For General Motors Corp., the Chevrolet Spark is the model that may help the company achieve a 10% market share in Asia’s fourth largest automobile market by 2010.
G. Richard Wagoner Jr., the company’s chairman and chief executive, is in India to launch the vehicle and review GM’s operations. The 54-year-old Harvard educated executive, who’s trying to a revive a firm recovering from $12 billion losses in two years, spoke to Mint about how he’s trying to offset flagging sales in traditional markets, such as North America, by boosting sales in emerging markets, including India and Russia. Edited excerpts:
What’s been your biggest challenge in India and what did you do wrong to get stuck with a 2.8% market share?
It’s growing. If we keep the trend, we’ll be selling big. Obviously you know the history. We came in with premium products in a market where the vast amount of growth and opportunity was in more competitive price points. To be honest, when we came in, the calls that could be made were the ones that were made.
I wasn’t part of it at that time. Our lowest-priced products were smaller products out of Germany, but still with reasonably expensive design. The Daewoo acquisition four years ago gave us a huge opportunity to relook at this region and frankly, other regions, differently because they had a product portfolio in production but, more importantly, (some) on the way to production. Those products were much better suited for markets, including India, that kind of enabled us to evolve our strategy here.
How do you plan to compete with cars that are super, super cheap and those your rivals are planning to introduce in India?
We have cars that are super, super good. We have cars that are very attractive and high quality. We are going to stand behind that quality with the right kind of warranties, we are going to work very hard with our dealers. I do understand the importance of having low cost and offering a really good pricing, but I think consumers pay for value and I think if you give them a very good looking product with very good fits and finishes, the right kind of durability and quality—they’ll pay for that. That’s the way we want to go to market.
But hasn’t that strategy not paid off for you in the existing segments?
We just walked through and looked at a range of products. To be honest, I look at the Aveo from a design perspective and in its category, from my case, it’s significantly more attractive than its competitor products.
We’ve been so far pleased with the sales of that product. I think as we particularly get into mainstream volume categories we’ll be able to convert more customers. First quarter sales are up significantly. We have ambitious sales target this year. We’ve to check in next year and see how it is growing, but my sense is we’ve got a clarity around the strategy now and the products are coming, the capacity is coming and, in some cases, in two steps rather than one, and we’ve got more thoughts behind what we are going to do next now.
So I feel right now that we’ve got the pretty clear vision as to where we want to go. Customers will decide, but I feel we are on the right path.
Does the target of achieving a 10% market share in the next three years seem ambitious? Do you want to pare that down?
Well, we’ll go for it. I think it’s something complicated by the fact that the Indian market is growing faster than we thought. But, I’ll put that very much in the “good problems to have” category. So if we don’t make it because we are using all our capacity at that time and the market is growing faster than we thought, we like that kind of problem.
I think that the significance of pulling off 10% is an indication of the confidence, the expansion of the product portfolio, the confidence we have in that portfolio and in our dealer network, to really move out of the very low levels—2% levels and expand. Logic would suggest if you haven’t been playing in the segment that accounts for 70% of your car volumes and you come in, with what we think is a very competitive car, the upside is significant.
So do you plan to use India as production hub for other markets, considering that costs here are among the lowest in the world?
I don’t rule it out. But that’s not why we are building facilities here right now. The primary focus is the local market, to encourage the development of the local supplier base, which is critical to development. The normal process is exploring suppliers before we end up exporting built up vehicles. But I don’t rule it out at all, nor do I rule out using our engineering centre to play a bigger and bigger role in low-cost product initiatives. But a lot of this is in the developing and emerging category rather than the stuff we do today.
Our strategy pretty much is to build where you sell.
There have been reports about how you are restructuring your (North American) employee health care proposals and to cut costs you are looking at two or three options. Where are you on that?
That will still be subject of work with our unions. We’ve taken out $16 billion in costs in one move two years ago, which was unprecedented, and we’ve more work to do there. But basically there are kind of two pockets of the US industry (that are) structurally uncompetitive with everywhere else in the world: pension burden and health care burden. We’ve covered our pension, but at GM, which is overfunded by $17 billion. We did that in putting $50 billion into pension in the last 15 years or so. In healthcare, we need to make a similar kind of move to take it off the table. It’s not unique in the US to GM. It’s an issue for the US economy. We are scheming ways to reduce that burden and any significant move will require the co-operation of the union.
Prashant Gopal contributed to this story.