After India, General Motors turns its back on ASEAN

General Motors is clearly in retreat mode.

Barely weeks after it sold its Pune plant in India, the same Chinese buyer, Great Wall Motors, has now snapped up its facility in Thailand. GM has also cut back on operations in Australia and New Zealand, which pretty much means that it has bid adieu to the ASEAN/Asia-Pacific region.

The company’s focus areas will now be South Korea, China, the US and Latin America. Clearly, the decision has been prompted by some hard choices on maintaining a strong bottomline. In the process, it has decided to shelve any plans of going aggressively global.

Time will tell if this was the right decision but, for now, there is no looking back for GM. Who would have possibly thought that the once formidable American auto brand has pretty much been relegated to a more modest status trailing the likes of Volkswagen, Renault-Nissan and Toyota.

This also comes at a time when a top official of the Volkswagen Group told this writer that the company would now look to leverage opportunities in ASEAN from its India operations.

Like GM, VW had done precious little in this part of the world but is still determined to hang in there and fight it out. Its leadership team in Germany has now gone in for a new business model, which will see Skoda and VW come together and achieve economies of scale that will see the rollout of competitively priced SUVs.

Citroen, part of Groupe PSA, has likewise drawn up an ASEAN strategy where India could just end up playing a big role on the lines of what VW is striving to do along with Skoda. GM’s decision to call it quits is, in this backdrop, quite intriguing.

Clearly, the company sees little hope from its business in ASEAN, which must have been the key trigger to take this decision. It is also keeping in line with its moves in the last few years, which have seen closures happen in India, Russia, Indonesia and South Africa.

Early bird

When GM set up shop in India in the 1990s, it was among the first entrants along with Peugeot, Hyundai and Daewoo. It was happy to amble along since there was really no compelling reason to rev up and make a statement in this part of the world. Compare this to Hyundai, which went flat out from the word ‘go’ and has since grown in stature as a global carmaker.

Things were pretty comfortable in the GM world of Detroit, where other markets in the West were strong and profitable. The company, to its credit, was also proactive with China, where it is among the leading players today with VW.

When things began turning topsy-turvy with the global slowdown of 2009 and new mobility challenges beginning to emerge, GM knew it had to go in for a makeover like other big automobile brands. Emerging markets were important but the challenge lay in getting many other things right, such as costing, retail and after-sales.

GM did not manage to get any of these right in India even while it tried hard to leverage the competencies of global allies like Daewoo and SAIC. Till about 5-6 years ago, it seemed as if the top leadership at Detroit was not going to give up without a fight but the script has clearly gone in a different direction.

In Europe, GM sold Vauxhall and Opel to a rejuvenated PSA while it has chosen to exit from emerging markets like India, ASEAN and a host of others. And while Latin America will continue to be on its radar, it’s no secret that the region can swing wildly either way, going by the recent experience in Brazil. Argentina is still not in great shape and there is no telling which way the wind will blow across LatAm.

GM is no longer the monarch of all it surveyed worldwide but is determined to carve out a new growth path. Whether this will work is a million-dollar question considering that it is up against new challenges and tougher competitors who have chosen to team up, as in the case of FCA-PSA and Toyota-Suzuki. Even while GM has chosen to exit from a host of markets, the aftermath of such decisions is not always pleasant. The problem with closures is that there is tremendous pain that accompanies this move, especially in the form of job losses. And when this happens during a slowdown, as what India and many parts of the world are now experiencing, things can only get worse.

When GM shut down its Gujarat plant, workers apparently got a pretty generous separation package even while they were given the option of relocating to the other facility in Pune. Even at that point in 2017, there were murmurs that it was only a matter of time before this plant would also cease operations, which is precisely what happened.

Interestingly, both were snapped up by Chinese automakers (SAIC and Great Wall Motors), which also sends out a strong message of the country’s intent as a global player. It is also perfectly natural for the new owner to start on a clean slate with an all-new workforce which means that the existing lot will just have to pack up and gracefully leave.

It is not as if closures have not happened before in India. Be it Peugeot, Daewoo, Hindustan Motors or Eicher Polaris, labour is the biggest casualty of any shutdown. Things may not get any better in the coming years as the automotive industry gets ready to enter a new phase of mobility disruption. Labour will face the heat when this transition happens and companies need to be prepared for this challenge.

Global phenomenon

It is not as if all this is happening only in India; other parts of the world are also under a great deal of pressure, thanks to a slew of new anxieties to cope with. With Brexit, plant closures may gain pace in the UK while geopolitical tensions like trade/real wars will only add fuel to the burning issue of job losses.

China’s present challenge with the coronavirus outbreak is already seeing the global automotive industry in its most wobbly state in recent times. As companies shut back on production, they will be hard pressed to retain people. The automotive world will be hoping that the woes of China end quickly; the likes of GM have huge stakes in the region.

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