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GM India skidding on cash front

General Motors' Indian subsidiary says it is unfazed by its parent’s bankruptcy in the US, but auto industry experts say consumer confidence is already taking a knock on its famed Chevrolet brand, reports HT Correspondent.

business Updated: Jun 03, 2009 20:28 IST
HT Correspondent

General Motors' Indian subsidiary says it is unfazed by its parent’s bankruptcy in the US, but auto industry experts say consumer confidence is already taking a knock on its famed Chevrolet brand.

GM India sells variations such as Spark, Aveo sedan, U-VA, Optra, Tavera and Captiva to address a range of segments, but its sales witnessed a free fall in the first four months of this year, plunging 21 per cent year-on-year.

"The bankruptcy proceedings for General Motors in the US may adversely impact consumer confidence in the brand in the short term although from the company standpoint, it is business as usual as India is not covered in GM's chapter 11 filing," said Kapil Arora, partner-advisory services at consulting firm Ernst & Young.

"From a financial standpoint, if the bankruptcy proceedings extend beyond 6 to 9 months, there could be an impact on the company's long term plans including financing for expansion, new model launches and product development,” he added.

Nevertheless, GM has announced the launch of its premium sedan Cruze later this year as also a small car below its benchmark Spark. On Tuesday, the company itself admitted it faced difficulties in raising cash.

"It hasn't been easy in India to raise the money ($ 200 million). Frankly, we have found difficulties from Indian financial institutions, but we have not given up," Nick Reilly, Group Vice President, GM India told analysts in a conference call.

“The majority of the fund remains to be raised. It might take us little longer, but the opening of the plant is largely on schedule. It may be delayed by a month or two.” Most of company's Rs 4,000 crore investment in India is parent equity but GM India is now on its own.

“GM India will find it difficult not only to launch new products, but even to keep its existing portfolio competitive. For the long-term health of GM’s India business, this situation is, at best, precarious,” said Vikas Sehgal, partner, Booz & Company.