GM opens second plant in India
Tuesday, September 02, 2008
TALEGAON, India -- General Motors Corp. opened a second plant in India today, boosting its production capacity in the country from 85,000 to 225,000 vehicles a year.
The factory is part of GM's aggressive push into emerging markets, which have helped cushion the beleaguered auto giant from falling sales in the developed world. It also furthers the Indian government's ambition to turn the country into a manufacturing hub for small vehicles.
"We believe India in three to four years will be a significant source of profit for us," said GM Asia Pacific President Nick Reilly.
The first car -- a pint-size red Chevrolet Spark draped with marigolds -- rolled off the production line at 11:25 a.m.
GM invested $300 million in the new plant in Talegaon, near Pune, a fast-growing manufacturing hub about two hours outside Mumbai, the nation's financial capital. The factory will start by producing the Spark -- a minicar introduced in 2007 that is GM's most popular local model -- for the domestic market.
Detroit-based GM is ranked fifth by sales in India and hopes to boost its share of the booming Indian auto market from 4 percent to 10 percent in the next few years. The company manufactures six Chevrolet brands at its factory in Halol, Gujarat -- the Captiva, the Optra, the Aveo, the SR-V, the Aveo U-VA, and the Tavera -- and plans to introduce another small car near the end of 2009.
GM said today that the new Talegaon factory also could be used for export as early as 2010.
Last week, the automaker pledged to invest another $200 million in a powertrain facility adjacent to the Talegaon plant, which will eventually produce 300,000 diesel and gas engines a year for both domestic and export markets.
GM also plans to double the number of dealer and service centers in India to 400 this year and said it would rely increasingly on its technical center in Bangalore, which employs more than 200 research and development engineers and designers.
GM's investment in India, which now tops $1 billion, pales in comparison with China, where the company produces more than 1 million vehicles a year. GM has poured $5 billion into its China operations and plans to invest $1 billion a year going forward, company officials said.
About 30 percent of the 9.5 million vehicles GM manufactures each year are made in Asia, a ratio Reilly said would likely jump to nearly 40 percent in the next five years. Vehicle sales in Asia, he said, would likely follow a similar trajectory, but North America remains the company's largest market, accounting for nearly half of total sales last year.
GM President Fritz Henderson said today that no matter how robust their growth, emerging markets alone cannot carry the company, which reported a second quarter net loss of $15.5 billion.
"We need to turn around our North American business. There is no choice," he said.
India is suffering from headwinds of its own. High inflation, slowing growth and tightening credit have pinched auto sales growth, which is expected to slide into the single digits this year after several years of double-digit gains.
Meanwhile, the Indian government is keen to establish itself as a hub of small car manufacturing.
Local officials were at pains to flaunt their pro-business credentials as Tata Motors announced today it was suspending construction of its Nano factory in Singur, West Bengal, following farmer protests that have stopped work for five days.
Vilasrao Deshmukh, the chief minister of Maharashtra state where Pune is located, thanked farmers today for giving their land for the GM factory and reiterated his invitation to the Tata Group, saying he would "roll out the red carpet" for a Nano plant.
More than 80 percent of the more than 1,000 employees at GM's new factory are from the local area, company and government officials said.
Tata already has a factory near Pune, as do Daimler AG's Mercedes-Benz unit and Indian automaker Bajaj Auto, among others. Volkswagen AG and Indian auto giant Mahindra & Mahindra Ltd. are planning to open plants in the area.
V.K. Jairath, the former state secretary of industries, who inked the deal with GM for its new factory, said that was just the beginning.
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