GM to exit India, leaving dealers bankrupt and thousands jobless

General Motors (GM), the multinational vehicle maker from Detroit, remained the largest carmaker globally for 77 years till 2008, when recession hit hard, and it almost sank into bankruptcy.

Now, after almost a decade, GM has announced it would be soon making an exit from India, as it has been struggling to get a foothold since its debut here.

This sudden announcement has left customers, dealers, and employees bewildered, and they now have no clue what the future holds for their association with GM.

On April 18, just a month before this announcement, GM had sent an invitation to its retail partner for the launch of the re-fresh model of Beat, its compact hatchback Beat, which was supposed to happen in July.

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"We have been given hope in various forms, first they announced a $1 billion investment in India and then it was shelved. Again another announcement came about 10 new products by 2020. So, we were hopeful of revival," a dealer told on the condition of anonymity.

As per some experts, GM tricked dealers into staying with it by offering incentives and lucrative offers from time to time, even though the sales kept on shrinking.

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"Even last month we were assured that General Motors has made 24 new Beat cars for the Media and very soon they will be launching this product in India. Also for the new Tavera we were told to send our manpower for training which was cancelled just a day before the scheduled training," a GM dealer told ET.

The dealers are now exploring the legal angle, having approached the Federation of Automobiles Dealers Association (FADA).

"The sudden decision of GM India to pull out of domestic retail has come as a rude shock not only for GM dealers but the entire dealer fraternity. It seems to be unilateral without confiding in their dealer partners. It is inducing a sense of insecurity in this business model. We at FADA are fully committed to back our GM dealer colleagues." said FADA President John K Paul.

Some dealers are afraid of their future, thinking they will be abandoned with inadequate compensation.

"There are hints that GM wants to pay a compensation to the tune of Rs 60 lakh to Rs 75 lakh per dealership which is very less. The cost on setting up a dealership minus land is no less than Rs 2 crore to Rs 5 crore depending on city, "points out a dealer.

Talking of the number of employees who would be left jobless once GM exits, over 10,000 people work in the 120 dealerships across the country, out of which over 7000 could lose their jobs in the coming few months.

"Given the current market scenario, it won't be easy for them to find jobs. As per some estimates, more than 500 people have been asked to leave," said a former GM employee.

The customers will also have to suffer since as many of these workshops will soon move to a new brand owing to falling profitability.

(Image source The Drive)