General Motors CEO Mary Teresa Barra says market share is not sustainable if it's not profitable
General Motors (GM) has been operating in India for almost two decades but hasn't been able to make a mark in a market dominated by Japanese and Korean companies. CEO Mary Teresa Barra, during a visit to India recently, announced that the company will shut its Gujarat plant to consolidate production at its Talegaon plant in Maharashtra and that it plans to invest $1 billion to launch 10 vehicles in the next five years and double its market share to nearly four per cent by 2020. In an interview with Business Today, she explains the US automaker's changing approach to the Indian car market. Edited Excerpts:
BT: You met with Prime Minister Narendra Modi and discussed the investment plans. How do you plan to move forward in India?
Barra: The $1 billion allocated for India is part of the $5-billion investment we plan for strengthening Chevrolet brands and positioning us to win in growth markets. We recognise India as an important country, where there are rising opportunities in sync with the growing aspirational middle class. Chevrolet, with a new family of vehicles, will be able to provide great value to the market. We have done a lot of work to understand the Indian customer, their concern on values, technology, fuel economy, safety and connectivity. We want to double our market share in a short span. The expansion of the Talegaon plant and supply base will create 12,000 jobs. We are looking at deep localisation of manufacturing in parallel to the Make in India strategy of the Narendra Modi government. Our strategy is to make GM India the hub of export. We target to export 30 per cent of the volume from the country.
Arvind Saxena, Managing Director, GM India: We already export cars to Chile. The next export destination is Mexico. We are scouting for new export markets including the African continent. We will also export powertrain and components.
Barra: We plan to present 10 locally manufactured new products in the next five years. The target is to reach all aspects of the Indian market since there is tremendous growth opportunity here.
BT: Why have you never introduced luxury products such as Cadillac and Buick in India?
We will be looking at launching the right products across markets and will check whether high-end products could signify the brand.
Stefan Jacoby, International President, GM: The emphasis is on local manufacturing, which makes sense and will boost the brands. The luxury cars are iconic American brands. We target to get sophisticated customers, who truly want new variants than moving from vehicle A to B. The base vehicles and the low-cost cars will, of course, grow because of the population migrating from two-wheelers to cars. But the other segment, the middle class, is focusing on features like safety, durability and fuel economy. Design is also important for middle-class customers. They are keen on content, appeal and attractive interiors and exteriors. We believe that Chevrolet could fit in this space. As far as the electric vehicles are concerned, it is still a long way to go in India. We see an opportunity for luxury vehicles here. We will deliver accordingly.
BT: You also have many of your great products in China but not in India. Will you introduce those products in India?
Jacoby: Introduction of those products is under consideration. We will not reveal which product we will bring here. But we understand the market and know that SUV is a potential segment in India, especially compact SUVs. We will have a full line-up to offer to the customers in the next five years.
BT: When we look at previous investments, there is a feeling that GM is focused more on China and Brazil rather than India. What are the reasons?
Barra: I think $1 billion is good enough to change that feeling. We have been in India for 19 years. We have invested $1 billion so far. But we decided to double our investment. This means we want to stay here. The 10 new products will be the new beginning. It will strengthen business.
BT: Where will you deploy the $1 billion?
Barra: This is for developing new products specifically for the Indian market. We are also investing for the equipment and machines at the Talegaon plant. We will make products here in line with our localisation policy.
Jacoby: Our localisation will even go to the Tier II of the supply chain. These will be deeply localised products for the Indian market.
BT: Why did you fail to keep on the momentum that you got with the launch of Beat in 2010 in India?
Barra: I was not at this job that time. Still, I can say that we didn't see some of the opportunities in the Indian market. We didn't have the right products to continue the success. The issues in quality and the recalls impacted growth. The $1-billion investment to strengthen the Talegaon plant will help us to overcome these issues. It is a recommitment and a new start for Chevrolet in India.
BT: Will you sell the Gujarat plant to reduce the liabilities from the books of the India unit?
Barra: We have decided to cease production and continue to look for opportunities. We don't have anything specific to announce right now. We plan to settle it in consultation with the employees.
BT: You made a loss of $600 million last year in India. Will you look at writing off part of your investments to reduce the burden on the books?
Barra: I am not going into specifics. The main message is that we want to build a sustainable and profitable business here. We have a comprehensive plan that we are executing.
Saxena: We have a strong plan to improve the customer experience. We have launched the global programme called Chevrolet Complete Care. We have about 250 service centres. As and when demand grows, we will increase the number of service centers.
BT: You have completed 19 months at the top job. What are your learnings? How are you redefining the company?
Barra: We are working hard to become the most valued automotive company. Our customers want us to grow, build strong brands and introduce breakthrough technologies to enhance experience. In my tenure, we focused on customers. We demonstrated that last year amidst the challenges. We developed a 'zero-defect' mentality and revamped the way we do validation and testing to become the leader in safety. Technology has advanced dramatically. See the electric cars. Chevrolet Volt and the next generation Volt EV are exciting. We announced the intelligent driving system, which will provide safety in congestions.
BT: There is a feeling that saturation has hit the western markets. Which segment offers greater margins for GM there?
Barra: The western market is still going strong. We are experiencing good growth. Every rollout under the strong brands gets acclaims there, whether it is Cadillac or Chevrolet or regional brands like Buick or Opel. We continue making progress in North America with strong results. We expect that Europe will break even next year.
BT: Are you still feeling the pangs of bankruptcy?
Barra: We have well passed that and progressed to the future. Today, we have a strong customer base, big brands and reliable partnerships with dealers, suppliers, governments and communities, which we work.
BT: How do you plan to regain the top spot that you lost to Toyota and Volkswagen?
Barra: The important aspect that we look at is margins and profitability. The $5-billion investment in key markets - China, India, Brazil and Mexico - will help us to gain market share and continue the growth momentum. If you look at our family of vehicles or acquisitions, you will understand that we are focused on profitability.
BT: Your strategy is linked to margins and profits. Why did you move away from the old strategy of top-line growth?
Barra: I want both. You can grow market share, but it is not sustainable if it's not profitable. We are looking to run the business in a sustainable fashion. If you look at the technology and the kind of vehicles we build for India, the effort is on customer satisfaction and value for money.
BT: The second quarter financial performance in China is appreciable. You have improved the margin from 10 per cent to 10.2 per cent despite the slowdown. How did you achieve it?
Barra: As we started seeing the market dynamics changing, the China team became proactive and looked for improving efficiencies across all aspects of the business. They keenly studied the customer requirements. Resultantly, we introduced successful SUVs like Buick Envision, Chevrolet Trax and Baojun 730. We are focused on building the vehicles that the customers want. GM is today nimble and agile to face the market challenges.
BT: How do you plan to cut costs in China? Will it affect the product quality?
Barra: Cost cutting has nothing to do with quality. We will never make a change that will affect quality. We are the industry leaders in quality and safety. We may look at discontinuing some irrelevant features. As part of cost cutting we look to improve efficiency in design and production.
BT: How did you overcome issues like safety recalls?
Barra: We changed the way we engineer and develop the products. In today's products, you see high quality, reliability and durability. That is the fundamental changes that we have done across the globe to make sure we are the leaders in safety and quality.
BT: I believe you are trying to change GM's culture and organisational structure, which was considered very insular and slow moving till its bankruptcy...
Barra: Yes, culture change happens every time. You will have to change the business process and the way people work and how you engage them. We have made tremendous progress, empowering people to do the right thing, focus on the customer and drive for results. In India, we have announced that. Still, we have a lot of work to do and we will continue to do that.
BT: What are the innovations happening in GM?
Barra: The key innovation is happening in developing technology for improving customer experience. We procure information on customer needs from our regional managers. We have a group of researchers to identify promising technologies. They work with universities around the globe. We have a comprehensive mechanism for collecting information from customers and putting it in technologies in the vehicles.
BT: You are the first woman CEO of any major automobile company in the world. How do you see it?
Barra: You are being recognised for a job because of your contribution for the results. There is no gender specific reason for it. But in this role I can motivate young women. Education is an important aspect that young boys and girls seriously look into. In today's world, everything is becoming technologically sophisticated. I advice young women should focus on mathematics and science for capturing the opportunities.
