GM to bring down the curtain on Halol plant

Friday, April 28, will see General Motors call it quits at its Halol plant in Gujarat after over decades of operations. On the face of it, the company has little to show after all these years. It was among the earliest entrants with Peugeot and Daewoo but remains an embarrassing marginal player with a market share of barely one per cent.

Even with the closure of Halol, GM still has its India innings intact with its more contemporary facility at Talegaon near Pune. But even here, there is little to suggest anything dramatic is on the anvil. The company has already called off its $1 billion investment plans for India and does not seem to be in any tearing hurry to grow its presence here.

Clearly, headquarters at Detroit has not prioritised India, at least for now. Perhaps, there is no compelling reason to do so either given that GM is doing roaring business in China where it is among the leading players with Volkswagen. While it is steering clear of ASEAN and Russia, the silence on India is baffling given that it is the third most important automobile market today after China and the US.

In the meantime, speculation has been rife that Halol marks the first phase of a complete pullout from India. The gossip within industry circles is that GM may just decide to exit Talegaon too eventually with one of the key contenders in the race being the PSA group. There is really no substance to support this argument given that the French automaker just announced its India re-entry plans jointly with the CK Birla group. Its only association with GM in recent times came to the fore during the move to acquire Opel and strengthen its presence in Europe.

For all practical reasons, the company will stick on to Talegaon and will most likely use it as an export base to Latin America. Will that be good enough for GM unless it plans to shift a lot of high-cost operations from Korea to India? Logically, when there is no strategy in place to increase its India presence, it makes more sense to use the engineering competencies available here instead.

Getting back to Halol, there is still a lot of anxiety at the ground level even as GM is determined to stick to its exit date. Over half the workforce has not accepted the financial package for this voluntary separation, which means negotiations will continue even after the plant is closed. GM’s loyal Chinese ally, SAIC Motor Corp, had decided to step into Halol but was categorical that all labour disputes would have to be settled first. It is still a million dollar question when this will actually happen and SAIC is ready to move in.

It is no secret that the Chinese automaker is keen on growing its global presence beyond its homegrown terrain it operates in through a slew of joint ventures with big brands like GM and VW. During the global slowdown of 2009, it threw a lifeline to its American partner, which had its back to the wall in the financial crisis that had engulfed Detroit.

SAIC had formed an equal joint venture with GM to reignite the Indian operations, which had also been affected by the global meltdown. There were broad indications of using the country as a hub to export vehicles to the ASEAN region. There was every reason to believe that SAIC was in a better position to understand the costing challenges in the Indian automobile arena and launch the Wuling series of pickups at a competitive price.

Nothing really materialised and GM was soon back in the saddle in India. The worst was over but there was still no indication if it had a plan in place to boost its India presence. In the interim, there were significant investment announcements but all of these were shelved subsequently, which meant everything was back to square one. Perhaps, SAIC will take over from where GM left even in Talegaon subsequently but that would mean getting started at Halol first.

Everything is completely hazy at this point in time and the picture could perhaps get clearer in the coming months when operations begin at the Gujarat facility with SAIC in the driver’s seat. GM dealers could perhaps continue with the Chinese automaker except that all this is in the realm of speculation.

How is it that GM got everything so wrong in India despite the early mover advantage? Rewind to the 1990s when it entered into a joint venture with Hindustan Motors to produce the Opel range at the latter’s Halol facility. There was certainly some traction then in the market for a premium brand but it was equally clear that customers still preferred a value-for-money option, something, which other newcomers such as Hyundai and Daewoo figured out quickly.

GM was also tipped to play a proactive role with Suzuki, which was (and continues to be) the monarch of the Indian market by virtue of its 20 per cent stake in the company. However, the script changed when Daewoo collapsed globally and GM stepped in as the knight in shining armour and eventually sold its Suzuki stake. The Daewoo acquisition helped considerably from the viewpoint of creating a competitive base in Korea, which helped GM roll out a range of products.

Yet, India remained elusive even while GM did its best in a rebranding exercise, which saw a new chapter emerge in the form of Chevrolet. Sure, there was initial curiosity, which saw a surge but the market turned unresponsive all over again. Customers were clearly more buoyed by mass market offerings from other companies be it Maruti Suzuki, Hyundai, Toyota, Renault and Ford. GM just did not figure in the scheme of things.

Back in Detroit, the top management obviously has more things to worry about especially with a new President who is keen on investments coming to America first. China is already doing well and it makes sense to focus on that market. It is really up to GM to take a call on India and figure out if it makes sense to continue or replicate a Halol in Talegaon. If it opts for this move, it would be a rather tame end after a long India stint where there has been little to show.