General Motors India exit leaves dealers, customers in a quandary
- Gold prices rise by Rs100 on increased jewellers buying
- Apple moves to store iCloud keys in China, raising human rights fears
- US moving embassy to Jerusalem by May in a faster timetable
- Indian startups can be at the forefront of global change
- PNB fraud: ED seizes Nirav Modi's 21 immovable properties worth Rs523 crore
Mumbai: On 28 April, General Motors India wrote to its 150-some dealers, asking them to prepare for the launch of the new generation Beat, a small car.
“This July, be ready for the Mobility revolution with the New Beat MCM from Chevrolet,” a brochure mailed to dealers said. Mint has a copy.
In the first week of May, rumours of a “big announcement” by GM India, possibly of an exit, started doing the rounds. This wasn’t the first time such rumours had surfaced but the company had always denied them, say dealers. And no one thought the company would ever exit one of the world’s fastest-growing markets, they add.
On 18 May, the company made the big announcement—an exit from the Indian market, the world’s fifth largest by sales, as part of a global restructuring exercise.
ALSO READ: GM India exit is a big mistake
The company’s dealers are distraught. They warn of job losses (around 15,000) and potential losses of thousands of crores, mostly from around 18,000 GM vehicles in stock that will probably not find any buyers now.
Equally distraught are customers. Tanveer Alam, an Indore-based businessman, is worried about the resale value of his Chevrolet Cruze (automatic), a premium sedan, for which he paid Rs17.5 lakh only a month and half ago.
The suddenness of the announcement has taken everyone by surprise. According to a communication from GM to its dealers, the company’s service arrangement with the latter will end on 31 December. Mint has seen a copy of the communication.
Mohit Arora, a partner at Singapore-based investment consulting firm, Mondriaan Group, said, “GM should have given a longer runway to its India operations. The transition cannot be so abrupt,” said Arora, citing the instance of Suzuki Motor Corp. which took three years to wind up its operations in Europe.
In an email response, a spokesperson at GM India said, “Last week’s announcement was a difficult one for GM India and a decision that was not taken lightly at all. It came after a lot of careful considerations and planning and after we assessed many different options.”
With monthly average sales of less than 900 vehicles, GM has been a laggard in the Indian market. The Tavera recall of 2013, when the company recalled 114,000 vehicles over problems related to emissions was a flashpoint. But hopes rose with the India visit of GM’s chief executive Mary Barra, in July 2015 during which she announced closing of company’s Halol, Gujarat facility, and a fresh investment of a billion dollars to breathe life into the company’s sputtering India operations.
GM dealers Mint spoke to are angry. They allege that executives at the India subsidiary were aware of the exit plan but kept them in the dark. “They kept giving us false assurances whenever we confronted them on the rumours,” one dealer who asked not to be identified claimed.
The GM India spokesperson said the final decision was made very recently (before last week’s announcement) and until then it proceeded with the previously stated plans. “As soon as the business decision was made, we updated all our stakeholders as early as we possibly could,” she said.
On 19 May, this dealer and many others received a non-disclosure agreement (NDA) from GM. Mint has a copy of this document that speaks of a “transition assistance programme” to prepare the dealers for expiration of retailer sales and service agreement on 31 December 2017.
Two dealers, including the one cited in the first instance, said they would not sign the agreement. They said the company’s dealers have asked FADA (the Federation of Automobile Dealers Associations) to intervene on their behalf.
The GM India spokesperson cited earlier said the company is meeting dealers individually and working through a plan that addresses their concerns while it fulfils obligations to its customers. “Given the commercial nature of these discussions, these discussion are confidential,” she said.
“How do they expect us to honour the service commitment when we are incurring such a huge loss?” a third dealer asked, speaking on condition of anonymity. Owners such as Alam fear being caught in the cross-fire between the company, which will soon leave and its aggrieved dealers.
The company should handle this better, Arora said.
“It may want to come back to India in the future; it shouldn’t be leaving on such a bad note.”