Buffeted by Centre and State, General Motors threatens legal action

Buffeted by Centre and State, General Motors threatens legal action

A year after announcing plans to sell its Talegaon plant, automaker rejects Maharashtra government’s order to continue operations

Squeezed between the Centre’s decision to clamp down on the proposed sale of its car manufacturing and export plant to a Chinese company, and the Maharashtra State government’s restrictions on shutting down the plant, American auto major General Motors has threatened to pursue legal options against the government.

More than a year since GM agreed to sell its factory in Talegaon to China’s Great Wall Motors (GWM) and six months after it applied for special permission under the government’s new ‘Chinese-FDI rules’, the company is yet to receive clearances. Meanwhile, the Maharashtra government has rejected the company’s application for permanent closure of the plant which ceased production from December 24, 2020, and has instructed the company to keep it running and pay the staff as usual. In 2017 the plant had 2,500 employees.

Rock and a hard place

“Effectively, the State’s decision amounts to a requirement that GM either produce vehicles for which there are no customer orders, or pay workers indefinitely for doing no work,” George Svigos, General Motors’ Director of Communications (International Markets) told The Hindu, in a written response from the company’s headquarters in Detroit. “We reject both suggestions. We will move for the reversal of the order as soon as possible and firmly believe the law is on our side,” he added. Hardening its position in the face of the double-clinch from the governments in New Delhi and Mumbai, GM says it sees absolutely no “scenario in which it would reinvest in the site”. 

“GM’s plan is unchanged. GM production has ceased at the Talegaon site and there will be no future GM production at the site,” Mr. Svigos wrote, adding that it is completing “all wind-down work” after which the site will be dormant. He said GM’s current offered package was well in excess of the legal minimum of 15 days per year of service, and asserted that the union, which moved the court, was refusing to negotiate a settlement.

Clouds from LAC

The plans for General Motors to exit from India ran into trouble last year after tensions at the Line of Actual Control between India and China rose over the Chinese PLA’s aggressive incursions into Ladakh, which led to new restrictions on “neighbourhood investment”. 

GM applied for permission to sell the Talegaon plant to GWM’s wholly owned subsidiary, Billion Sunny Development of Hong Kong, filing an application on July 9, which was forwarded to the ministries of external affairs and home affairs, as also the Reserve Bank of India, for clearances on July 13. 

While none of the departments concerned has commented on the issue, sources confirmed to The Hindu that GM has not received any clearances thus far, nor has the government given clearance to any of the companies that have applied in the Chinese-FDI category.

2017 sale to MG Motor

In 2017, GM was successfully able to sell its Halol plant in Gujarat to another Chinese-owned company, MG Motor, the Indian subsidiary of SAIC Motor Corporation of China. Experts say the changed environment due to India-China tensions is affecting many third parties as well as India’s attractiveness to investors. 

“The GM-GWM saga is a stalemate that benefits no one and is adversely impacting India’s stature as an FDI destination,” said Santosh Pai, a partner with Link Legal, which advises companies on investments in India. “Ease of business includes ease of exiting a market.”

According to sources aware of the negotiations, GWM has not yet given up hope of being allowed to buy the GM plant in Talegaon, but plans are on the back-burner for now. 

Also hanging in the balance the Chinese company’s MoU with the Maharashtra government for investments of up to ₹3,770 crore for “Make in India” projects.

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