Part-2: GM India’s exit: bumpy ride comes to an end! (Is it good decision?)

In my (not so humble!) opinion, I believe GM India’s decision of exiting Indian domestic market is unwise & short sighted. Below are few points of argument;

1. Ever changing expectations of key stake holders & decision makers: Mis-communication was quite apparent when GM India told dealers to be ready for new beat car in April-2017 & then in May-2017 announcement came that GM India is exiting the Indian domestic market. This indicates that internally GM may not be interested in closing down its’ Indian domestic market business but due to pressure of some key stake holders to reduce the loss, this decision is forced down. Business history of the world is replete with many famous goof-ups & ever changing expectation at board level. Case of GM may add to this history. As it is said, in the world of business no decision is permanent. In the light of this it looks plausible that some time in the future, when giant emerging countries like China & India keeps on increasingly contribute to higher sales for automobile companies and other competitors are successfully surviving in these markets in search of higher business growth key stake holders of GM may re-look at the decision of exiting in Indian market.

2. Role of emerging markets in business growth: This is the strongest reason I believe GM should not exit Indian domestic market. When among top three countries in terms of global sales number, two countries are emerging countries (1^st- China, 2^nd- USA, 3^rd- Brazil) for GM, I cannot find any reason to be strong enough to give up & accept the defeat in the Indian market which is going to be third largest automobile market in the world by 2020. China market has become the biggest market for GM that shows how well GM is doing there. Surely, GM can also find right mix of strategy to re-enter, survive & grow in Indian market. (GM cannot be foolish again in terms of replicating the successful strategies or products in China for Indian market, in China GM gets high sales from premium priced cars as no. of millionaires in China is rapidly growing. But in India so far for the car makers the success has come by producing competitively price yet features-rich small/mid size cars.)

3. Changing policy framework- The game changer:  The biggest game changer in the automobile world is coming when transportation ministry reiterates about putting in place policy for achieving 100% electric vehicles in India by 2030. Earlier, GM India has proved itself a bad player with existing rules of the game in automobile world in India, but as the rules of game is changing (or the game itself is changing!) GM India has a chance given the unpreparedness of many Indian auto players. With this back drop, I believe GM is competent & competitive enough to fight in ‘game changer’ business environment as it has strong team &high R&D expenditure for electric cars, has capacity to beat other strong competitors and has already started focusing on the biggest market (China) for hybrids & electric cars which will give important learning & traction for GM. Of course, only if these factors play out positively for GM then only it stands chance in new world of automobile (fossil fuel free world), but if GM turns out to be dumb or slow mover (or both) then this can turn upside down for it.

4. Stakes are high for implementing exit plan: I believe many times it is better to shutdown the loss making unit which can not cover the variable cost and if that’s going to continue for many years resulting  into constant loss, then continue to operate it . But what if cost of shutting down the operation is huge & may permanently dent the brand name if possible re-entry of such brand name happens….. then what? GM India will be facing legal trouble, trade union conflict, customer shock, trust deficit for GM brands, outburst from dealers and many more troubles which GM never expected leading to huge financial & reputational cost. The higher the stakes for implementing exit plan, the more difficult it is for the company to re-enter in that market both financially & reputationally. If GM India had designed & implemented better exit strategy from Indian market, then this cost & burden would have been far less.

 In all possibility any of below three scenarios (or more can be in real world) can be played out for GM India in long run;

Scenario-1 : GM India becoming respectable exporter of cars from India

If this happens: Here, Decision of exiting Indian domestic market will be defended & resource diversion by moving from domestic market to export market will be considered as a good strategic move.

Scenario-2 : GM India may re- enter in Indian domestic market with the hope that this time it ‘ll do it differently & achieve better performance.

If this happens: It will be proven that GM’s decision of exiting Indian market was act of idiocy and we have yet another story of high profile corporate goof-ups & key stake holders' ever changing expectations.

Scenario-3: None of the above two scenario develops, GM India slogs (remain small player) in exporter of the cars from India.

If this happens: This will be more than big tight slap on the corporate face of GM, this will be concluded as like Indian domestic market GM also failed in Export market which will be similar to committing corporate suicide in over all Indian market.