Aditya Vij, CEO, GM India: Taking GM onto the fast lane

In 1988 at general electric, the then CEO Jack Welch launched a programme called Work Out. It was meant to take critical issues out of the conglomerate's bureaucratic framework and put them on the fast track. Early this year, when General Motors' President and CEO Rick Wagoner decided to rid the auto giant of its slow-coach culture, he borrowed Welch's idea and renamed it Go Fast. Now, any time GM's layers of bureaucracy threaten to stifle decision-making, managers gather in a room to thrash out issues. Once a course of action is decided, it is quickly escalated to the senior management for approval. In fact, the new Pontiac Solstice went from sketch to a driveable concept in less than four months.

But that is in Detroit, USA. In Greater Kailash II, the bustling New Delhi locality that houses the corporate headquarters of General Motors India, it's more like Let's Go Somewhere...Anywhere. Only the second multinational after Daewoo Motor to hit the Indian auto market after it was opened up in 1993, the world's largest car manufacturer is still struggling to make a mark. During calendar 2001, General Motors sold just 8,012 cars in a 5.7 lakh-a-year market. Compare that to its Detroit neighbour, Ford Motor's performance. Although it's just a one-car company (GM has three), Ford sold over 40,000 units, of which more than 25,000 were actually exported.

WHAT GM COULD BE ROLLING OUT It is a mixed bag, but has no small car in it.

AN MUV While GMI says it will be a mid-sized utility vehicle like Safari, the market is betting it will be the Isuzu Panther. Price is expected to be in the Rs 6-9 lakh range.

OPEL ZAFIRA It's a compact car that can seat up to seven. It also allows all or any part of the passenger compartment to be converted into cargo space without removing the seats. The 1,600-cc car could be priced at Rs 11-12 lakh.

OPEL VECTRA This D-segment car got stuck in the government approval process. Now, it has competitors in the Sonata, Accord, and Mondeo.

A SUBARU MODEL GMI has not yet decided on the model, but given that Subaru, GM's ally in Japan, makes high-performance cars, there should be a niche for it.

Yet, GM's Delhi office uncorked the bubbly last April to celebrate its highest ever monthly sales: a grand figure of 1,367 (market leader Maruti Udyog sells as many in less than two days). So, what's up? For one, there's Rs 600 crore coming in by way of fresh equity investment into GMI. For another, the government of India has approved its CBU (completely built-up units) programme, paving the way for a slew of new cars. Buoyed by the developments, GM India's President and Managing Director Aditya Vij is talking of steering GMI onto the fast lane, with annual sales volume of 40,000 units by 2005. "We have come to believe that this market is driven by new products," says the 44-year-old. "Therefore, we plan to bring in four-to-five new models in the next three years."

Vij isn't showing his cards yet, but BT learns that at least two new products are already being test-driven in the market. One is the Opel Vectra, which globally comes in engine sizes between 1.8 litre and 3.2 litre. The Indian offering will likely be in the 2-litre category, and pitted against the Honda Accord, Ford Mondeo, and the Hyundai Sonata in the D-segment. The big news at GMI, however, is not the Vectra. It is that the company is finally beginning to look beyond the Opel line-up for possible launch candidates. Given GM's huge portfolio, there's plenty to choose from, although realistically only a clutch of marques may have what it takes to please the Indian market's unique requirements.

The first departure from the Opel line may result in a utility vehicle. Reports of the 2.5-litre Isuzu Panther coming to India have been doing the rounds for some time now, although Vij won't confirm or deny it. All he says is that he would prefer a mid-sized utility vehicle somewhat similar in size to the Tata Safari. A typical pricing for a utility vehicle would be between Rs 7 and 9 lakh. Says K.K. Swamy, Deputy Managing Director, Toyota Kirloskar Motors: "Utility vehicles is a sound strategy for (GMI). From a crowded segment, it will move to a less crowded one."

Besides, the Indian market may just be getting used to utility vehicles, thanks to the success of Tata Sumo, Safari, and Toyota's Qualis. If GMI manages to get the specs and price right, the utility vehicle should fetch what's been eluding it all these years: volumes. Even a Panther-like vehicle (in Indonesia, the Panther competes successfully with the Toyota Kijang from which the Qualis is derived) should go well with the consumers in India. GM's own research has forecast that the utility vehicles segment-sports or multi-will clip at 10-12 per cent annually, provided the passenger car market grows at 9-10 per cent per annum.

The two models apart, GMI could bring some high-end models in limited quantity to cater to a niche segment. Doing so will not only create a better profile for GM in India, but also seed the market for bigger and more expensive cars. A few likely candidates are Opel Zafira and Cadillac, which do not have any ready competition in the country. Agrees Infrastructure Leasing and Financial Services Executive Director Vimal Bhandari: "It's a reflection of the first stage of market restructuring. It's an acknowledgement that the Indian market cannot be taken for granted."

Glitches To Fix

What's worrying, however, is the fact that GMI seems to be doing little to mend some of its chronic problems. Take the biggest of them all: the inability to launch a product in the mother of all segments-the sub-compacts. These under-Rs 4 lakh cars make up more than three-fourths of the market, and any manufacturer that has ambitions of making it big must necessarily get a slice of the pie. Still, the auto major does not have one model that fits the bill, notwithstanding its wide repertoire globally. Even the latest product development team, headed by Vice Chairman Robert Lutz (former President of Chrysler Corp), only talks of compacts, which fit the mid-size segment in India.

Things could have turned out vastly different had GM also snagged Daewoo Motor's Indian operations as part of the global deal. Daewoo's small car, Matiz, would have given it a ready foothold in the segment. That, however, does not stop the Indian subsidiary from tapping into Daewoo Korea for compacts such as Lanos, Nubira, or Tacuma. Another alliance that would have benefited GMI but hasn't happened is that with Suzuki. Globally, GM owns a fifth of Suzuki Motor Corp., and it was widely expected that the company's subsidiary in India, Maruti Udyog-where the Indian government recently handed over control to Suzuki-would ally with GM. But the Japanese auto-maker's Chairman, Osamu Suzuki, told BT last month that no such alliance was planned.

"I seriously doubt GM's ability to compete effectively. They don't have any reach outside a few urban centres." B.V.R. Subbu, President, Hyundai Motors India

The problems facing GMI are not unique, though. Rivals like Ford have been through similar-in fact, worse-situations. For instance, soon after Blue Oval's stodgy Escort flopped in the market, it quickly returned to the market with a made-for-India car, Ikon, which was built on its best-selling model in Europe, the Fiesta. It was a bet-the-company strategy, but one that worked. Says Vinay Piparsania, Vice President (External Affairs), Ford India: "The Escort taught us a lot of lessons. We looked for a car that was designed with India in mind, and manufactured here. We also took care in establishing suppliers, dealers, and a good distribution network."

If GMI was unable to consolidate its early gains (Astra sold a record 1,360 in December 1997), it's partly because of the problems that the parent in Detroit had been going through until recently. In 2001, GM's sales tumbled from $184.63 billion (Rs 9,05,010 crore) to $177.26 billion (Rs 8,68,884 crore), unit sales fell by some 6 lakh, and the bottomline plummeted from $4.45 billion (Rs 21,812 crore) to $601 million (Rs 2,945 crore). In his report to GM shareholders, the company President and CEO Rick Wagoner described 2001 as a year of "toughest competition in memory".

The turbulence in Detroit affected Delhi too. Astra's lead began to wane once Honda entered the fray with its 1,493 cc, 100-bhp sedan, City. Suddenly, Astra's 78 BHP started looking inadequate in comparison. Matters worsened when Ford and Hyundai spotted opportunity in the lower price-band, between Maruti Esteem and the Astra. Ford Ikon and the Hyundai Accent offered the look, feel, and features of bigger mid-sized cars, but at bargain prices of less than Rs 6 lakh.

GMI tried to rectify that problem by launching the Corsa. The car-which comes in two variants of 1.4 and 1.6 litres-hasn't really set the Indian roads afire and its highest sales, recorded in March this year, were a not-too-mind-boggling 940. Since its launch in 2000, Corsa has sold only 13,377 units, compared to Ikon's 41,905, and Accent's 43,091-both of which were launched the previous year. Says B.V.R. Subbu, President and Director (Marketing), Hyundai Motors India: "A clear understanding of the marketplace and reach are imperative for success. I seriously doubt GM's ability to compete effectively. They don't have any reach outside a few urban centres, and even there, their dealerships aren't exactly top-drawer."

Still A Steep Climb

To make its India strategy work, GM needs the Vectra and the utility vehicle to deliver the goods. No doubt, the vehicles-like the Astra and Corsa before them-will be world-class in quality. But they would still have to face stiff competition. In the D segment, where the Vectra will be slotted, the market's brimming over with the Mercedes C-Class, Ford Mondeo, Honda Accord, and Hyundai Sonata. Volumes are severely constrained-all four together sold 4,875 units in the whole of last financial year-whereas value-sensitivity is very high. Therefore, a company that can indigenise content and yet deliver global quality will win in the long term.

In utility vehicles, competition is just hotting up. Maruti Udyog is slated to roll its mpv Grand Vitara during the festival season. Home-grown Mahindra & Mahindra is going to unveil its Scorpio in another three months, and Tata Engineering and Toyota Kirloskar-the two other contenders in the segment-have their own plans aimed at maintaining their marketshares. Says Swamy of Toyota Kirloskar: "The product, pricing, and positioning have to be right for a customer to bite."

Vij must be hoping as much, but to fight a price war (even if disguised in the form of 'value') GMI will need the full backing of the parent company. Fortunately, the proposed infusion of Rs 600 crore is indicative of that. Also, GM's own fortunes are beginning to look up. In fact, its net income is expected to surge to $3.4 billion in 2002. If the alliances with Daewoo and Maruti Udyog work out, GMI will zoom ahead of its competition. But that, at the moment, is a big if.