Economic Times of India
GM, Chrysler Bankruptcy to Hurt TCS Most Among India Companies
The ripple effect from the U.S. auto crisis will reach India, hitting Tata Consultancy and auto-parts vendors particularly hard
The grave financial crisis at US automobile companies General Motors (GM) and Chrysler has put at risk deals worth nearly $1 billion (Rs 5,000 crore) annually for Indian auto parts suppliers and some of the country's top software firms.
Tata Consultancy Services (TCS), India's 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 doesn't file for Chapter 11 (bankruptcy), it's 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 Chrysler's 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.
An outsourcing expert said GM and Chrysler award software projects worth $300-350 million annually to Indian vendors such as TCS, Wipro and Satyam. Wipro has a five-year, $300-million contract with GM that was signed in 2006. And TCS signed a $150-million with Chrysler last year to maintain software applications.
Any reduction in outsourcing by the US auto companies will hurt TCS the most. The Indian IT firm counts GM among its top 10 clients and also provides services to Chrysler and Japanese automaker Nissan. TCS had to face write-offs when its client Nortel Networks filed for bankruptcy protection earlier this year.
While a TCS spokesman said the company does not comment on specific clients, Wipro said it was in the silent period leading up to the announcement of its Q4 earnings. In an email response, a Satyam spokeswoman said, "We would not like to comment on this issue as we are still assessing the impact. As of now, our existing relationship with GM continues unchanged."
A GM bankruptcy could hit the revenues of large Indian IT firms by about 2%, said Anand Rathi Securities institutional equities director Tarun Sisodia. However, he added that it was unlikely that the US government would let these companies fail. "The auto majors' existing contracts with Indian vendors are likely to continue but renewals may come under pressure," Mr Sisodia said.
SBICAP Securities research head Anil Advani said there could be a negative impact in the short term for Indian IT firms but outsourcing will pick up as the American companies look to cut costs.
(With inputs from Chanchal Pal Chauhan in New Delhi)
General Motors (GM) and  will receive  from the government of Canada and the provincial government of Ontario, however no more will be forthcoming from either Canadian or US governments unless the companies can reinvent themselves.

"This is a regrettable but necessary step to protect the Canadian economy.  We are doing this on the assumption that we obviously cannot afford either in the United States or Canada a catastrophic short-term collapse." said Stephen Harper, .

"We cannot, we must not, and we will not let our auto industry simply vanish.  This industry is, like no other, an emblem of the American spirit; a once and future symbol of America's success," said Barack Obama, . "These companies - and this industry - must ultimately stand on their own, not as wards of the state." 

Chrysler will receive 1 billion and may in fact be eligible for as much as CA$4 billion. If Chrysler succeeds in the next 30 days with a restructuring plan it would be eligible for a US$6 billion loan. A part of Chrysler's restructuring plan must include a partnership with  within 30 days to appease the US administration. Fiat is a supplier of smaller  vehicles, and the merger will help Chrysler to be viable in the North American market. A Chrysler court  would inevitably lead to it being sold off.

As a part of Chrysler's restructuring plans, Tom LaSorda, the president of Chrysler announced that Canadian operations would fold if it does not receive both the US commitment of $2.3 billion of aid and a new  CAW contract to reduce all-in costs by CA$19 per hour.  As a result of this announcement Chrysler's auto sales volume in Canada dropped 23% compared to March of 2008.

GM has until the end of May to restructure its company to receive up to CA$7.5 billion. As part of the companies restructuring, General Motor’s chief executive Rick Wagoner was replaced Sunday with Fritz Henderson, the current chief operating officer. Henderson spoke out on Tuesday that GM has submitted a restructuring plan which would close five plants, and this may be increased to meet the requirements for financial aid.  He is in full compliance with Obama's auto task force to seek bankruptcy if GM cannot negotiate with their unions, bondholders and others.

GM recently brought forward the ''"GM Total Confidence"'' program providing consumer purchase protection for customers who lose their job for economic reasons within the first two years from purchase. As a result of Chrysler's restructuring announcement in Canada, GM's Canadian vehicle sales volume fell only 17.3% compared to 2008, an increase from the previous month.

GM must reduce some of its  which include its pensions and union health care costs. A part of GM's ailments arose from investing in supplying truck and  during an economy of high gas prices when consumers were demanding fuel efficient vehicles.
2009  
, , is hoping that the CAW will support the restructuring process and re-negotiate their agreement. Whereas a  negotiator has said, “I don't see how the UAW will do anything until they see what the bondholders will give up."
 
The Obama administration is looking toward bankruptcy proceedings for the automakers, "as a mechanism to help them restructure quickly and emerge stronger. It will quickly clear away old debts that are weighing them down.  What we are asking is difficult. It will require hard choices by companies. It will require unions and workers who have already made painful concessions to make even more. It will require creditors to recognise that they cannot hold out for the prospect of endless government bailouts." said Obama.

The auto parts suppliers and IT software exporters in India have already been affected by the declining auto sales. GM and Chrysler software contracts provide US$300 to 350 million a year to vendors in India. As well these two major automakers usually award US$1 billion contracts to auto parts suppliers. "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," said a Delhi auto parts supplier. 

"Going forward, the industry will undoubtedly be smaller, but if our efforts are successful it will be viable and it will support good jobs for Canadians," said Clements. 

,  Congresswoman put forward the CARS act which provides a US$3,000 to 5,000 incentive for those who trade in their vehicle for a fuel-efficient car. "It clearly stimulates the economy, and it gets the consumer into the showroom and gets them buying again. But importantly — and this is what I particularly like about it — it really helps the environment quite a bit in two respects." said William Clay Ford Jr., executive chairman of Ford Motor Co.

 has not come forward with requests for assistance.

Since December GM and Chrysler have received US$17.4 billion government loans.