GM addresses damage control issues in India

General Motors India to address the issue of resale has run a pilot called Chevy OK at 11 dealerships where customers can sell and exchange cars. These outlets are visited frequently by people who want to exchange their Opel (Corsa and Astra) cars. It requires a different staff. And for the small dealers, this might not be the right thing.
In the days after the bankruptcy announcement, General Motors India sales team called up prospective customers who had come to the dealerships but had not made any purchase. Ten per cent said that they had decided against it because of the news from the US. Immediately, the company stationed 35 key people at critical dealerships that fetch the company 70 per cent of its volumes. These people were asked to address any query that the prospective customer may have.
Visits to two showrooms in New Delhi find the staff well-informed about the bankruptcy proceedings in the US. They are willing to spend time with prospective customers to answer any query. Most customers, on their part, are found making comparisons with Daewoo — the company collapsed once its parent in South Korea went bankrupt. Its bestseller was the Matiz which incidentally is now sold by General Motors as the Spark. “We are here to stay. We even make our own engines,” says a salesman in one of the showrooms.
The weekend before General Motors filed for bankruptcy in the US, Slym and his team launched mega service camps from Bangalore. This on-ground activation will happen all across the country every weekend till August. It is more like a carnival with music and food. People come with their cars and family. There is music and fun. 650 car owners came for the Bangalore camp and 400 for Pune. The idea here seems to improve the connect with the company’s existing customers. Word of mouth, after all, plays a crucial role in the automobile market.
This was also the time that Slym started to talk about the new launches planned by the company. In the first week of June, the company launched the LPG version of the Spark. Full-page advertisements in top national dailies, in fact, showed two cars under blankets ready to hit the tarmac. The first in September will be the Cruze, a sedan based on the Optra platform, followed by a small car priced around Rs 400,000 and based on the Beat platform some time in December. There could be another one in 2010. The idea is to tell that GM are not a fly-by-night operator in India and have invested $1 billion (Rs 4,800 crore) in India in two plants which can produce up to 225,000 cars and the power-train.
Sector experts say there could be some pitfalls. If the bankruptcy process doesn’t clear up in 60 to 90 days, there is going to be a drop in consumer confidence. GM has a strategy for India — it has a small car and brands in the mid-segment. The key thing it needs to remember is that with the Nano in the market, the current small car segment will get redefined. Component makers aren’t perturbed. India is a growth story and rhey say they need not worry about the rest of the world.
Before his customers, Slym had to calm the nerves of his key stakeholders. Two months before the crisis broke Slym began to meet all dealers and employees to brief them on the emerging situation. By June 1, he had spoken to about half his dealers and all his 4,000 employees. Fortunately for him, his brand in India, Chevrolet, stays with the reformed General Motors and (along with Buick, GMC and Cadillac) is not on the block. General Motors had started out in India with Opel but switched to Chevrolet some six years back — a wise decision, at hindsight. As a result, there has been no extraordinary attrition in the last couple of months. Their attrition is the same as the rest of the industry: 12 per cent.
Questions were also raised on General Motors India’s access to funds. Its investments were bankrolled by the US parent. That tap has now turned itself off. Slym says he has been working with Indian banks for the last six weeks to meet any need that may arise for funds. GM India will depend on internal accruals, loans from financial institutions and intra-company support from Asia-Pacific. General Motors’ Chinese operations are known to be fairly profitable.
Is General Motors India profitable too? The company makes operational profits. Depreciation and interest costs, thanks to the $1 billion investment, have impacted the profit after tax. It means the company is not burning cash and can take care of its operations. This is important in the current scenario.
Some sector analysts expect General Motors to relocate some production to India in the near future as costs here are lower. Moreover, there is spare capacity in India. While General Motors India sold around 62,000 cars in 2008-09, it has the capacity to produce 225,000 cars between its two plants at Halol in Gujarat and Talegaon in Maharashtra. And this will go up to 385,000 cars soon. There could be some truth in it. The new small car will also be produced for overseas markets.
At the moment, Slym is sticking to his old target of 10 per cent market share by 2010. As projections are the market will expand to 1.8 million by then, this will mean annual sales of around 180,000 or monthly sales of 15,000 for General Motors India almost thrice the current volumes. Some experts even expect General Motors India to drop prices if volumes dip in the next one or two months. Much will depend on GM’s ability to convince customers.–