numbers he likes to focus on when talking about the huge potential for automakers in India and China, with their billion-plus populations.
 
“In America there are about 850 cars per 1,000 people, in India there are seven per 1,000 and in China there are 17 per 1,000," he told.
 
“It’s very clear there’s a high car saturation level in the US while in India and China, it’s not just a replacement market, there are new first-time buyers every day,” he said.
 
“It will all be very important for the new GM,” he said, referring to the slimmed-down, focused and hopefully profitable automaker to emerge from the US bankruptcy proceedings.
 
In China, where Detroit-based GM entered in 1996, it is one of the top automakers, having sold more than one million cars last year. In India, where Japanese-owned Maruti Suzuki is in a solid leadership spot, GM has been slower out of the starting gate.
 
The US auto company, which started selling its Chevrolet marque in India only in 2003, is the fifth-largest carmaker in the country.
 
It sold 65,702 cars last year, up nine per cent from the previous year, but way behind Maruti which sold close to 800,000 cars.
 
Still, GM believes it can only grow in the India as it penetrates the minicar segment which accounts for 80 per cent of Indian car sales.
 
“We can really say we didn’t come to India until we brought in the Spark (in 2007) because the minicar segment is where most of the action is,” said Slym.
 
But the company is still having to work to ensure its reputation is not tainted in India by its US parent’s bankruptcy and is running ads to reassure customers it will still be around to service its cars.
 
GM India’s sales in May fell 11.75 per cent to 5,109 units from a year ago, a decline the company attributes to customer concern about the automaker’s US troubles.
 
However, it says its Asian operations won’t be hit by the bankruptcy as they were not included in the filing and that it is aiming to open new factories in India, China and Thailand even as it shuts down US plants.
 
In India it is also planning two more launches in 2009 – that of its Chevrolet Cruze sedan and a new minicar. It will also be putting a “made in India” tag on its cars.
 
Its new minicar, to be priced at around Rs400,000 ($8,500/£5,340), will be made at its Talegaon plant in western India for the domestic as well as export markets.
 
Up to now, GM India has built its cars using knocked down units from plants abroad.
 
The automaker has invested over Rs50bn ($1.1bn/£ 691,305) to build its two factories in Gujarat and Maharashtra that have capacity for 225,000 vehicles a year – giving it plenty of growth headroom.
 
It is also spending $200m (£125m) on constructing its first car engine and transmission plant.
 
“We’re now going to be a truly local manufacturer in India,” Slym said.