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China's SAIC Motors starts hiring ahead of India foray

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01 March 2017

China's SAIC Motor Co has registered a company in India and started hiring key executives, as it is set to become the first Chinese automaker to manufacture products locally in what is possibly the world's fastest growing car market, reports The Economic Times.

 
The MG 6, currently produced in China and the United Kingdom  

MG Motor India, the local unit of China's largest automobile company, will sell vehicles with the 'MG' tag, a British brand that SAIC acquired from Chinese firm Nanjing Automobile about a decade ago, several people in the know told ET.

It has identified Rajeev Chhaba, a former India head of General Motors, as managing director. At least seven more people have been hired to lead the finance, human resources, purchase, IT and other functions.

SAIC has the Competition Commission of India's approval to acquire General Motors' factory at Halol in Gujarat. But the final deal is conditional upon General Motors - SAIC's partner in China - settling labour issues at the plant. If that happens by the middle of next month, the Chinese company is ready to take over the plant as early as in April and roll out its first vehicle from there late next year or in early 2019, said one of the people ETAuto spoke to. If that doesn't happen, it plans to build a new facility.

While Chinese companies sell everything from toys to telecoms equipment in India, efforts by automakers such as SAIC, Beiqi Foton and Great Wall Motors to make inroads into this market have not been successful. One of the reasons is perceptions of poor quality of Chinese vehicles, say industry experts. The companies are cautious too, as global automakers such as Volkswagen, Fiat, Ford Motor and General Motors have struggled in this market where they have been present for more than a decade. But if they can convince consumers on quality, Chinese automakers, with their frugal technologies, can reap big success in the cost-conscious Indian market and pose a big challenge to leaders Maruti Suzuki and Hyundai Motor, say auto experts.

SAIC had made an effort to enter India back in 2010, in an alliance with General Motors. The duo had planned to introduce five Chinese models, including a small car, a sedan and light trucks. The project was subsequently shelved.

SAIC now wants to make products locally for the Indian market. Chhaba's experience in Indian and Chinese markets will come in handy here.

Chhaba has been associated with General Motors at various markets for over 18 years. He was General Motors India managing director between 2005 and 2007. His most recent position at the US automaker was in China, where he was vice president of sales and marketing.

Another General Motors India veteran, P Balendran, will also be joining as a top executive. Both Chhaba and Balendran are currently working as advisers and the formal appointment will happen later. The two are on the MG Motor India board where the remaining six members are Chinese nationals.

On the website of the Ministry of Corporate Affairs, Balendran's name is given as the representative of MG Motor India. He didn't comment on the company's plans. Chhaba didn't respond to calls made by ET to his mobile phone.

SAIC has hired KPMG to conduct the market study while PwC has done study on the cost of the General Motors plant. It also roped in EY to help in finalising suppliers.

The immediate hurdle to start operations is the labour issues at the General Motors plant.

General Motors is in the process of consolidating its operations in India and had announced that it would shut down operations at Halol and focus on the other plant at Talegaon, Maharashtra. The American carmaker extended the deadline to close the plant till August last year and then to March 2017.

On 6 February General Motors offered 100 days' salary to workers at the Halol plant for every year completed. However, sources from its labour union said they had not agreed to this and sought a higher compensation.

''This offer is good for the supervisor level people who have spent over 20 years in the company but for the shop-floor and junior worker it is very little. We expect the company to provide us either jobs or give us enough money to survive which should around Rs30-Rs35 lakh,'' a labour union representative said.

He added that shop floor workers are in the age group of 30-35 and they have a service of 10 to 12 years with salary ranging from Rs25,000 to Rs28,000, which means in the current offering they will get between Rs8 lakh to Rs11 lakh per person. Currently General Motors has about 600 such employees.

Then there are about 150 to 200 supervisor level people whose salary ranges between Rs50,000 and Rs60,000 and their service ranges between 20 and 22 years. So in total, General Motors will have to shell out about Rs115 crore to the workers even if they agree to the current proposal.

Sources suggest that the Gujarat government has also given its nod to the American carmaker. A section of workers are trying to reach out to the chief minister to raise their issue, while GM is also trying to transfer some workers to its other plant in Maharashtra.

When contacted by ET, a General Motors India spokesperson said, ''Discussions with SAIC on the sale of Halol are progressing well. We continue to work with our employees on the implications of a sale and with the government to secure necessary approvals."

MG Motor India officially describes itself as a ''manufacturer of motor vehicle, trailers and others''. Its first product in India is expected to be an SUV, priced in the Rs15 lakh - Rs18 lakh range to take on the likes of Hyundai Tucson.

The company will also be borrowing products from SAIC-General Motors-Wuling Automobile's Baojun product range in India. General Motors has already brought Wuling brand vehicles, like the Enjoy and Sail, to India.

SAIC-General Motors-Wuling is a joint venture among SAIC, General Motors and Wuling Motors. SAIC and General Motors also work together in Shanghai-General Motors, a much larger joint venture that makes the Buick, Chevrolet, and Cadillac cars for the Chinese market.





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