Concern in India over GM’s future

Concern in India over GM’s future
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First Published: Tue, Jun 02 2009. 12 36 AM IST
Updated: Tue, Jun 02 2009. 12 36 AM IST
Pune/Mumbai/Bangalore: General Motors India has said its operations here will not be affected by the bankruptcy filing of its US parent, but analysts and executives at companies that supply parts to the US firm say there will be a small, but significant India fallout.
The primary impact would be on vendors and investors, add these people. “Indian vendors will be impacted as General Motors goes through the exercise of pruning production, models and brands. But it is those who have been supplying to brands such as Saturn and Hummer who will be badly impacted”, said Sumeet Tandon, chief executive of Lifelong India Ltd, a supplier of plastic components for GM vehicles in North America, Latin America, Europe and Korea. Tandon, however, is convinced GM will continue in business. Around $5 million (Rs23.5 crore) of the company’s exports of $10 million go to GM.
The auto maker had said in its contingency plan in February that it plans to phase out Hummer this year and Saturn in 2011 if no alternatives arise.
Both consumers and suppliers will have to be reassured about the US car firm’s future, said Deepesh Rathore, managing director India at IHS Global Insight, a market intelligence and forecasting firm, because bankruptcy has a different and more serious connotation in India than it does in the US.
On Monday evening, GM sought to reassure both constituencies that all is well in India.
“We are committed to ensuring that our customers continue to receive a top-notch sales, service, spare parts and warranty coverage experience. Our dealers will also continue to receive all our car lines, while our suppliers will continue to work with us to supply parts and components for our cars, which we will continue to build at our state-of-the-art Talegaon and Halol facilities in the normal course of business,” said Karl Slym, president and managing director, General Motors India Pvt. Ltd, in the statement.
Slym added that the company’s planned launches, too, would happen on schedule.
Still, that’s unlikely to reassure suppliers, some of whom have ventured abroad to better service customers such as GM. Bharat Forge Ltd, for instance, spent $10.84 million to acquire the Lansing, Michigan-based Federal Forge in 2005.
In a recent interview with Mint, Bharat Forge chairman Baba N. Kalyani said: “Our US subsidiary is a different challenge altogether, and unless the Chrysler and General Motors saga unfolds completely, we can’t put any strategy in place for this market.”
IT firms such as Wipro Ltd and Tata Consultancy Services Ltd may also be affected by GM’s bankruptcy filing. Both service GM and in February 2006, Wipro won a five-year outsourcing contract worth $300 million from GM, emerging as the sole Indian winner in a contract that the auto maker split among firms such as IBM Corp., EDS Corp. and Hewlett Packard Co. A Wipro executive, however, sought to downplay the impact of Monday’s announcement. “Given the strategic nature of our relationship with General Motors, we have been working closely with them for the past several months to address any eventuality and ensure minimal disruption and continuity of business,” said N.S. Bala, senior vice-president for manufacturing and healthcare at Wipro.
Much will depend on how the US firm is now restructured, said another executive. “If the fate of these companies is going to be a well-mannered reorganization after getting the protection of bankruptcy courts, and what emerges is a more viable GM and Chrysler, it would mean companies like Systech can help them (GM, Chrysler) cut costs,” said Hemant Luthra, president of Mahindra Systech.
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First Published: Tue, Jun 02 2009. 12 36 AM IST
More Topics: General Motors | GM | India | Saturn | Hummer |