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November 11, 1997


Hard drive

In India, General Motors is the computer
software and telephony company!

The biggest expansion prospects for General Motors in India lie not in cars but in telephony and computer software, says John F Smith, chairman and CEO of the world's biggest corporation.

He has been reported as saying that the car market in India is extremely competitive, large new capacities have come up, and there could be a couple
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of rough years ahead before this capacity is digested. But the scope for expansion is enormous in telecommunications.

General Motors' subsidiary, Hughes, in partnership with the Ispat group, has bagged the licence to do basic telephony in the Maharashtra telecom circle. The VSAT operations of Hughes have also fared well (it has just bagged a big order from the Reserve Bank of India), and this subsidiary has excellent expansion prospects.

Is it really possible to make any money in basic telephony, given the high licence fees? Smith insists that he expects Hughes-Ispat to be profitable, and is not intended to be a loss leader. In that case, will GM bid for other circles where re-tendering is due to take place? No, says Smith. His appetite for telecom is already satisfied.

The computer software division has also done very well, he says. Indian skills have proved very competitive, and will be used not just for low-end software but also for complete solutions where the value addition is much higher.

The company has 500 engineers already and it finds that global demand is booming and will expand rapidly. Its own engineers will provide the software for the big Hughes-Ispat project in Maharashtra as well as other ventures in India (which include auto finance and auto ancillaries).

Smith thinks General Motors has got off to a good start in India in the face of intense competition. When asked where he would like to see GM five years from now, he says with a grin, "Somewhat bigger than Maruti!"

He adds that he is "just kidding". What he wants is for General Motors to be known as the car company that provides the best customer satisfaction. He is aiming for quality.

Will GM bring in a small car to compete with Maruti? Yes, in due course, he says. Most foreign car companies intend to bring in small cars, including Daewoo and Honda. GM has sold over a million units of its Corsair model, which is made in Mexico currently, and should do well in India too. This is larger and costlier than the Maruti Zen and will be at the upper end of the small car market, but he thinks customers will be willing to pay for quality.

Does General Motors find prospects better in China or India? Smith says conditions in the two countries are quite different. China is still a controlled market in which a few entrants have to bid for projects while entry into India is very liberal. So there is more competition in India. The skill levels in the two countries are comparable, in auto ancillaries as well as cars.

It is too early, he says, to come to a judgement on which will prove more competitive.

GM's Delphi division has set up five auto ancillary plants in India, four of them fully owned. It makes supplies to Maruti and Daewoo as well as to its own joint ventures with the Birlas. Smith sees auto ancillaries as a promising area for India to become globally competitive. GM also intends to buy components from other Indian producers. Smith has high praise for Sundaram Fasteners, which was recently voted the best GM supplier. It has supplied over 4 million radiator caps without a single defect.

What about new areas to conquer in India? Smith says GM is supplying locomotive technology to the Indian Railways but does not intend to produce locomotives itself. Nor does it plan to produce trucks, since the existing manufacturers occupy most of the available space. GM will instead focus on expanding its existing lines of business.

- Compiled from the Indian media

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