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backASIAtalk June, 2009
India: Order loss stares auto component makers in the face
The bankruptcy filing by General Motors, the world’s largest carmaker till last year, may hit Indian auto component exports, lead to surplus capacity and payment delays in the domestic market, say industry experts.
GM accounts for a significant chunk of India’s exports of auto components worth $900 million to the US every year. The extent of order losses faced by Indian component makers could not be ascertained. Some component makers said they had cut exposure to GM in the previous months as its bankruptcy became imminent.
“As part of its restructuring, GM will close 11-12 plants and phase out some models. If a component maker is supplying auto parts to that model or plant, it would be definitely impacted,” said Surinder Kapur, chairman and MD of parts maker Sona Group, which sells about 3% of its overall export to GM in the US.
Agreed Shriram Pistons managing director AK Taneja: “The component industry is already facing surplus capacity and GM’s restructuring could add to that burden.”
Several Indian component makers had insured themselves against loss of orders and delayed payments on account of the US automaker’s bankruptcy.
But many were unable to get an insurance cover. Auto Component Makers Association (ACMA) secretary general Vishnu Mathur said that companies that do not have an insurance cover might face delayed payments. Some manufacturers such as Rico Auto, which gets 2.5% of its overall export revenues from GM, said they haven’t faced any payment delays yet.
Meanwhile, GM India in a press statement clarified that it would continue to operate in the country even as its parent filed for bankruptcy. GM, which has invested $I billion in India in the past decade, said it would go ahead with its plans to launch new cars including the mid-size sedan Cruze, a new mini-car (code M300) and an array of alternative fuel cars such as the Spark LPG and Aveo CNG.
Kolkata-based GM India dealer Dulli Chand Motors’ owner Rajesh Sanci said the news has ended several months of uncertainty in the market. “GM has made it clear that its Indian subsidiary is separate from the US and Canadian operations. While customers were a bit wary initially, there has been no real impact on our retail sales as our average monthly sales of 80-90 cars remain intact.”
Source: Economic Times - GAI
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