autoXchange: While GM India isn’t included in GM’s Chapter 11 bankruptcy filing on June 1st, how has it impacted your operations?

Karl Slym: First of all, it’s not impacted. Our operations continue as normal. Our facilities are continuing to be expanded, and our launches are continuing as per plan – like the LPG Spark, and the soon to be launched Cruze, which I got to drive while I was in Halol. So the latest Cruze is already coming off our assembly line. And the mini-car by the end of the year – all those remain in place. We’re still building the powertrain plant, and we’re still expanding our stamping plant, so no effects from that side.

The effects are that we’ve been in the news, and there’s certainly a lack of clarity – I would say a lack of clarity prior to June the 1st as to what it means. So, whilst pre June the 1st, I was able to go to dealers and explain what might happen and get them to understand that either it’s a ‘363 approach’ or a ‘non-363 approach,’ outside of the courts with reorganization – but there will be some method of reorganization. And I can do the same with suppliers – most of them have probably had some experience like that with a US company, it’s not unusual in the US. I can do that with employees as well, so I met all 4,000 employees prior to June the 1st as well.

The customer is a little more difficult. So, whilst we have done some things for the customer in the media, and contacting customers, we felt like we couldn’t take a big step until after the announcement – when Obama and Fritz actually say that it doesn’t include divisions like GM in India, it’s only in North America. And it’s after that that we’ve been able to launch the ‘There for you, there for India’ campaign. So, really, its two pockets – everyone apart from the customers before, everyone again now. But now we can include the customer as well, which includes existing customers who currently own GM cars, and also customers whom we want to continue to attract.

AX: The plan is to launch your all-new D-segment model, the Cruze, by September, and your all-new mini-car, based on the Beat concept, by the end of the year – are these launches likely to be on time?

KS: Yes, the Cruze is in Halol, we’re building cars, and everything’s fine as far as that’s concerned. We’ll launch in the beginning of September, and we’re just starting to fine tune the campaign now. The mini-car, off the Beat platform, will be built in Taelagaon. So we’ve seen the first few cars come out of Taelagaon as well, they’re not as advanced of course because the launch is still a few months away. But we still have the equipment installed and we’re starting to produce it. So, no changes to our plans. Both launches are very important for us for different reasons. The Cruze is not going to be 50,000 units a year, but it’s a very important vehicle from an image point of view, and it’s just great to drive – it takes me back to Europe. The mini is a high volume mini-segment car. AX: Your global CEO, Mr. Fritz Henderson, said recently in a live web-chat with reporters that GM will be reducing executive manpower by 34% from year-end 2008 through 2009. He also said that the salaried workforce would be cut by 20%. Will measures such as that have any impact on your Indian operations? KS: No. There are certain areas of our business which are in expansion mode, and those are going to continue in that frame. Our expansion plans in India continue with our new models and infrastructure completion. In areas like North America and Europe where you’ve got more of a saturated business it’s a different scenario. North America was 18 million units about 18 months ago, and now we’re running on 10 million units, which is just unbelievable. Not just for GM, but for the rest of the industry as well. So, we’ve all been caught by this change. It started off with the crazy oil prices, and then quickly into the recession. In India, however, we don’t have any salary or hourly cuts, and our hiring is in line with the new model launches. AX: You’ve made substantial investments in India, especially recently, to the tune of $1 billion USD – do you think, in retrospect, that was too aggressive, and is there a cash crunch at this stage?

KS: I think timing wise it was probably perfect actually because we have the infrastructure in place for 2.25 lakh units (a year) now, and Taelgaon was built with an opportunity to be 3 lakh or 3.85 lakhs, with a powertrain plant of a similar 1.60 lakhs in step one, and 3 lakhs in step two. To have that in place now is extremely important for a market like India. If you were in another country where you don’t know what the long term future holds, then maybe you would be wondering whether you should do that. But there’s no question that India is going to be a powerhouse as far as the industry, and growth, is concerned. You know the pent up demand of a country with an average age of 25-26, and with growth continuing, will be back next year and catching up quickly. Because of the type of environment we’re in, it’s not something we should be concerned about for the long term.

AX: And, of course, despite the chapter 11 filing, it doesn’t mean that all the investment in the US has stopped either. In fact, only a few days ago, GM opened a new battery lab (for vehicle powertrain application) in the US, which not only points to ongoing investment, but also just how important that technology is for the future of GM – what role do you see India playing in that aspect of GM’s future?

KS: Of course India’s slightly further behind – perhaps we have more LPG, CNG style vehicles than many other countries. So when I say slightly further behind, it’s in terms of demands and expectations of electrification. But if you think of alternative fuels, then India’s fairly well advanced – in the vehicles, not the infrastructure I might add.

Our approach here is that number one is fuel economy. We have 500 powertrain engineers in Bangalore now, and their efforts for the local market is to ensure we have the best fuel economy, because the customer buying a 2.5 lakh car or the customer buying a 20 lakh car in India first wants to know what the FE is. So, he wants that value. In fact, for the Captiva, I get emails from customers telling me, ‘I got better mileage than you post for the Captiva,’ which, of course, is very positive.

So, first of all, fuel economy, then, alternative fuels. And I would say that we’ve really only had our first effort this month with the launch of the LPG, and then CNG to follow, so that’s our alternative fuels. We also have 6 cars running around India with bio fuels in them. I have a field of jetropha in Taelgaon that I’m growing in conjunction with the CSMCRI (Central Salt & Marine Chemicals Research Institute), which grows on land that you wouldn’t normally use for food. So it’s very positive from an image point of view as well. And lastly, infrastructure – you can have whatever you like as a car fuel, but unless the infrastructure is there to match it, you can’t sell it. So that’s important for us. And of course, there’s alternative propulsion – we have probably the most famous alternative propulsion car in the world at the moment, which is out next year, the Volt. But that technology is capable of being more than just the Volt. The Volt is going to have a specific customer base. I think it’s fairly limited in India at the moment. It’s going to be a high end vehicle, and reasonably expensive as well. The technology ensures that you have electric power, but you’ve got your diesel and petrol engine as well, so we’ve got a lot to offer. But India is a small car market, and I don’t think we can ignore the fact that we should be thinking about alternative propulsion on the small car as well.

AX: The Volt mules have been seen running around on Cruze bodies – is it just a production constraint in terms of expanding that powertrain to other cars in the lineup, or is it a question of first getting the Volt out there, and seeing what happens? KS: I think there is a production constraint, but that’s not going to stop us doing the right things with the Volt. But, first of all, we’ve got to have a proven success. You can’t all of a sudden come out with something across the whole product range, and find out that there are some learnings still to be had. The testing that’s been done has been huge as you can imagine. Its beyond anything that’s been done on any other vehicle, and I already think we do a lot of testing. So, because of the importance of this, in terms of it being new and game changing, you can’t fail at that. So you’ll see an introduction, but the technology is capable of being spread. AX: China has been a very important market for GM, you have a leading position there, and it’s a market that’s expected to grow even bigger than the US market in the next 5-6 years – how do you see GM’s position in the Indian market in that context, and the Indian market in general compared with China?

According to Slym, the new Chevrlet Volt is game changing, and GM can't afford to fail with it

KS: 1.3 billion in China, and 1.3 billion in India. The market for commercial vehicles and passenger cars together last year in India was about 2 million in the whole industry. Conversely, GM sold nearly 1.2 million in China during the same period, so it just shows you the huge difference.

Saturation is the way you look at it. Let me start with infrastructure because there’s a budget coming up and it would be good to see the Government do something a little bit different. I don’t think they’re short of money that they’ve put into infrastructure – or their ideals about what it should look like. But the execution is lacking – whether it be airports, roads or ports. The infrastructure as a whole is behind. I think the difference between China is that the infrastructure has paved the way for industry to develop. In India, the industry is here, tugging along the infrastructure. You open a new flyover, and the day its open, it’s full, and then what do you do? So I think infrastructure is a problem. The focus needs to be on execution, and not finance.

In terms of market saturation, America has 850 cars per 1,000 people, India has 8 cars per 1,000 people, and China has 17-18 cars per 1,000 people. So on a saturation basis, India’s got a long way to go to catch up with the China numbers. Also, the age demographics – you’ve got a massive population that’s now moving into the buying picture. Not only have we got an economy that’s stable, the Government has provided stability with the reelection, people now have more disposable income, and they’re moving into that age now where they’re looking for a car as well. That’s why India is exciting and important.