The Hindu Business Line : GM India believes worst is over

GENERAL Motors India Pvt Ltd (GMI), which wrote-off accumulated losses worth Rs 373.40 crore in October 2002 by going in for a restructuring of its equity base, feels it has turned the corner for the first time since it began operations in Gujarat 10 years ago.

Mr Aditya Vij, President and Managing Director of GMI, points at fresh investments to the tune of Rs 600 crore that the company is making at its Gujarat plant as global auto major's commitment to the Indian markets. However, the fact remains that the GMI has run up hefty accumulated losses in the last couple of years.

"Typically, we write-off investment made on the engineering side. In the case of Chevrolet Tavera, which has been 21 months in the making, GMI would have incurred an expenditure of Rs 500 crore, including production capacity that has been ramped up at Halol where we hit the three-shift mode only a fortnight ago. Last year too was not profitable, even on the operational side but that is set to change during this fiscal," Mr Vij said.

Even as the company went in for two shifts last August and thereafter for three shifts in May this year, the sales have yet to reflect this trend, though the company claims to have touched 6,600 units in the first four months of the current calendar year. While GMI is not yet ready with the figures for 2003-04, the sales in the previous two years have not been all that promising.

The extended 18-month accounting period between April 2001 and September 2002 saw 12,080 vehicles getting sold with the next six months coming good for 3,077.

As the company claims a production of 15,155 units in 2003 (calendar year), the one-third capacity utilisation jinx seems to have been broken. With no figures on sales and profitability yet forthcoming for 2003-04, admittedly another loss-making year, what is significant is that GMI managed to run up a loss of Rs 110.04 crore in only six months of operation during October-March (2002-03). Coming as it did close on the heels of the company cleaning up its balance sheet by way of a Rs 373.40-crore loss write-off operative from March 31, 2002, industry watchers are rather circumspect about GMI's claim of profitability for the current fiscal.

What bailed out the company during this period was fresh infusion of equity by General Motors Asia Pacific Holdings LLC. The nominated subsidiary of GMC subscribed to 9.65 crore shares of Rs 10 each and 1.56 crore shares of Rs 10 each and 2.10 lakh shares of Rs 1,000 each - the latter two coming in the form of cumulative redeemable preference shares in GMI. The GM Asia Pacific's holding in GMI as of March 31, 2003 stood at Rs 461crore and the last 12 months would have seen it creep closer to the four-figure mark.

"Till date, GMI has not gone in for any commercial borrowings or term loans from India towards working capital as the entire funding has been met by foreign equity. This has given us the option to write-off loans whenever deemed necessary, as otherwise, it would reflect poorly on the global profile GMC as a profitable organisation. We are convinced that our entry into the Indian MUV segment will help turn the corner and this is being backed up by fresh investments in the 60,000-capacity paint shop," said Mr P. Balendran, Vice-President, GMI.

But it may take a while before the numbers start fitting in and till then the company could either stay the course with the present slew of vehicles or lay new platform for brands like Matiz, already under the GM-Daewoo umbrella. Surely, the company could not be too keen to write off further huge amounts towards product development even if it translates into operating profits as General Motors enters its second decade of operations in India.