The shocking death of Tata Motors managing director Karl Slym, who apparently fell from his 22nd-floor hotel window in Bangkok late last month, sent ripples of sorrow and horror beyond the family and colleagues who knew him personally. For the global corps of company-hopping auto executives and their families, used to long hours, high pressure and trying relocations, Slym’s death represented a worst fear realized. But beyond the grief and bewilderment that inevitably surrounds this kind of tragedy, Slym’s passing underlines serious questions about both the broader state of the Indian auto industry, the growing economic grasp of China and the efforts by U.S. automakers’ to tap into the car-hungry emerging world.
India’s car market has long been one of the most challenging of the so-called BRIC nations, upon which the major global automakers are relying for long-term growth, and last year it posted its first overall decline in a decade. That weakness in the domestic market translates into poor prospects for India’s domestic automakers, which now significantly lag China’s in the race to establish indigenous brands and products in export markets. Tata, which Slym was assigned to turn around, seemed to exemplify India’s automotive struggles, betting big on a low-cost Nano that has fallen victim to technical problems, overhype and price inflation.
But before Slym took the reigns at Tata, he actually helped ramp up the pressure on India’s automakers by establishing an automotive foothold on the subcontinent for its strategic competitor, China. As managing director of General Motors in India from 2007 to 2012, Slym shifted GM’s India operations into a 50-50 joint venture with China’s Shanghai Automotive Industry Corporation, paving the way for the introduction of Chinese-made, low-cost vehicles to India. Under the cover of the Chevy bowtie logo and Slym’s cricket-aficionado, Indophile charm, the Wuling Hong Guang van, one of China’s most affordable and popular vehicles, entered India’s commercial vehicle market as the Chevrolet Enjoy.
Cheap Chinese vehicles did not immediately take off in India, however, and in 2012 the Chinese sold most of their shares in the India venture to GM, citing weak performance. But because the factory in China is paid royalties for every kit it ships to India, it was making money even as GM lost a reported $200 million on Indian operations last year (and selling far fewer than Slym’s 2011 prediction of 300,000 units). Thanks to this kit-assembly and royalty-based deal, negotiated during GM’s darkest hour, GM India became the Chinese auto industry’s first toehold in a strategic competitor’s market.
And this achievement, likely celebrated as much by politicians in Beijing as it was by automakers in Shanghai, has not been problem-free. Last year GM’s India operations found themselves embroiled in an emissions-testing fraud scandal that has claimed the jobs of at least 15 GM employees, including the firm’s global powertrain chief. According the preliminary Indian government investigation, GM acknowledged tampering with a Chevrolet Tavera sent for emissions testing, but denied bribery had taken place.
Though already working at Tata by the time the scandal erupted, where he remained tight-lipped about his role in the investigation, Slym was named in Indian media reports as a target of the government investigation. In a seemingly damning twist, his successor as managing director of GM India, Lowell Paddock, took credit for exposing the fraud to investigating officials, effectively throwing Slym under the bus. Earlier, in 2013 Indian media reported that Slym also faced a warrant for a six-month jail sentence issued by the Chandigarh State Consumer Disputes Redressal Commission over Tata’s alleged failure to provide a commission-ordered redress for warranty repair on a Tata Nano.
For all his outspoken love for what he called his “adopted home,” reports of Slym’s travails in the automotive “Wild East” of India and China show signs of potential stressors beyond even the always-grueling expat auto exec grind.
And to be sure, the entire Asian auto business is under a lot of pressure.
As GM becomes an increasingly China-centric company in the wake of its 2009 “Chinese bailout,” which saw it trade control of both its Shanghai-GM and India ventures for a $400 million Chinese bank loan, it’s becoming a lightning rod for China-India economic rivalry. Indeed, as the brouhaha over a household servant caused a diplomatic uproar between the U.S. and India, Shanghai may have decided the facade of U.S. partnership is no longer worth preserving. A few weeks ago, Chinese media reported that SAIC-GM-Wuling Automobile Co., the Chinese-controlled joint venture with the U.S. automaker, is now pursuing full ownership of the India venture. Having got a foot in the door with the help of Slym and GM, Shanghai is moving to consolidate its position on the subcontinent.
This situation wasn’t hard to foresee. As part of a “pillar industry,” China’s automakers operate under a government strategy that leverages joint ventures to acquire the technology and know-how to compete with global majors, eventually surpassing their erstwhile partners. SAIC has executed that plan to near perfection with Shanghai-GM, attracting key GM R&D projects to its joint research center, taking a majority stake of its Chinese sales company, developing and building Chevrolet-badged vehicles for export, and now apparently taking over the Indian “joint venture.”
Edward Niedermeyer, an auto-industry consultant and former editor of the blog The Truth About Cars, is a contributor to Bloomberg View’s Ticker.