By Santanu Choudhury
NEW DELHI-- General Motors Co. is retooling its game plan for
India, betting $1 billion it can emerge as a bigger force in a
market where it currently is a bit player with a somewhat tarnished
reputation.
Stefan Jacoby, running some of the Detroit auto maker's
operations in international markets, said Wednesday that one Indian
factory will be closed, shifting focus to a single plant with
220,000 vehicles of capacity. That factory, in the state of
Maharashtra, will in five years produce 10 new Chevrolet models, a
third of which will be earmarked for export.
"Today we draw the line and mark the beginning of a new General
Motors here in India," Mr. Jacoby said at a news conference
attended by Chief Executive Mary Barra. "We have a lot of hard work
ahead of us."
The auto maker's sales are down sharply in India through six
months, even as the wider industry has grown modestly and as India
is seen as one of the emerging markets with the highest potential.
Having to recall 269,000 vehicles in the past two years in India,
GM has seen its image take a hit.
GM produces seven vehicles in India, including the Spark and
Beat hatchbacks, but only holds about 1.3% of India's light-vehicle
market, according to WardsAuto.com.
It trails nearly every major auto maker selling in the market,
including Toyota Motor Corp., Ford Motor Co. and Hyundai Motor Co.
It also lags far behind the big local players, including market
leader Maruti Suzuki India Ltd., Tata Motors and Mahindra &
Mahindra.
GM's India investment is part of a larger $5 billion quest to
develop more competitive vehicles for emerging markets. The auto
maker is a big player in China and Brazil, but Mr. Jacoby has said
the company has too many platforms on which it builds vehicles.
GM will work with its Chinese partner, SAIC Motor Corp., to
create a new family of low-price Chevrolets off a single
architecture and aimed at an array of emerging markets. The goal is
for 2 million vehicles, or 20% of GM's entire production, to come
from that family of vehicles.
The auto maker has sold vehicles in India since 1996 and
invested $1 billion to build two factories. A plant in the western
state of Gujarat will close under the plan by Mr. Jacoby, a former
Volkswagen AG executive. While production capacity at the
Maharashtra plant will increase to 220,000 vehicles annually,
overall capacity will decline 21% due to the closure.
Mr. Jacoby's plan to revive GM's presence in India is among the
most important he faces. He doesn't oversee operations in China,
where GM holds 14% of the market, and doesn't oversee big
operations in Europe and Brazil.
Since joining GM in 2013 from Volvo Car Corp., where he spent
about two years as CEO, Mr. Jacoby has realigned GM's footprint in
Asia and other markets with an eye on boosting profits and limiting
risk. The company closed plants in Australia and Indonesia and has
scaled back in Thailand.
Mr. Jacoby's plan for India will be welcomed by the government
of Prime Minister Narendra Modi, which has been promoting foreign
investment through a "Made in India" campaign. In March, Ford
opened a new factory in western India, part of $17.3 billion in
direct foreign investment India has attracted over the first five
months of 2015.
Ford's new investment, part of its own multibillion growth plan
in India, is aimed at boosting exports from India, much like GM's
plan. Unlike the biggest economies in Asia, India has had limited
success in shipping automobiles and other big-ticket items to other
markets.
Write to Santanu Choudhury at santanu.choudhury@wsj.com