GM, CHRYSLER BANKRUPTCY COULD HURT TCS THE MOST

 

The grave financial crisis at US automobile companies General Motors (GM) and Chrysler has put at risk deals worth nearly $1 billion (Rs 5000 crore) annually for Indian auto parts

 suppliers and some of the countrys top software firms.

Tata Consultancy Services (TCS), Indias largest software exporter, faces the biggest impact among IT companies, while vendors of auto components will be particularly affected if GM files for bankruptcy, analysts and executives from the two industries said.

On Sunday, the US government gave GM 60 days to come up with a new plan to cut debt and prevent bankruptcy. Chrysler has been ordered to finalise a partnership with Italian carmaker Fiat within 30 days.

A Delhi-based auto parts supplier to GM said there has already been some reduction in orders from the American firm. We are worried and closely watching the developments in the US to gauge the impact. The decline in auto sales in the US has already hit the order books of Indian suppliers, he said.

A GM bankruptcy will have a crippling effect as production lines will be reduced and a number of models scrapped. Even if the firm doesnt file for Chapter 11 (bankruptcy), its likely that payments will be delayed. We have already reduced our supplies to GM, an executive at a leading auto component company said.

GM and Chryslers woes-the two have been struggling in recent years-have also put their new IT outsourcing projects in a limbo.

 

Several new outsourcing decisions are pending at GM and Chrysler because of the uncertainty about their future and the anti-offshoring sentiment that is being voiced by many political lobbyists, said a person familiar with outsourcing decisions at these auto companies.