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Business News/ Companies / News/  GM staff face heat after Tavera recalls

New Delhi/Mumbai: A day after the government ordered a probe into General Motors India Pvt. Ltd’s (GM) recall of 114,000 units of its Tavera multi-utility vehicle, more than 20 executives, including four top managers, are being asked to leave the company, said three people familiar with the development.

The Indian government has indicated that the problem with the vehicle may be more critical than previously believed.

“It is not a case of malfunctioning but a very basic problem with the engine," said Vijay Chhibber, secretary, ministry of road transport and highways. “GM has accepted that they have defaulted on the vehicle."

On Wednesday, General Motors said it was recalling the Taveras to address issues related to emissions and specifications.

On the same day, The Press Trust of India reported that the ministry of road transport and highways and the department of heavy industries had launched an investigation into the vehicle testing set-up in the country.

A General Motors India spokesperson declined to comment on the departures of the executives.

“We will not comment on an internal personnel matter," the person said. “Our focus at this time continues to be working with regulatory authorities and consumers to resolve the Tavera emissions issue to their satisfaction."

Meanwhile, the US parent of General Motors India has taken the issue very seriously, said a person familiar with the matter.

“They don’t want to compromise on ethics," he said. The company is likely to issue some transfer orders besides asking some senior executives in key positions to leave, he added.

General Motors India may also be penalized, he said.

Chhibber said the government probe will be concluded “in a few days".

“We have asked the ministry of heavy industry to probe into the matter. They have formed a committee which would be headed by the NATRiP CEO (Nitin Gokarn)," he said. National Automotive Testing and R&D Infrastructure Project, or NATRiP, is a joint initiative of the state and Central governments with the industry.

The Taveras being recalled were produced and sold between 2005 and 2013.

To be sure, the Indian subsidiary of the US automaker had relaunched the Tavera in 2011 to meet upgraded Bharat Stage IV fuel emission norms.

According to one of the three people familiar with the development, the repercussions of the move may be widely felt.

“At least two people who were involved with Indian operations three years ago and are serving in GM in North American markets may also feel the heat," he said.

Most of the people who may be asked to leave belong to departments such as finance, quality, engineering, purchase and sourcing, he said.

“Two of the top Indian executives are also under the scanner," this person said.

Mint could not ascertain the names of the people who will be asked to leave.

A top official, whose role may also be questioned, said, “Yes. I think so", when asked if people were being asked to leave.

When asked whether he had received any intimation from the company, the person said, “I would not like to disclose that."

He directed Mint to the company spokesperson on other questions.

According to one of the persons familiar with the matter, the issue was to do with the weight of the vehicle that went for testing to the Automotive Research Authority of India (ARAI).

ARAI is a co-operative industrial research association established by the automotive industry with the department of heavy industries.

“The Taveras, which were sent to ARAI for testing, were lighter and hence passed the emission test. But the ones which were sold in the market were heavier and would emit more CO2," said the person cited above.

The General Motors spokesperson agreed that the company’s “internal audit revealed inconsistencies in emissions results".

While government-approved testing agencies such as ARAI and the International Centre for Automotive Technology (ICAT) carry out random sampling to gauge conformity with norms, it wasn’t clear if GM’s Tavera was involved in any random checks.

On whether the firm had received any probe-related notice from the government, the company spokesperson said GM India was “not aware of any such development".

An expert with sector-specific consultancy IHS Automotive said that any decision to ask executives to leave would be an “acknowledgement on behalf of GM."

“They seem to have been taking responsibility. The whole issue is unfortunate but not something unthinkable," said Anil Sharma, senior analyst, IHS Automotive.

Chibber of the ministry of road transport and highways said, “It should have not happened in the first place. There has been a breach in the protocol." He added that ICAT and NATRiP, both of which come under the ministry of heavy industry, should “pull up their socks".

“Unfortunately unlike other markets, the consumer movement in India is not strong. Had it been, it would have impacted sales," he said.

Vehicle recalls, which were unheard of until two years ago in the Indian market, have grown in the last 12 months.

Mint reported on 23 July that auto companies have recalled about 210,294 cars, or about 11.43%, of the 1.8 million sold in the 12 months ended June, according to data provided by the Society of Indian Automobiles (Siam), an industry lobby group. The seven recalls in the current year ended June cover nine car models.

In July alone, including the GM recall, there have been three such instances.

While there was no penalty clause in the Voluntary Recall Code announced on 2 July last year, Siam had recommended that the government take action if members failed to recall vehicles when required.

Sharma of IHS said the GM recall raises the need for a formal recall policy by the government.

“We don’t have any clearcut guidelines. GM issue is a case of complete ignorance of regulations in the country," he said. “There is a need for legal binding on recalls."

In the US, which is the world’s second largest auto market, a company could be fined as much as $32.4 million by the government for failing to recall vehicles due to faulty parts.

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Updated: 26 Jul 2013, 07:45 AM IST
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