GM to quit selling cars in India, 400 layoffs confirmed

Last Updated: Thu, May 18, 2017 15:47 hrs
A model stands besides a GM Chevrolet Volt car during India's Auto Expo in New Delhi

General Motors Co plans to quit selling vehicles in India by the end of this year and will sell operations in South Africa, the latest steps in a strategy of focusing cash and engineering effort on fewer, more profitable markets.

A General Motors India spokesperson has confirmed that the decision to stop domestic car sales in India will affect 400 jobs. He also stated that there are no plans to bring other GM brands to India and that the company was looking at strategic options, partnerships to increase utilisation of production capacity at Talegaon plant.

The spokesperson clarified that the decision to stop selling in India was not influenced by any government's policies.

GM India had earlier confirmed that they would be accepting new applications for a separation scheme from employees who had been impacted by the decision to cease manufacturing at the company's Halol plant in Gujarat.

GM India's President and Managing Director Kaher Kazem had said then that the decision to accept the new applications for the separation scheme was taken after a number of employees had approached the company's management "individually requesting that fresh applications for the Voluntary Retirement Scheme be considered".

The Detroit automaker told Reuters on Thursday it will take a $500 million charge in the second quarter to restructure operations in India, Africa and Singapore. It will cancel most of a planned $1 billion investment to build a new line of low-cost vehicles in India.

About $200 million of the charge will be a cash expense, GM said. The moves are expected to save $100 million a year in a sector of GM's global business that last year lost about $800 million, the company said.

GM President Dan Ammann said in an interview that the latest restructuring moves - and a series of earlier decisions to quit unprofitable markets - (will) allow GM 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."

GM also has said it is investing about $600 million a year in efforts to develop autonomous vehicles and transportation services.

"What are we spending our time doing?" Ammann said. "Are we spending time pursuing opportunities … or all of our time fixing problems?"

An unnamed source confirmed to that layoffs had begun at GM India and that all Sales and Marketing personnel were expecting the pink slip. The severance package for employees with under three years of experience was said to be a months salary for every year of service, while it was to be one-and-a-half-months salary for every year of service for those with more than three years under their belt.

General Motors India was originally formed in 1994 as a 50:50 joint venture between General Motors Corporation and the CK Birla Group of Companies. In 1999, GM bought out its partners' stake and GM India became a fully-owned subsidiary of General Motors Corporation.

GM, like its Detroit rival Ford Motor Co, has found it increasingly expensive to compete in emerging markets outside of China. GM sold just 49000 vehicles in India and South Africa combined last year.

Chief Executive Mary Barra traveled to New Delhi in 2015 to announce a plan to invest $1 billion there to build a new line of Chevrolet models developed as part of a Global Emerging Market vehicle program - GEM for short. Since then, auto sales overall in India have slumped, and GM has failed to gain traction against incumbents such as Maruti Suzuki India Ltd.

Now, GM plans to stop selling Chevrolet brand vehicles by the end of the year and will produce vehicles only for export at its remaining factory in Talegaon. The company currently employs about 2,500 workers there.

GM said it would continue work at its design and engineering center near Bangalore.

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