GM sets final deadline for Daewoo asset sale

Delay is hurting small car project

General Motors has told the creditors of the erstwhile Daewoo Motor India to free Daewoo's assets for purchase by GM India by June 30. If the creditors fail to meet the deadline, the company would use an alternative set-up to enter the small car market.

According to P Balendran, vice-president (corporate affairs) of GM India, the deadline is final because the drawnout process of the asset sale has delayed GM's entry into the small car category by a year. He added that GM was optimistic that the assets would be freed for sale before the deadline.

GM India wants to introduce a small car, Chevrolet Spark, by using the production facilities originally meant for the Daewoo Matiz.

Balendran said the Daewoo plant needs to be refurbished, something that would cost "a few hundred million dollars."

If the creditors fail to free the assets for sale by June 30, GM would consider setting up a greenfield facility or expand its existing facility in Halol, Gujarat, to enter the small car segment. The minimum investment required for a greenfield site would be about Rs 500 crore.

Balendran said a greenfield facility for the small car could be used as an export base, therefore, it may be set up near a port.

He, however, added that if a state such as Uttaranchal could offer incentives that more than offset the disadvantage of a location in the interior, GM could set up its small car facility there.

GM took over Daewoo's global operations in 2000. In India, Daewoo's creditors, ICICI Bank, IDBI Bank and Exim Bank, are locked in a dispute with the government over the sale of assets because Daewoo owed some dues to the customs department. GM India is prepared to buy the assets only if they are free of encumbrance.

Small car is integral to GM India's plans. The company's head, Rajeev Chaba had earlier said that GM aimed to sell about 160,000 cars by 2007-08. Given the company's current level of sales, about 23,000 units in 2004, the small car is needed for a significant increase in its sales volume.

Balendran said GM India plans to roll two products a year in the future. One such rollout, would be a hatchback, perhaps by the end of the year, that would supplement its car, Corsa Sail, in the segment where Maruti Udyog's Swift has been positioned.

A bumpy ride

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• GM to introduce Chevrolet Spark by using facilities meant for Matiz
• Daewoo plant refurbishment to cost "a few hundred million dollars"
• If creditors fail to free assets, GM may consider greenfield unit or expand facility at Halol in Gujarat
• Creditors are locked in a dispute with Centre over dues owed to the customs department
• GM to buy assets only if they are free of encumbrance