CORPORATE RESTRUCTURING OF

GENERAL MOTORS INDIA

SUBMITTED BY: SUBMITTED TO:

MR. K.B. SINGH KHUSHBOO KUMARI

MBA/4511/08
What is corporate restructuring?
Restructuring is the corporate management term for the act of reorganizing the
legal, ownership, operational, or other structures of a company for the
purpose of making it more profitable, or better organized for its present
needs. Alternate reasons for restructuring include a change of ownership or
ownership structure, demerger, or a response to a crisis or major change in
the business such asbankruptcy, repositioning, or buyout. Restructuring may
also be described as corporate restructuring, debt restructuring and financial
restructuring.

Corporate restructuring is necessary when a company needs to improve its

efficiency and profitability and it requires expert corporate management.
A corporate restructuring strategy involves the dismantling and rebuilding of
areas within an organization that need special attention from the management
and CEO.

Characteristics

 Cash management and cash generation during crisis

 Impaired Loan Advisory Services (ILAS)
 Retention of corporate management sometimes "stay bonus" payments or
equity grants
 Sale of underutilized assets, such as patents or brands
 Outsourcing of operations such as payroll and technical support to a more efficient
third party
 Moving of operations such as manufacturing to lower-cost locations
 Reorganization of functions such as sales, marketing, and distribution
 Renegotiation of labor contracts to reduce overhead
 Refinancing of corporate debt to reduce interest payments
 A major public relations campaign to reposition the company with consumers
 Forfeiture of all or part of the ownership share by pre restructuring stock holders (if
the remainder represents only a fraction of the original firm, it is termed a stub).
Capital is generally the assets, often monetary, that are available to generate more
assets. Thus the liquidity of capital should be high. Restructuring them means reallocating
them to improve their availability (liquidity). The process requires selling assets to buy
different ones in order to improve your capital (monetary) position so that you can
improve your asset position thus enabling you to earn more with them. It is generally
undertaken by companies that are generally doing poorer than expected and wish to
stabilize future performance of their assets.

Capital Restructuring touches upon the following aspects:--

1. Leverage of the company: This is essentially the Debt: Equity Ratio. Here, companies
have the option of undertaking Debt Restructuring - especially if it is a Debt - laden
company (high debt leveraged company).

> Debt Restructuring: It is a process that allows a private or public company - or a

sovereign entity - facing cash flow problems and financial distress, to reduce and
renegotiate its deliquent debts in order to improve or restore liquidity and rehabilitate so
that it can continue its operations.

2. Investment Pattern: This relates to ability of corporations to identify the various

investments opportunities that would lead to higher returns.

3. FDI Participation: This aspect relates to the change in structure of the shareholding
due to the increasing FDI inflows.

4. Divestitures: As stated earlier in the types of Divestiture in Portfolio and Asset

Management, this aspect relates to divesting divisions and / or businesses to improve the
financial standing of the organization.

Motives of Capital Restructuring

1. To enhance liquidity.
2. To lower the cost of capital.
3. To reduce risk.
4. To avoid loss of Control.
5. To improve Shareholder Value.

Benefits of Capital Restructuring

• Greater Financial Muscle

• Access to Better / Greater Technologies
• Focus on Core Competencies

Issues in Capital Restructuring

> Loss of Management Control

GENERAL MOTORS INDIA

General Motors India

 Type Wholly-owned subsidiary

Founded 1994

Headquarters Halol, near Vadodara,Gujarat, India

Key people Karl Slym - President and Managing

Director

Industry Automotive

Products Automobiles

Employees 3,500

Parent General Motors

Website General Motors India

Introduction

General Motors India Private Ltd. (GM India) is a wholly-owned subsidiary of General
Motors Company that is engaged in the automobile business in India. The registered
office of GM India is in Halol, near Vadodara, Gujarat. The company operates vehicle
assembly plants in industrial parks in Halol and Talagaon, near Pune, Maharastra,
maintains a headquarters operation in Gurgaon, Haryana and a large technical center
in Bangalore.

History
General Motors began doing business in India in 1928, assembling Chevrolet cars, trucks
and buses, but ceased its assembly operations in 1954. GM continued with tie-ups
with Hindustan Motors to build Bedford trucks, Vauxhall cars, Allison Transmissions and
off-road equipment.

In 1994 General Motors India was formed as a joint venture, owned 50 percent
by Hindustan Motors and 50 percent by General Motors, to produce and
sell Opel branded vehicles. GM bought out the Hindustan Motors interest in 1999. GM
India continued to produce Opel cars at the Halol facility until 2003, when it started
production of Chevrolet vehicles at that location.

In 2000, GM India moved its headquarters to Gurgaon. In 2003, the company opened its
technical center operations in Bangalore, which included research and development and
vehicle engineering activities. The technical center operations were expanded to include
purchasing and financial support services for General Motors operations located outside
of India (2006), vehicle engine and transmission design and engineering (2007) and a
vehicle design studio (2007).

GM India began construction of a second vehicle assembly plant in Talagaon in 2006,

which began production of Chevrolet vehicles in September 2008.

Vehicle sales, service and marketing business

Like most other automotive companies in India, GM India appoints independently owned
dealers to sell, service and market vehicles that it produces. As of August 2008, managed
the Chevrolet dealership network (including export dealers located
in Nepal, Bangladesh, Sri Lanka and Bhutan) from its headquarters in Gurgaon, and
regional zone offices in Mumbai, Kolkata and Chennai.
GM India also sells parts and services to independent vehicle maintenance providers
under the AC Delco brand.

Models

Chevrolet

 Chevrolet Aveo
 Chevrolet Aveo U-VA
 Chevrolet Captiva
 Chevrolet Forester (discontinued)
 Chevrolet Optra
 Chevrolet Optra Magnum
 Chevrolet Optra SRV
 Chevrolet Spark
 Chevrolet Tavera
 Chevrolet Cruze

Opel

 Opel Astra (discontinued)

 Opel Corsa (discontinued)
 Opel Corsa Sail (discontinued)
 Opel Vectra (discontinued)

Corporate restructuring of GENERAL MOTORS INDIA Pvt. Ltd.

US carmaker General Motors has created a separate entity for its sales and distribution
activities in India as a part of restructuring and realignment of the company's corporate
structure. "As a part of the restructuring and realignment of its corporate structure, GM
India is transferring its sales, marketing and distribution activities to the new entity, while
all manufacturing activities will remain with General Motors (India)," the company said in a
statement. The formation of the new entity, General Motors (India) Marketing Pvt Ltd,
comes close on the heels of the US car major stepping up its investment in India with
plans to pump in 200 million dollars at Talegaon in Maharashtra, to set up a powertrain
facility.

"With GM's operations in India expanding significantly in size and scale, it has become
necessary to bring greater focus and efficiency to selling and distributing our world-class
products and services," GM India Vice-President P Balendran said. The move would help
GM improve planning, inventory management, transport management, timely delivery and
maximise cost synergies, he added. The restructuring exercise would also involve
transfer of some employees, who were engaged in sales, marketing and distribution
activities, to the new company, the statement said. GM India is expanding its sales points
to 145 and service outlets to 160 by the end of this year. At present, it has a network of
122 sales points and 129 service outlets across the country.

General Motors has hived off its sales, marketing and distribution functions as a separate
profit centre in India even as it expects slowdown in its sourcing of $1 billion worth of auto
components from the country.

General Motors’ India President and Managing Director, Mr Karl Slym, told Business Line
that half of the $1 billion worth of auto components have already been sourced from India
but the rest of it will get delayed beyond the targeted 2010. “The timeline may get
extended beyond 2010 but the value will remain the same,” Mr Slym said.

This was because of the recession in the global auto industry, he said.
Good growth rate

Mr Slym said the Indian operations of the car maker will not be affected because of
changes in the US operations of General Motors.

“We don’t foresee any problems for the Indian operations because we are maintaining a
good growth rate here,” he said.

In 2008, General Motors sold 65,702 car units, achieving a growth rate of 10 per cent
over the previous year. It expects the same growth rate to be maintained during the
current year too.

More flexibility

Mr Slym said the sales, marketing and distribution of the Indian operations of General
Motors have been hived off into a separate profit centre because the car maker wanted
more focus on these operations. “It is now a separate entity from April 1 this year. It
allows us more flexibility in terms of operations,” he said.

The manufacturing and the R&D businesses will be part of one operation while the sales,
marketing and distribution will be another. Both of them will, however, be part of General
Motors India with Mr Slym as its President and Managing Director.

Dealership network

He said the dealership network is being doubled to about 200 this year compared with
last year. General Motors has been busy with new launches this year. It recently launched
a new version of the Captiva and the Cruise and now plans to launch a new mini-car in
the premium segment later this year. The mini-car will be a global launch and will be
positioned as a feature-rich car but will carry a higher price tag.

Mr Slym said with the setting up of the Talegaon plant in Maharashtra, General Motors
may not require any additional capacity for some more time. The total capacity of the car
maker in India is now about 2.25 lakh units a year. Mr Slym said the auto industry has
shown encouraging results during the first quarter of this calendar, “which gives us
confidence”.