Indian Economy News

GM drives out of Halol, to invest $1 bn in Talegaon by 2020

New Delhi: General Motors, the world’s second-largest automaker, plans to invest $1 billion in India by 2020. The announcement follows the company’s decision on Tuesday to invest $5 billion in global growth markets like Brazil, China, Mexico and India.

The fresh investment will be used primarily to expand the capacity at  the Talegaon plant from 130,000 units a year to 220,000 by 2025. “GM cannot remain a global leader without making a serious investment in expanding presence in growth markets like India,” Chief Executive Mary Barra said.

The company had invested $1 billion in the country since 1996, when the Halol (Gujarat) plant was set up, but its Indian operations remained marred by losses.

India’s eighth-largest automaker on Wednesday also announced its plan to shut its Halol plant and expand capacity at the Talegaon facility in Maharashtra. The Halol unit had earlier faced labour unrest on two occasions — first, in 2010, when workers went on a strike that lasted three days; and second in March 2011, when their strike went on for six weeks.

A senior official from Maharashtra Industrial Development Corporation told Business Standard the GM CEO was scheduled to meet Chief Minister Devendra Fadnavis on Thursday to make the company’s proposal to expand capacity at its Talegaon plant. The proposed expansion is for exports, for which Talegaon has good infrastructure and ecosystem.

Maharashtra Industries Minister Subhash Desai said: “GM’s decision to expand its Talegaon site proves Maharashtra is the preferred investment destination for global players.”

GM has a market share of 1.8 per cent in India and is the eighth-largest player here. Its announcements follow a meeting of Barra and company president Stefan Jacoby with Prime Minister Narendra Modi in New Delhi. This is Barra’s second visit to India since Modi took charge in May last year. She had last come to India and met Modi in September 2014.

Barra said the company was restructuring and consolidating its Indian operations to have a sustainable business.

She, however, did not specify a timeline by when the company is expecting to turn its Indian operations profitable. The new investments, the company claimed, would create 12,000 new jobs for GM and its suppliers in India. Despite expansion at Talegaon, the company’s India capacity will decline from 280,000 at two plants to 220,000 at one after restructuring.

Operations at the Halol plant, which has a capacity of 110,000 units a year, will be stopped from the second half of 2016. This plant employs 1,100 workers.

Jacoby said the company was working hard to find an alternative solution to Halol. According to the company, Halol’s 1,100 employees will have the option of applying for roles at the Talegaon plant. Temporary workers say contracts of nearly 250 of them have not been renewed this year. However, Nihil Mehta, president, Gujarat wing, Indian National Trade Union Congress (Intuc), says: “Workers at Halol will be paid only their basic wages, void of allowances. This is basically asking them to leave. If someone decides to stay back till June 2016, he or she would either be eased off with a month’s pay or transferred to the company’s Talegaon plant near Pune.” Workers are contemplating legal action.

As for its India plans, GM said it would launch a completely new product portfolio by 2020 and the oldest vehicle then would be less than three years old. It would produce 10 vehicles locally over the next five years, beginning with the SUV Trailblazer in October this year. It also plans to launch its multipurpose vehicle Spin in early 2017.

“The Indian market is expected to grow to eight million units by 2025. We want to be part of this growth”, Barra said. GM also aims to export up to 30 per cent of its production from India over the next decade. Last year, it exported just four per cent of its production. It categorically said there was no plan to export Indian products to mature markets like the US.

Jacoby said the day’s announcement marked the beginning of a new GM in India, adding the company would change its way of doing business here. Growth, however, would not come easy for GM as competition in the multi-player Indian market will further hot up. GM’s operations have been hit by issues like large recalls. Early this month, it announced its biggest recall in India, of 155,000 units of the Spark, Beat and Enjoy, manufactured between 2007 and 2014, to address a potential safety issue related to remote keyless entry accessory. GM had earlier recalled 114,000 units of its sports utility vehicle, Tavera, in July 2013.

Arvind Saxena, president & managing director of GM’s India operations, said the company had not done a good job in the past. “We are committed to fixing that. We are changing our behaviour”. GM’s sales volume declined sharp 36 per cent in 2014-15, while the industry grew four per cent. Sales also declined in the April-June, by 36 per cent, even as the industry grew over six per cent.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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