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GM faces hurdles raising funds in India

June 02, 2009 14:16 IST

Bankrupt General Motors said on Tuesday it is facing difficulties in raising funds for its under-construction engine transmission plant in India, involving an investment of $200 million, because of the apprehensions of financial institutions.

The company also said the falling sales of General Motors India, the wholly-owned subsidiary of the US firm, were mainly because of customers' perception on the months-long uncertainty over the future of GM, which finally filed for bankruptcy protection in a New York Court on Monday.

"It hasn't been easy in India to raise the money ($200 million). Frankly, we have found difficulties from Indian financial institutions, but we have not given up," GM Group vice-president Nick Reilly told reporters in a conference call.

"The majority of the fund remains to be raised. It might take us little longer, but the opening of the plant is largely on schedule. It may be delayed by a month or two," he added.

Reilly also said that the company's sales in the past couple of months have been declining in India on account of 'customers' perceptions' in view of the uncertainty prevailing in the US market over the parent company's fate.

"We have seen some decline (in sales) in the Indian market in the last few months, obviously the market is weak. But mainly, I think, it was because of customers' response due to widespread coverage on what was happening in the US," Reilly added.

According to Society of Indian Automobile Manufacturers data, GM India's sales showed a constant fall in the first four months of 2009, by 29.18 per cent, 12.64 per cent, 27.25 per cent and 13.67 per cent respectively.

GM India's sales in May was down 11.75 per cent at 5,109 units from 5,789 units in the year-ago period.

Reilly said the company's sales during May in the Asia-Pacific region, however, increased by 44.5 per cent at 1,83,000 units, which was mainly driven by growth in China. It has also consolidated GM's market share in the region to 8.4 per cent in 2009 from seven per cent earlier.

"The market has been quite weak and our competitors Maruti Suzuki and Hyundai Motor India have been very aggressive in terms of market incentives, but we can't match them," Reilly said.

The company is hopeful that it would make a turnaround by increasing local components in its products, he said, adding, "Once our engine plant is complete, an important portion will be locally sourced." It would also undertake some aggressive marketing programmes.

In August last year, GM India had announced setting up of a power-train facility at Talegaon with an initial investment of over $200 million, which was in addition to the $300 million already invested in the car manufacturing facility having a capacity of 1,40,000 units.

The power-train unit, to be operational in the third quarter of 2010, will have a capacity of making two lakh units a year and could be expandable up to three lakh engines per annum.

Asked by when the company is expecting to complete the raising of $200 million for the engine plant, Reilly said, "Indian financial institutions are a bit worried for what has been going on in the US, but hopefully they will come forward now after the filing. We are talking to two financial institutions at present, both Indian and global."

Reilly, who is also the president of GM's Asia Pacific operations, said the Indian operations is insulated from the bankruptcy filing by the once numero uno in the US.

"We need to find our growth in Asia Pacific. India is a very important market for our growth. we are still bringing in new products in (the) Indian market," he added.

GM India plans to launch a luxury sedan Chevrolet Cruze in September, besides introducing a "mini car" by the end of this year in the country. It will also launch the LPG variant of its small car Spark this week.

On making India an export hub, Reilly said: "In future, there can be significant exports from India. For that we need to have relatively high localisation to be competitive in terms of cost effectiveness, but that is not happening in the next 12 months."

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