GM bankruptcy may hit Indian auto component sector

Moody's today said filing of bankruptcy by America's largest car maker General Motors may adversely impact India's auto component industry, which should increase its exposure in other expanding markets.     

"Defaults in payments to creditors are unlikely, but given the dismal state of the US auto market, delays or negotiations on repayment terms may be unavoidable," Moody's economy.Com said in a release.     

This may have downside implications on the cash flows of Indian suppliers in the near term, it added.     

Moody's added that "as the 'Big Three' US auto companies — General Motors, Ford and Chrysler — struggle during the recession, Indian suppliers also inevitably feel the squeeze".     

The biggest concern to Indian suppliers caused by the recent US auto woes is perhaps the downgrade in sales outlook.     

"To maintain a strong growth pace, Indian auto part suppliers need to increase exposure to markets that are still expanding," it said.     

Earlier this week, America's largest car maker General Motors (GM) filed for bankruptcy protection but asserted that it would be business as usual in India.

Moody's added that as long as Indian output remains price competitive, there is scope for higher sales in the neighbouring China.     

The increase in appetite for low-cost parts and components has boosted trade between Indian manufacturers and US automakers in recent years. Members of the Automotive Component Manufacturers Association of India shipped almost $1 billion worth of parts — about 27 per cent of their total exports — to the US in 2007-2008, it said.      

The domestic car market also has ample growth potential and its niche in producing small cars — which are increasingly popular around the world — may also help to keep local automakers and part suppliers on strong footing.     

GM India at present produces Chevrolet Optra Magnum , Chevrolet Tavera, Chevrolet SRV, Chevrolet Aveo, Chevrolet Aveo U-VA and Chevrolet Spark at its plant in Halol, Gujarat.