India investigation hits GM data claims

An Indian government investigation has accused General Motors of “corporate fraud” for submitting false emissions data to regulators for vehicles manufactured and sold in India from 2005-2012. The panel’s findings have led to a recall of more than 125,000 vehicles in India and could result in charges against current and former senior executives. The company also faces a fine of more than $17 million.

According to press reports, the panel investigation claims that GM’s senior leadership in India and the company’s global engineering department were aware of or participated in the systematic submission of false data to Indian regulators. GM reportedly has fired 20 employees in India and elsewhere and claims it disclosed the problems to regulators. 

India is expected to be the third-largest car market by 2016 and is a target for global manufacturers faced with stagnant home markets. Vehicle recalls are not unheard of, but the size of the recall and the claims against GM are distinctive. Prior recalls of vehicles by other manufacturers have been fairly modest in number and nature and none have featured allegations of systematic manipulation of regulatory submissions. GM reportedly suspended sales of the vehicles involved in June and July.

While details are sketchy, the problems resemble previous scandals with in-country leadership in India such as generic drug manufacturer Ranbaxy and Reebok. The current report does not name any of the accused GM India management, but the investigation and any subsequent charges could prove problematic for Karl Slym, who was managing director of GM India from 2007 to 2012.

Slym is highly regarded for building the Chevrolet brand in India by using domestic engineering talent and adapting products for the Indian market while the main company struggled through a bankruptcy and a taxpayer-funded bailout. He left GM in 2012 to become managing director of Tata Motors, and subsequently has recruited senior executives from his former team at GM India.

___________

Russell Stamets is a Contributing Editor of the FCPA Blog. He was the first non-Indian general counsel of a publicly traded Indian company and was general counsel for a satellite broadcasting joint venture of a large Indian business house. He can be contacted here.