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India exit puts GM in 'right markets'

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DETROIT -- Just three years ago, General Motors moved its Asian headquarters to Singapore from Shanghai, partly for better proximity to India and other promising markets in the region.

But GM's hopes for huge growth in India have fizzled, and the automaker now plans to stop selling vehicles there entirely, instead turning it into a low-cost export hub for Latin America. GM also is abandoning South Africa after 104 years.

The exits come two months after GM agreed to sell nearly all of its European operations to PSA Group.

"Today's GM management is correctly focused on profits, not sales volume and market share," said Michelle Krebs, executive analyst for Autotrader. "It has shown a willingness to cut its losses if there's no clear path to profitability and market dominance. In light of a slowing U.S. auto market, this pragmatic approach to the global business is necessary."

GM CEO Mary Barra foreshadowed the India exit last year, when she suspended plans for a new small-vehicle platform for the market and said future investments there were under review. When the sale of Opel and Vauxhall was announced in March, Barra said executives were exploring more cuts in international markets.

In announcing the India and South Africa moves last week, Barra signaled that GM does not plan more major reductions to its geographic profile, though she said the company would keep aggressively paring costs everywhere it operates.

"Globally, we are now in the right markets to drive profitability, strengthen our business performance and capitalize on growth opportunities for the long term," Barra said in a statement. "We will continue to optimize our operations market by market to further improve our competitiveness and cost base."

GM's market share in India, which it entered in 1994, is only 1 percent. Many of the vehicles sold there are cheap, small cars that offer tiny profit margins relative to GM's products in North America and China.

GM said it would phase out Chevrolet from India and South Africa by year end.

Isuzu Motors has agreed to buy GM's plant in Struandale, South Africa, and GM's 30 percent share in their South African joint venture.

GM, the largest automaker in the world from 1931 through 2007, said it would take a $500 million charge in the second quarter for the India and South Africa moves but save $100 million a year going forward.


Posted by Maye Rosales on 22nd May 2017