Explainer: What has gone wrong at General Motors India plant?

General Motors has sent a letter to its employees asking them to accept the voluntary separation package issued by it or be ready to face a lawsuit.

February 25, 2021 / 09:13 AM IST
The struggles for the US-based company which marketed cars under the Chevrolet brand are far from over.

The struggles for the US-based company which marketed cars under the Chevrolet brand are far from over.

It’s been more than three years since General Motors (GM) stopped selling cars in India after struggling for more than two decades to get a foothold in the domestic market. The struggles for the US-based company which marketed cars under the Chevrolet brand are far from over.

After the deal to sell its only manufacturing plant in India to a Chinese company got delayed, GM has been dragged to the court by its own employees alleging unfair practices. Last week, GM sent a letter to its employees asking them to accept the voluntary separation package issued by it or be ready to face a lawsuit.

Why has GM issued the letter?

Following closure of its only plant in Pune in late December 2020, GM made its intention clear about exiting the Indian market in total. Against this, the company offered a severance package to 1,600-odd employees associated with the plant. The employees not only rejected the benefit package, but also dragged the US carmaker to court against its decision to close the plant.

GM reasons that since there were no more export orders for the plant it was decided to shut it down. The Talegaon-based plant, which was set up in 2008, had been making cars only for the export market as GM wound up sales operations in India in 2017 after being in losses since setting foot in the country in the mid-1990s.

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What are the GM employees claiming?

Instead of a severance package, employees of GM Talegaon plant want continuity of their service for which they are citing memorandum of understanding (MoU) signed between GM and the Chinese company Great Wall Motors (GWM). The agreement, the employee union claims, facilitates a transfer of ownership of the plant which thus prevents from its closure.

The union further claims that the Closure Application for the plant filed by GM with the Government of Maharashtra states that certain manufacturing would continue past the date of closure.

The Closure Application was filed on November 20, 2020, and the date by which the state had to respond was January 19, 2021. The employees alleged that state dragged its feet on the application to ensure a deemed approval as according to the Industrial Disputes Act if no order is passed within 60 days of the application then the application is deemed approved.

What is the role of the Maharashtra government?

Employees moved the Bombay High Court in mid-January to make the Government of Maharashtra approve or reject GM’s closure application. The union even met Maharashtra’s Labour Minister Dilip Walse-Patil.

The Government of Maharashtra rejected the closure application submitted by GM and instructed the company to run the plant as usual and keep paying its employees. The rejection came two days after the GM union moved the Bombay High Court. The rejection, General Motors, claims has gone against the ‘investor friendly’ image of the state.

While GM had given the employees time till February 23 to accept the severance package, the next hearing before the labour minister was also scheduled for February 23.

What happened to the deal between GM and GWM?

GM signed a binding term sheet to sell the legal entity which includes the Talegaon plant to China’s GWM for an undisclosed amount. The change of ownership was supposed to be complete before December 31, 2020. GWM was to begin production from early 2021.

However, following the heightened tensions at the line of actual control (LAC) with China, India did not provide the FDI approval to GWM within the envisaged time limit. There were as many as 175 such proposals pending approvals by August last year. GWM has not given up on India as yet and hopes to get the approvals soon.
Swaraj Baggonkar
first published: Feb 23, 2021 06:38 pm

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