After filing for bankruptcy protection on June 1, General Motors has changed course of automotive world forever. General Motors has been the largest automobile manufacturer in world for over seven decades. It collapsed hard and injured many of those associated with it, as its crashed violently. The reverberations of its crash down were felt in India too.
For the first time General Motors India has stated that it was finding it difficult to raise funds for its under construction engine transmission plant in India. The facility set to come up at a cost of $ 200 million, is unable to raise finances due to the apprehensions of financial institutions concerning its parent company.
To add to the confusion, the vast media coverage on GM’s restructuring and its bid stave off bankruptcy created an image of uncertainty. Indian financial institutions like banks and private lenders have declined to give funds to finance the new engine, transmission plant. The majority of the funds still remains to be raised.
General Motors India officials think that it will be a few more months before the Indian financial institutions feel comfortable about GM’s new status and are convinced to finance its projects.
The company has suggested that the sales fell as customers were worried about GM’s future in India. The company officials blame it on the customer’s perceptions of the unsettled conditions in U.S. General Motors India has always claimed that it remains insulated from the events in United States. To showcase its commitment to Indian buyers, GM has lined up new products for this year. The car launches lined up by GM India are the luxury sedan Chevrolet Cruze in September, and a ‘mini car’, smaller than Spark hatchback. The company will also launch an LPG variant for its flagship model Spark in this month.
The sales have not been healthy for GM India in the last few months. As per the data provided by Society of Indian Automobile Manufacturers (SIAM), the company’s sales showed a constant fall in the first four months this year. In the consecutive months from January, 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 down by 11.75 percent after selling 5,109 units as against 5,789 units sold in the corresponding period last year.
When the market situation worsened since the global meltdown started in October, GM’s competitors Maruti Suzuki and
Hyundai Motors undertook aggressive measures in terms of market incentives to push sales. A weak GM could never afford those attractive schemes. Instead GM is planning to cut costs to make their cars more price competitive as Indians tend to be frugal while buying cars. They plan to increase the localization content in their cars to cut down market prices of their cars.
GM India had made investments worth $ 300 million for setting up a manufacturing facility at Talegaon, Maharashtra. The plant has a capacity to manufacture 1.4 lakh units annually. Additionally, GM had announced to set up a powertrain facility at a cost of Rs $ 200 million. It was scheduled to start operations in 2010 and will be equipped to produce 3 lakh engines per annum. But GM is unable to raise finances to fund this project.
India will play a significant part in GM plans in South Asia, and South East Asia in future. It could also become the hub for its small car manufacturing as India is a small car market itself. Since GM has filed for bankruptcy protection, Indian banks may find General Motors as a viable company.
