GM eyes Halol exit, but SAIC entry still on low gear

As General Motors prepares to bring down the shutters at its Halol plant, in Gujarat, on April 28, it is still a million dollar question if SAIC Motor Corp of China will take over from here.

It was widely believed that the company would take charge of this facility from May 1 but industry sources say this is not likely to happen in a hurry now.

In the first place, there are still issues to be sorted out with at least 600 workers at the Halol plant, who want a heftier compensation package from the voluntary separation scheme.

According to Rachit Soni, a labour union leader at the facility, these workers want at least three times more than the ₹8-10 lakh GM has offered.

The closure will still be on course despite this hiccup but this will be enough reason for SAIC to put on hold its takeover plans. This was made quite evident in a recent statement the Chinese automaker had issued to the media.

While reiterating that it had not signed any formal agreement with GM for the Halol plant, the company added that this deal was subject to “GM’s submission of all government approvals, settlement of labour and all other pending issues”.

According to Soni, nearly 50 workers accepted the GM financial package of up to ₹10 lakh while over 350 opted for a transfer to its Talegaon facility near Pune last October.

In the meantime, SAIC is in talks with other State governments to explore the option of setting up a greenfield facility.

“SAIC has had at least three rounds of discussions with the governments of Maharashtra, Andhra Pradesh and Gujarat,” said a source tracking the developments. Interestingly, it is open to the idea of setting up a plant at Sanand in Gujarat, which is already home to Tata Motors and Ford.

“The company will obviously be looking for incentives when it is planning substantial investments.

At this point in time, State governments are awaiting some clarity on GST since it remains to be seen how incentives will be offered in this regime as in the case of VAT and CST refunds,” added the source.

Nitin Patel, Gujarat’s Deputy CM and Finance Minister, had already made it clear that the days of offering goodies to investors would soon be history.

“No longer will there out-of-the-way concessions offered, as these would require budgetary allocation. Special provisions will have to be made to offer any such concession or subsidy,” said Patel.

In this backdrop, it will be interesting to see how SAIC plans its roadmap for India. Despite worker negotiations likely to delay the Halol change of guard, it still remains the most cost-effective option for the Chinese carmaker. It also remains to be seen if it hires some of these workers or goes in for a fresh recruitment drive.

Assuming that the company decides to set up its car operations elsewhere, Halol could just end up becoming a defunct facility on the lines of other automotive plants like PAL-Peugeot near Mumbai, Daewoo at Surajpur near Delhi, LML at Kanpur and Hindustan Motors in Uttarpara, West Bengal.

From SAIC’s point of view, this is only the first step in a longer India journey. Beyond the location of plant, it will have to get in the right products and then build a retail network in the world’s most intensely competitive car market.

It will be keen on doing better than GM, which has achieved precious little in its over 20-year stint in India.