American carmaker General Motors on Thursday decided to close its India operations by the end of this year due to mounting losses, near-negligible sales and poor business management.
GM India, which has already shut down its Halol plant in Gujarat last month, said production will continue at its Talegaon factory in Maharashtra as some of the export markets will be fed from India.
But the company will stop selling cars in one of the world’s most high-potential automobile markets over the next couple of months, bringing an end to a painful existence that included crisis such as the emission scandal of 2013 where it was accused of committing a “corporate fraud” by a government panel. GM India started its India operations in 1996 and has so far invested over a billion dollar.
It would also not help us achieve a leadership position or compelling, long-term profitability in the domestic market. Difficult as it has been to reach this decision, it is the right outcome to support our global strategy and deliver appropriate returns for our shareholders,” Jacoby added.
GM India has around 6,000 employees and management said around 400 of these, or about 8%, will be laid off gradually. Around 2,500 employees are posted at its global R&D centre at Bangalore and an equal number is employed in Talegaon plant.
Ironically, GM’s exit from India comes at a time when some of the other global car companies such as Korea’s Kia, China’s SAIC and France’s Peugeot are rushing in on expectations of healthy sales potential. India is the world’s fifth largest passenger vehicle market and is forecasted to be the thirdbiggest by 2020, behind China and the US.
The exit from India comes months after GM moving out of Europe by selling its car operations to France’s Peugeot. Sources said Peugeot may also take control of GM’s Talegaon plant and the US carmaker may source vehicles for exports through a contract manufacturing arrangement. The company is already in negotiations with its Chinese partner SAIC for sale of Halol facility, though a deal is not reached due to nagging labour issues and pending clearances from the Gujarat government.
GM India’s business appeared to have stabilised around 2011-12 when its sales crossed over a lakh units. However, its fortunes started dwindling due to a series of controversies over an emission scandal where a government panel accused the company of engaging in “corporate fraud” in testing of its engines.
The company recalled lakhs of vehicles and followed it up with a poor product strategy by making relatively low-quality cars with Chinese partner SAIC.
Surprisingly, GM’s global CEO Mary Barra said around two years back that growth in India was a pre-requisite to remain strong globally. “It is difficult, but we will have to win the trust of customers. India is a strategic market and a key to our success globally… GM cannot remain a global leader without making a serious investment towards expanding our presence in growth markets like India,” Barra had told TOI in July 2015.
Coupled with a poor local management and inconsistency at the top leadership, the company’s volumes started slipping rapidly and closed the previous fiscal (2016-17) with 26,000 units compared to 1,10,050 in 2011-12. Its dealer network had been reduced to 150 from 240.