GM India Fights to Save Face, Protect Projects
by MohantyGeneral Motors may have changed course in the automotive path as it filed for bankruptcy protection. It collapsed hard and crashed down violently, injuring many of those associated with it, while going down. The aftershocks were felt in India.
For the first time General Motors India said that it was facing difficulties in raising funds for its under construction engine transmission plant in India. The facility set to come up at a cost of $ 200 million, due to the apprehensions of financial institutions.
The vast coverage by media to GM’s restructuring and its bid stave off bankruptcy created an image of uncertainty. Indian financial institutions have declined to give funds to finance the new engine, transmission plant. The majority of the funds still remains are yet to be raised. GM India officials think that it will take some more months before the Indian financial institutions are convinced to offer finances.
The company has also blamed the falling sales to customer’s view of the uncertainty over its parent company GM. The company officials blame it on the customer’s perceptions of the unsettled conditions in U.S.
According to data provided by Society of Indian Automobile Manufacturers (SIAM), GM india’s sales showed a constant fall in the first four months this year. In the consecutive months, GM posted a fall of sales of 29.18 percent, 12.64 percent, 27.25 percent and 13.667 percent respectively. In the month of May GM India’s sales were was down by 11.75 percent after selling 5,109 units as against 5,789 units posted in the corresponding period last month.
When the market was weak, GM’s competitors Maruti Suzuki and Hyundai Motors India resorted to aggressive in terms of market incentives, but GM could never afford those attractive schemes. Instead GM is planning to cut costs to make their cars more price competitive. They have already invested $ 300 million for setting up a manufacturing facility at Talegaon, Maharashtra. The facility can manufacture 1.4 lakh units annually. In addition to thse GM had announced to set up a powertrain facility at a cost of Rs $ 200 million. It is scheduled to become operation in 2010 and will be equipped to produce 3 lakh engine per annum. But this facility is unable to attract finances as the parent company GM in United States was enmeshed in an unprecedented financial crisis.
But General Motors Asia Pacific operations have always claimed that GM India is insulated from happenings but in vain. The company plans to bring in new products to India. Lined up for this year’s launch are the luxury sedan Chevrolet Cruze in September, and the mini car, smaller than Spark by the end of this year. An LPG variant of its small car Spark is set to launch this month.
Indi will play a significant part in GM plans in South Asia, and South East Asia. It could also become the hub for its small car manufacturing as India is traditionally a small car market. Since GM has filed for bankruptcy protection, banks may find it ease their condition to offer loans to its Indian subsidiary.