When Wagoner was the cynosure of all eyes

General Motors has finally launched its successful mini car in India, the Chevrolet Spark, albeit with embarrassingly limited production capacities. But then as president (Asia-Pacific), Nick Reilly sees it, with a new plant coming up in Maharashtra only by August 2008 there was no other alternative but to go ahead and cope with the present production constraint.

“Do we sit and wait and stay out of the market or do we get into the market knowing that we would be somewhat constrained? We decided that we would rather let the car get into the market and be a bit constrained for a period of time,” he told Autocar Professional.

But beyond the world of constrained capacities, it was G Richard Wagoner’s (chairman and CEO, GM) presence at the launch in the Capital that sparked off excitement among industry leaders and parts suppliers. At a packed meeting organised by the Confederation of Indian Industry (CII), Wagoner told eager industrialists the four lessons that his company had learnt over its almost 100 years of existence.

“One size does not fit all; you need to tailor your approach to each market. You need to get local as quickly as you can and in as many aspects of your business as you can. Your products while leveraging global cost structures need to be closely adapted to local consumer needs. Entering new and emerging markets frequently can give you learning that you can apply to your mainstream businesses around the world, particularly a leaner and more efficient cost model,” he said.

Wagoner was extremely bullish on emerging markets, especially India. “We see India as one of the countries that stands out as having a great chance to continue to outperform. India is very important to GM’s future business strategy. Our experience around the world is that if you combine trade liberalisation with an entrepreneurial society the result is tremendous economic growth for all citizens of the country. We certainly see the ingredients of that playing out here in India,” he said.

BULLISH OUTLOOK

Wagoner was bullish on the outlook for the auto industry. Last year was the global auto industry’s fifth consecutive year of record sales with 67.5 million cars and trucks retailed around the world. This calendar will see a further increase to 70 million units. “This growth is overwhelmingly coming from Asia Pacific. Over the next 10 years, emerging markets here alone will account for approximately around 70 percent of global automotive sales,” he said.

As he added, three of the top five growing countries and eight of the top 15 are in Asia Pacific. During the next decade, GM believes India will be the second fastest growing automotive market in the world driven by strong economic growth.

##### In fact, Wagoner said his company was astounded by the pace of growth in markets like China. He also felt that the auto industry in Russia was showing great potential. “Our industry is increasingly being influenced by growing markets like India which are modernising and challenging our industry’s traditional business model. This is a great opportunity for us to learn here and to extend lessons to our other businesses worldwide, including developed markets,” he said.

In China, GM has a 50:50 joint venture with a local partner which sold more than 900,000 vehicles last year. This makes it the second largest national market for GM. In Russia, it has one joint venture but is also building a Holden facility in St Petersburg.

TECHNICAL CENTRE

Wagoner was all praise for GM’s technical centre in India. “Shortly after we set up our assembly plant, we opened up a technical centre in Bangalore and it has been a great move for us. Today we have over 800 engineers and PhDs. They work as part of a 24-hour global engineering product development team which is an exciting opportunity and influences our capabilities around the world.

“Our Indian engineers are experts in computer-aided design and manufacturing. We also have a science lab here which is one of seven globally. We have almost 100 researchers who are working on some very cutting edge stuff contributing to GM efforts in areas like manufacturing processes and light weight materials,” he added.

GM India is building a new facility in Talegaon which will see annual capacity increase sharply to 225,000 units. Wagoner said the company was not only hopeful of leveraging its supply base here to meet local needs but would look at sourcing more parts out of here to support its global operations. “If we look at it over the next several years, we will see a multiple increase in the level of purchases we do here,” he said.

“The Chevy Spark is a good example of a product that we sell in many markets but have adapted and fine-tuned it for India. We have had to change gear ratios for Indian driving conditions and also change the engine management system to adapt to local fuel quality. The air conditioning system had to be significantly optimised to meet buyer expectations. We have done similar kind of adjustments to the other products that we sell in the Chevy lineup. When you want to enter and be successful in an emerging market, you really have to run your business in a very lean and innovative manner,” he reasoned.

SPARK'S TRACK RECORD

The Spark is based on one of the most successful minis in the GM stable. Since the launch of the first generation in 1998, about two million vehicles have been sold in over 100 markets. The car will be initially manufactured at GM’s Halol plant. It comes in four different trim levels and will cost Rs 3.09 ex showroom Delhi for the base version and Rs 3.89 lakh for the one with frills.

GM India will clearly be at a disadvantageous position as sales of the Spark gather momentum. The current capacity at Halol is a mere 85,000 units. Of this, according to the Society of Indian Automobile Manufacturers (SIAM), GM India produced 36,879 units in 2006-07 (of the Optra, Aveo, U-VA, SRV and Tavera).

Assuming a growth rate of 20 percent, 2007-08 could mean a production of around 44,000 units, thereby leaving a capacity of 40,000 per annum for the production of the Spark. However, all this will change once the Talegaon plant is up and running and monthly sales of the Spark could be up to 15,000 units or even more on an average.