Auto focus

Of auto plant closures and labour woes

| Updated on: Aug 13, 2015

GM’s Halol facility will soon join a list of jinxed operations of other carmakers

General Motors will pull down the shutters on its Gujarat plant next year. In the process, it will join a growing list of automakers that have opted for this route since the time India opened its doors to multinationals in the early 1990s.

Looking back

The first entry was PSA Peugeot Citroen which was among the early entrants to this market. It joined hands with Premier Automobiles (PAL) to manufacture the 309 at a facility in Kalyan near Mumbai.

This was formerly its Indian ally’s plant and home to the 118 NE which was hived off as a joint venture with Peugeot.

Things, however, did not go according to plan and the first obstacle came in the form of a lockout following a labour strife in ’96. A series of setbacks followed which included shortage of CKD (completely knocked down) kits coupled with a funds crunch. The partners then decided to part ways and Peugeot was set to take charge of operations.

Headquarters in Paris then abruptly decided enough was enough and slammed the brakes on India. This happened just when employees were gearing up for a new chapter with Peugeot at the helm. Though they were shell-shocked hearing the news, they did not give up and continued to assemble cars. It was a futile exercise as there was no way Peugeot was going to change its mind.

This decision left a bitter taste in everyone’s mouths right from the employees and customers to dealers, suppliers and bankers. They were outraged that the company had left them in the lurch without any sort of prior warning. The closure left over 1,500 workers staring at joblessness and it would take them many years to get over the trauma.

As time went by, there were interested suitors like Mahindra & Mahindra which explored the option of using Kalyan for Project Scorpio. Apparently, the biggest deterrent turned out to be fears of another labour-led lockout and Kalyan finally abandoned all hopes of restarting automobile operations.

Unfortunate end

Daewoo, like Peugeot, was among the early entrants to India and opted for Surajpur near Delhi to locate its plant. The carmaker was keen to grow its presence except that luck was not on its side. It had invested substantially in India and had promising products like the Cielo in its kitty.

The Korean parent, however, was in all kinds of financial trouble and it was clear that it would not be able to last without a bailout of sorts. The local management pulled out all stops in assuring customers that things would soon be back on track but hardcore global realities decided otherwise.

It was a pity because Daewoo had a promising product in the Matiz compact car which had already made a strong connect in the market. Unlike Peugeot, where the top brass in Paris took an abrupt call, Daewoo really had no option but to look for a buyer. Ford first bid the highest but exited from the exercise and this is when GM stepped in as the knight in shining armour.

Operations at Surajpur had, of course, come to a complete stop though good news came in the form of GM offering to buy out the facility. Reports also began doing the rounds that M&M was keen on some of the assets but nothing eventually materialised.

Finally, entrepreneurs entered the scene and set up Argentum Motors to keep the plant going. There has been no update since then though it is clear that Surajpur will never see its heady days again. From GM’s point of view, however, the Daewoo acquisition helped it immensely in setting up an R&D base in Korea and delivering global products.

Last chapters

The other automobile plant which also bowed out from the scene was PAL’s Kurla unit, once home to the iconic Padmini. The company entered into an alliance with Fiat in the late ‘90s by spinning off its auto business. The Italian carmaker eventually took charge of operations at Kurla but just could not build a presence despite tremendous brand recall and promising products like the Uno and Palio.

As in the case of Daewoo, Fiat’s Indian operations were being hit by issues back at the Turin headquarters and it finally needed fresh leadership to put things in order all over again. The company joined hands with Tata Motors to make a fresh start at Ranjangaon near Pune and Kurla exited the Indian automobile map.

The most recent plant closure relates to Hindustan Motors’ Uttarpara facility near Kolkata last year. There was just no way for the manufacturer of the iconic Ambassador to sustain a hefty wage bill and low sales. Uttarpara and Kurla had been around for decades and were part of post-1947 Independent India’s march into industrialisation. However, they just could not cope with market realities of newer models and a youthful customer base.

Finally, mention should be made of LML in the two-wheeler space which was once a close challenger to Bajaj Auto in scooters. Its Kanpur plant which was once buzzing with activity has since ceased operations.

There is doubtless a sense of nostalgia about these closed plants and GM’s decision on Halol will only fuel this in the coming months.

Published on January 23, 2018

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