It will be a tightrope walk for GM at Halol

It was barely a week ago when General Motors India announced that its Halol facility in Gujarat would be operational till March 2017. This meant an extension of its closure plans which were due to kick in during the course of this month.

Yet, it remains to be seen even if this revised date will actually be implemented with the Gujarat government tightening its stance against any such effort. The Labour Commissioner has cited non-compliance of Section 25 (O) of the Industrial Disputes Act, 1947 when GM applied for closure of the plant that is home to the Tavera, Beat and Cruze.

"The company had applied for closure about eight months ago but did not justify its plan. The Labour Commissioner then raised an objection for non-compliance of provisions in the Industrial Disputes Act," said KO Shah, Additional Commissioner Labour.

The Labour Commissioner had held three hearings with the company’s representatives and worker leaders. According to Shah, GM withdrew its closure application sometime around February-March when it did not get clearance.

He said the government is clear about its stand in such applications where protection of workers' interests is priority. “If GM cannot find a buyer or does not come up with an appropriate exit plan even by March 2017, it again means non-compliance with the provisions of the Act,” he said.

Political play With Gujarat heading for Assembly elections in 2017, GM’s exit plan may just end up queering the political pitch. While the ruling BJP is keen to home its pro-worker stance, the opposition Congress does not quite buy into this posturing. 

"It is apparent that the State has forced GM to stay put in Halol for its own political purposes. An exit of such a big brand before the elections will hit its image. These are short term measures as labour issues have been constantly neglected in Gujarat," said Ashok Panjabi, a lawyer and Senior VP, Gujarat Pradesh Congress Committee. 

It is not clear what all these could mean for GM which has made it clear that its growth engine in India will be its Talegaon plant near Pune. Reports have been doing the rounds that its trusted Chinese ally, SAIC Motor Corp, was open to the idea of buying out the Halol facility but this is not going to happen now.

"SAIC does not seem very keen on acquiring this plant and is exploring greenfield options in Maharashtra, Tamil Nadu and Andhra Pradesh,” said an industry source familiar with these developments.

A GM spokesperson did not comment on the SAIC issue. "We do not respond to speculation. As we continue to work through options for the Halol assembly plant, GM India will extend production at the site until March 2017," said Swati Bhattacharya, Vice President, Corporate Communications, in an email reply.

It now remains to be seen if the script goes off smoothly and GM exits Halol on schedule next year. The company has indicated that it is keen to give a fresh impetus to its India innings which has been little to write home about thus far. Even though GM has been around for nearly two decades, its market share is embarrassingly low and revival efforts have yielded little dividends.

Strategic partnership Last year, the American automaker announced that it would invest $5 billion to develop a new range of Chevrolet vehicles for emerging markets. This drive was planned jointly with SAIC in India, China, Brazil and Mexico with a focus on compact cars and SUVs. It was in this backdrop that GM’s CEO Mary Barra, said the company would pump in $1 billion in India as part of its comeback plan.

Interestingly, it was SAIC which turned out to be GM India’s lifeline in 2009 when the global slowdown had Detroit’s automakers on the mat. The two teamed up with the objective of rolling out a slew of products including the Wuling series of pickups. Such an arrangement was the best bet for SAIC which was keen to enter other markets and, with GM, grow its presence in the Asia-Pacific region. There could not have been a better starting point than India and the duo was hopeful that it could replicate its China partnership magic in India too.

Going forward, the GM-SAIC combine planned to enter other markets in the ASEAN region like Malaysia, Indonesia, Thailand and the Philippines. Eventually, nothing much really materialised once GM was back on track with a stronger balance sheet and bought out a substantial part of SAIC’s stake in the originally proposed India JV. In the process, the proposal for small commercial vehicles was also put on hold.

Today, GM has pruned its operations in Thailand and Indonesia with the focus being on China, its largest market, and India. Its market presence here is almost minimal but there are other obvious benefits in the form of Talegaon doubling up a viable manufacturing hub for exports.

For the moment, though, the priority would be to ensure a smooth transition from Halol next year.

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