Barra Buying Into Beleaguered GM India’s Turnaround

MUMBAI – General Motors India steadily is losing money and market share, but its turnaround plan has a highly placed supporter: Mary Barra, CEO of its parent company.

Despite a restructuring effort now in its third year, the U.S. automaker’s India affiliate has lost Rs65 billion ($1.04 billion) since its establishment 18 years ago, wiping out its cash reserve.   

The GMI facility at Talegaon is the world’s first flexible plant that simultaneously can make highly efficient 1.0L, 1.2 or 1.3L diesel and gasoline engines. Annual production capacity is 160,000 units, but it has manufactured just 100,000 in two years.

Infrastructure is further underpinned by the 247 dealer outlets GMI maintains in 170 communities.

But since the peak year of 2010, when sales soared 59.8% year-over-year to 110,361 units, volume steadily has decreased. WardsAuto data shows the 57,565 deliveries in 2014 were 20.6% below the prior year and roughly half the 2010 total, leaving GMI with a minuscule 1.9% share of the Indian market.

Sales remained on their downward trajectory in January, dropping 20.5% from like-2014 to 4,410 units. 

GMI’s plight caught the attention of Barra, who visited India in September to assess the affiliate’s options. She conceded GM did not have the right focus, often didn’t understand the Indian market and lacked desirable models. But, she added, “A lot of things went right, too, for GM in India.”  

Prior to Barra’s visit, GM Chairman Tim Solso, international operations chief Stefan Jacoby and Chief Financial Officer Chuck Stevens established a new leadership team with Jacoby in charge of GMI’s strategies, plans and performance. 

The team outlined five key initiatives: Protect the value of Chevrolet brand in India, restore the role of GM’s India Technical Centre as a leader in technology and innovation for developing markets around the world, understand the Indian customer, develop the right vehicles and address quality challenges.

The new strategy shifts GMI’s focus to exports, apart from new models for the local market. GMI has exported 1,052 Chevrolet Beat and Sail compact cars to Chile during the past three months. Likely markets for further expansion are South Africa, Mexico and other Caribbean and Latin American countries.

If You Can't Sell Here, Export There

The automaker plans to export 19,000 cars during 2015 and 40,000 in 2016. But it has not conducted market surveys or substantive planning for exports; the idea emerged simply because GMI was unable to sell in India.

For the local market, GMI is working on the next-generation compact Beat Sedan, which is taxed at the lowest rate in India because it is less than 15.2 ft. (4 m) in length. Due in 2017, it will use GM’s M300 Global Small Vehicles platform.

GMI also was working on a new Global Emerging Market platform called Project Amber, which was expected to be launched in India during 2014 with three new compact cars – a premium hatchback, sedan and SUV. Project Amber, however, apparently has been postponed to 2017.

These plans have several weaknesses.

By 2017, India’s other major automakers – Maruti Suzuki, Hyundai, Tata, Mahindra & Mahindra, Toyota, Honda, Ford, Nissan and Renault – will be producing and exporting compact premium hatches, sedans and SUVs with M300-platform proportions. This in addition to new technologies and projects.

Also cost structure and market preferences likely will change over the next two years, and whether the current Beat can hold the fort until then is not known.

Observers of the Indian market note similar strategies by two GMI presidents and managing directors – the late Karl Slym in 2011 and Arvind Saxena in 2014 – failed to click.

Slym was enthusiastic in 2011, GMI’s best year but also his last with the automaker. Boasting that engines “developed and made by GMI in India were the most suitable for Indian climate and roads,” he had planned six new hatchback, sedan and SUV models and looked to triple sales to 300,000 units annually by 2013.

Slym also wanted to invest $500 million in the automaker with an eye toward GMI growing at twice the rate of the Indian market – at the time 12%-15%. And he dreamed of further raising the company’s profile by producing and exporting several locally built global models.

Slym wanted to move faster, but he did not last at GMI. After technical fudging of vehicle emission certificates and safety recalls cost him his job, he briefly headed a GM commercial-vehicle-manufacturing JV in China before becoming managing director of rival Tata.

Saxena joined GMI just before the turnaround plan was developed ahead of Barra’s visit and has been working on making the business sustainable. But he has had little success mending the automaker’s dented image despite offering attractive, fuel-efficient models such as the Beat, Spark and Sail.

Barra, focusing on the future, said during her September visit that GMI could flourish by adopting a global perspective. Indeed, GM is planning 40 new cars for India and international markets.

“We have put in efforts to develop new products with the Technical Center not just for the local market but also for global applications,” she said. “We will also make sure we understand the Indian customers and develop the right vehicles.

“India is a very significant market, and I see a lot of opportunity here.”