GM launches clean fuel Spark compact car in India

General Motors' ambitions for its Indian business were on display Tuesday as it unveiled the liquefied natural gas version of the compact Chevrolet Spark in Mumbai, where the company is fighting to gain a bigger share of a largely untapped car market.

GM's painful reorganization has cut off an important source of funding to fuel its global expansion, particularly in the small but growing car markets of India and Thailand, where GM has planned $645 million in factory expansions.

GM's regional businesses haven't been able to get financial support from their U.S. parent company since the Detroit-based automaker filed for Chapter 11 bankruptcy protection on June 1.

That's not a problem for GM's profitable Chinese business, but it means the Thai and Indian divisions have to scramble to secure new funding, said Johan Willems, vice president for communications for GM's Asia Pacific operations.

In China, GM is sticking with a five-year plan to double annual sales to 2 million units, roll out 30 new or updated models and add a factory.

In Thailand, GM plans to spend $445 million to build a diesel engine plant and upgrade its existing factory in the eastern seaboard province of Rayong.

The automaker's Indian business is midway through constructing a $200 million power train factory in Talegaon, about two hours outside Mumbai.

Willems said India and Thailand are "two very rapidly developing countries. That's why we need to put investment in place for future growth." That money, he said, "would have come from the mother company out of the U.S."

Now it can't.

GM executives say they are confident they'll be able to cobble together adequate funding to keep the Thai and Indian expansion plans on track, using revenues from domestic operations, bank loans, and money from other foreign divisions, like China, where GM is a market leader. Yet they declined to reveal details.

That funding could prove crucial as the company fights to bolster its weak presence in India's promising auto market and transform Asia into a bigger production base.

Sales in India rose about 10% last year, to 65,702 cars, but the company is still a distant fifth to market leader Maruti Suzuki, which sold 711,818.

"We're a challenger," said Karl Slym, president and managing director of GM India.

Today, GM sells seven Chevrolet brands in India, but the Spark has been most successful, accounting for about half of cars sales last year.

Globally, GM has sold 3.5 million Spark cars in 100 markets. The version unveiled Tuesday is GM's first clean-burning liquefied natural gas car in India. GM has already launched an LPG version of the Spark in Italy.

Even before GM decided to hive off non-performing brands like the gas-guzzling, military-style Hummer SUV, it planned to grow the percentage of vehicles manufactured in Asia from 30% to 40%.

China, India, and Korea will likely play a "major role" in small car manufacturing for the leaner, smarter GM that many hope will emerge from bankruptcy proceedings in a few months, Willems said.

"Building small cars needs to be done in a cost-effective way," he said, adding that to do so profitably in the U.S., where costs are higher, requires significant volume.

GM has already invested over $1 billion in India. The company's two automobile factories there can churn out 225,000 cars a year, far more than it sells domestically.

Executives said Tuesday that they don't plan to layoff any of their 4,000 workers in India and are on schedule to expand the number of dealerships from 104 at the end of 2007 to 245 by the end of 2009.

GM also plans to launch a new "global mini car" in India by year's end, to be quickly followed by versions in Europe and other Asian markets, Slym said.

Slym said the mini car would cost around 400,000 rupees ($8,000) — about four times as much as the ultra-cheap Tata Nano, which is scheduled to hit India's streets in July.

He added that for the new GM to flourish, it has to turnaround its U.S. business.

Asia, he said, "can certainly help, but I don't think it can lead."