Daily Management Review

Operations In India And South Africa To Be Cut By GM


In what is being touted as General Motors Co’s latest steps in a strategy of focusing cash and engineering effort on fewer, more profitable markets, the car maker plans to quit selling vehicles in India by the end of this year and will sell operations in South Africa.
In order to restructure operations in India, Africa and Singapore, it will take a $500 million charge in the second quarter, the Detroit automaker said on Thursday. Most of a planned $1 billion investment to build a new line of low-cost vehicles in India would be cancelled by it.
CM said that cash expense would account for about $200 million of the charge. The company said that in a sector of GM's global business that last year lost about $800 million, the moves are expected to save $100 million a year.
GM would be allowed to focus more money, engineering effort and senior management time on expanding where the company is strong, including China and the North American pickup and SUV business, where GM has a "product onslaught coming" b by the latest restructuring moves, GM President Dan Ammann said in an interview.
In efforts to develop autonomous vehicles and transportation services, it is investing about $600 million a year, GM also has said.
"What are we spending our time doing?” Ammann said. “Are we spending time pursuing opportunities … or all of our time fixing problems?”
Competing in emerging markets outside of China has bene found to be increasingly expensive by GM, like its Detroit rival Ford Motor Co. last year, just 49,000 vehicles were sold in India and South Africa combined by GM.
To build a new line of Chevrolet models developed as part of a Global Emerging Market vehicle program - GEM for short, announcement of a plan to invest $1 billion in India was made by Chief Executive Mary Barra who traveled to New Delhi in 2015 for that purpose. Since then however, GM has failed to gain traction against incumbents such as Maruti Suzuki India Ltd and auto sales overall in India have slumped.
Now, GM will produce vehicles only for export at its remaining factory in Talegaon and plans to stop selling Chevrolet brand vehicles by the end of the year. The company currently employs about 2,500 workers there.
GM said it would continue work at its design and engineering center near Bangalore.
Amman said that to account for about 2 million vehicles a year in global sales volume, mainly in Latin America, Mexico and China, the $5 billion GEM program, which GM is developing with its Chinese partner Shanghai Automotive Industries Corp, remains on track.
"The market opportunity for GEM has continued to grow," he said.
Along with the 30 percent stake the U.S. automaker owns in a truck venture with Isuzu Motors, GM plans to sell its South African factory to Japan’s Isuzu Motors Ltd and stop building Chevrolet vehicles in South Africa. Isuzu agreed in February to buy out GM's 57.7 percent stake in a joint venture in Kenya.
At its GM International Operations headquarters in Singapore, GM also will cut an undisclosed number of staff. The company said that about 200 people work in that operation.
Focus on the highly-profitable North American light truck and sport utility market, Latin America, vehicle financing and transportation services that ultimately could use autonomous vehicles and China have been the main stay of the strategy of that Barra has taken after taking over GM in 2014.

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