GM India accumulated losses inch towards Rs 10,000 crore
The US car maker posted a loss of Rs 222.43 crore for FY23, 47 percent higher than the Rs 150.76 crore losses it posted in FY22.
Even as it tries to exit the Indian operation almost five years after the decision to stop selling cars in the country, General Motors India’s accumulated losses inched closer to Rs 10,000 crore at the end of FY23.
The company posted a loss of Rs 222.43 crore for FY23, 47 percent higher than the Rs 150.76 crore losses posted by the company in FY22. The losses for FY23 were almost 6 times higher than the revenues that General Motors India generated in FY23 at Rs 37.53 crore.
As per the annual report sourced from business analytics firm Tofler, the accumulated losses of General Motors India increased from Rs 9,656.87 crore in FY22 to Rs 9,879.58 crore at the end of the last financial year.
According to the 29th Board’s report of General Motors India on 23 October 2020, the company decided to close its only manufacturing plant in Talegaon, Maharashtra due to a decline in demand for vehicles manufactured in the export markets.
“This was a result of the change in customer choices and increased requirements with respect to the vehicle safety and emission norms as per the relevant applicable laws that required further investments in the Talegaon Plant,” stated the note.
In terms of the different options explored to sell the Talegaon Plant, the annual report noted that the company has entered into a term sheet with Hyundai Motors Limited to sell certain identified Assets followed by entering into a binding Assets Purchase Agreement (‘APA’) in the month of August, 2023.
“All handover-related activities are under process in terms of the APA,” the report added.
The annual report clarified that as of March 31, 2023, the accumulated losses of the company have substantially eroded the net worth of the company. It elaborated that effective March 31, 2021, the company had ceased its manufacturing activity and its export operations. It had offered its employees and workers affected as a result of such a decision, a voluntary separation scheme and separated certain workers/employees and during the year. The company had entered into a term sheet with a potential buyer to transfer a majority of the property, plant and equipment and subsequent to the year-end, the company signed the asset purchase agreement (APA) in the month of August 2023.
The above factors indicate that the “going concern basis of accounting is not appropriate in these circumstances. Accordingly, these financial statements have been prepared on a not for going concern basis.”
Accordingly, the values of respective assets have been substituted by their realisable value (except for property, plant, and equipment which are carried at cost less accumulated depreciation and impairment loss), liabilities are stated at their estimated settlement amounts and provisions have been made for additional liabilities that may arise due to closure of business operations.
“Subject to this, these financial statements have been prepared on an accrual basis and under the historical cost convention. Except for effects of going concern assumption not existent, the accounting policies adopted in the preparation of financial statements are consistent with those of previous year,” added the annual report.
The last vehicle was produced in December of 2020 and since then, GM India has explored the potential of selling the factory to Great Wall Motors, which was called off, and now to Hyundai Motor India.
Yet the protesting union workers continue to pose multiple challenges for the US car maker to finally conclude its exit formalities, due to numerous court cases and sustained pressure on the local administration to stall the asset purchase agreement with Hyundai Motor India.
To resolve the impasse, the state government has invited both GM India and Hyundai Motor India officials along with workers' union to arrive at an amicable solution.
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