GM looks at India more confidently
Rick Wagoner, CEO, says that everything is in place now to assure good growth in the coming years, reports P Tharyan from Shanghai.
Good news has also come in the form of reduced losses for the corporation as it reported a net loss of $115 million in the quarter gone by compared to $1.66 billion in the corresponding period last year. Analysts say that the current loss was actually an adjusted profit of $529 million if special items related to its restructuring were excluded. There is even bigger news for the Asia-Pacific region as GM prepares to shift gears in the region.
“The population in this part of the world continues to grow and the economic growth continues to provide more and more people the means to buy cars and trucks. We are very excited about the opportunities to grow our business in this very important part of the world,” said Rick Wagoner, CEO, General Motors Corporation. He flew into Shanghai recently from the company’s headquarters in Detroit in the corporate Gulfstream aircraft to drive the Shanghai Mayor in the company’s hydrogen-powered fuel cell car, the Chevrolet Sequel.
China is increasingly becoming a major market for GM in the Asia-Pacific region. South Korea too has become very strategic due to the success of the company’s relations with GMDAT (GM Daewoo Auto & Technology). According to the company’s website, as of the year 2006, the ownership pattern in GMDAT is: GM 50.9 percent, Suzuki Motor Corporation 11.2 percent and Shanghai Automotive Industry Corporation Group (SAIC) 9.9 percent. The Daewoo Motor Creditors Committee owns the remaining 28 percent. Vehicles manufactured by GM Daewoo are sold in more than 150 countries under some of the world's most popular nameplates including Chevrolet, Buick, Pontiac and Suzuki.
“We have also made an important move in India,” Wagoner said. He made a special mention of his company’s expansion in the country both with its product plan and recent intention to start a greenfield facility. GM, he said, was pleased with the rapid growth over the last couple of years in research and development in its engineering resources in India. To a question posed by this correspondent at an international press meet in Shanghai on the difficulties being faced by GM in its negotiations with the union and Delphi, Wagoner replied that GM had been working on a three-way negotiation for a long while now.
“I am pleased to report at this point of time that a lot of progress has been made. One good example would be of an agreement by Delphi to offer early retirement programmes to many workers. One of the challenges of reorganisation is what happens to workers in businesses that cannot continue profitably. Many Delphi workers have accepted early retirement programmes and others have been offered other opportunities. I must say, though, that things are continuing to fall in place. A lot of progress has been made and we hope to see a final agreement on restructuring very soon. It is still hard to do a three-way tango,” he said.
##### INDIA BULLISH
Wagoner readily conceded that the size of GM’s investments in China and Korea were bigger than those made in India. Despite this, he was bullish on the outlook for sales in the subcontinent. “We have also seen, over the last five years, growth in a pretty competitive spare parts market in India. GM now buys some components and exports them worldwide. We want to take advantage of this and only need the right branding and product. We have also found the opportunity to integrate and capitalise on the benefits that the Daewoo acquisition has given us. We see a much clearer product strategy, rather than taking some of the products we have developed for Europe into the Indian market. Frankly, that has not been successful,” he admitted.
GM is quite optimistic on growth prospects in India especially now when it believes it has the right product and distribution strategy. The ability to leverage technical resources in the country is also something it continues to be excited about. Each market offers its own unique advantage and India has its own, Wagoner said.
Nick Reilly, group vice-president and president, GM Asia-Pacific, said, “In India, we have historically been a pretty small niche player. But we have significant plans for the country as we enter different market segments”. GM India is building a new facility in Talegaon near Pune to produce the promising Chevrolet Spark. “I am clear that the first product will be the current and future models of the Spark. We also have the option of potentially putting something else in that plant in the future. I do not want to confirm that it is definitely going to be the Spark but we do expect the product to grow around the world. India could certainly be a source for other countries for that product. However, this need not be the only option that we have for exports,” he added.
GM India will also be offering its first diesel engine on the Optra, followed by the Aveo. “The Aveo will get a diesel but not for a couple of years yet. We have to actually wait for a model change for a diesel there but the big issue is a diesel in the mini car. I will just say that we recognise the opportunity there and are looking at it very seriously. Since we need to develop one, it won’t be there for another three years,” Reilly said.
He hinted that GM could set up a diesel plant in India at a later stage. Interestingly, on this subject, the company is also open to the idea of sourcing the Fiat 1.3 Multijet diesel engines which will be produced at the new Maruti plant in Manesar near Delhi. Output in the initial phase has been pegged at one lakh units and could treble in the coming years of which a substantial part will be exported.
According to Wagoner, the challenge in countries like Korea and China was to bring out many new models. “We have been growing quite rapidly in these markets. The emphasis in North America and Europe is on new designs. “As far as cutting costs are concerned, we use our global engineering capabilities to develop more parts of higher quality for lesser investments. A good example is the capability of GM Daewoo. We are also focusing our components from cost-competitive countries like Mexico, Eastern Europe, China and India,” he said.
##### STRENGTH OF CHEVROLET
On the growing strength of Chevrolet, Wagoner said it is a foundation brand around the world. It has a big presence in North and South America and has been introduced in South Africa, Europe and India. “Our research has shown that the Chevy brand signifies freedom, opportunities, value and trust and exciting performance. These fit very well in almost all markets we are in. You will see us continuing to grow that brand in most markets of the Asia-Pacific region, especially India,” he added.
The GM CEO attributed his company’s success in the Asia-Pacific region also to Daewoo’s capability as a member of the GM family. When GM initially started the process of working at some sort of transaction with Daewoo it was excited about the prospects of getting involved in the Korean market. “It has been a crown jewel of the Daewoo family, which has developed over time. It has excellent product development capability and importantly products that are appropriate for many parts of the world. They perform well, look good and offer great value,” he said.
Since GMDAT capability was widely appreciated by the GM family, many of the products designed and engineered in South Korea were shipped for sale all over the world. GM expects this trend to continue. “What we are doing over time with the GMDAT engineering capability is integrating that to a single world engineering capability that we have. Eventually, the GMDAT engineering team will have responsibility for specific products that we use globally,” Wagoner said.
According to him, a profound issue that the auto industry faces today is proliferation of technology, whether it is improvement in the internal combustion engine, diesel engines, hybrids, bio-fuels or fuel cells. It could become very expensive for a manufacturer to invest as much in developing each of these technologies and have enough resources. Wagoner sees many partnerships developing here. “We already have an advanced technology programme on hybrids with DaimlerChrysler and BMW. We will continue to see more and more of these cooperations,” he said.
GM, in his view, has been in the vanguard finding ways to improve fuel economy and reducing pollution. The best long-term solution to reducing vehicle emissions and securing energy resources is fuel cell powered vehicles. “Fuel cells are non-polluting and have the greatest energy efficiency. We have been expending significant resources in developing fuel cells technology over the last decade and have made terrific progress. Our objectives as a whole are to provide real world practical solutions that reduce the world’s reliance on petroleum and still allow people to enjoy the freedom, mobility and benefits of individual motoring. However a transition to a hydrogen-based economy will require the development of infrastructure. We believe its creation is not only advisable but is in relative terms less expensive than what a lot of people think,” Wagoner said.
Lawrence D Burns, vice-president, research & development and planning, GM said: “China is an extremely important market and offers global automobile companies the opportunity to introduce fuel cells and hydrogen technologies. “We intend to take the Sequel all over the world. We showed it first to California and then brought it to China. We are looking at further opportunities to take it to Korea and Japan and the rest of the world”.
##### HYDROGEN AND FUEL CELLS
GM’s 2010 goal is to make cars like the Sequel a popular vehicle for car owners. “The remaining technical challenge is primarily with hydrogen storage not from a safety stand point. The mass of the compressed hydrogen tanks in the cans are a little higher than what we like and we are working on it. Beyond that it will be the infrastructure and that is not the technology issue.
“About 50 million tonnes of hydrogen are produced annually worldwide. If all of that is used for automobiles, you can fuel 200 million automobiles every year. The point is that hydrogen has an excellent safety record. It is produced affordably for a number of different applications,” he added.
The immediate challenge is to prove that vehicles can go 300 miles between refills of hydrogen. “It came out a little heavier than we thought. This is because of the safety that we wanted to build into the vehicle. So it is by-wire steering and by-wire braking. You can control torque, traction, steering, braking and suspension dynamics on each of the four corners independently and integrate all of them for the driver dynamics you want. It is an extraordinary driver’s car,” Burns said.
George P Hansen, fuel cell commercialisation, Asia-Pacific, GM Asia Specific (Japan), had this to say: “Our goal is to develop a fuel cell system which is competitive to internal combustion engines in terms of performance, durability and cost at volumes by 2010.
“However, to commercialise vehicles like the Sequel and bring them to the broader public will need a joint effort with governments, infrastructure companies, educators and with all the stakeholders in society to move from a petroleum-based to hydrogen-based fuel cell transportation system. So depending on where this move is happening (it could be in the US, China, India or Japan), we are flexible.”
Hansen believes that the fuel cell technology will be ready by 2010. The major issue is whether there is a market for it. “How do you create a market for it? That is a timeframe that will be difficult to predict. Some regions within a country could witness hydrogen fuelling systems popping up,” he said.
GM has around 700 people dedicated to fuel cell technology. It has spent upwards of a $1 billion on this project. “On certain aspects of technology on hydrogen refueling, we had some work going on with BMW and Honda. This is for the interface. You cannot have every car with different interface for their refueling nozzle,” Hansen said. Now with such aggressive plans on almost all fronts, it is to be seen whether GM races ahead as a clear leader in the global automobile industry.
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