General Motors (GM) recently announced that it expects a significant restructuring of its joint venture operations with SAIC Motor Corp. in China, which will cost the Detroit automaker more than $5 billion in noncash charges and write-downs. The details were disclosed in a federal filing on Wednesday morning, stating that GM anticipates writing down the value of its joint-venture operations in China by between $2.6 billion and $2.9 billion. Additionally, the company expects another $2.7 billion in charges to restructure the business, including plant closures and portfolio optimization.
GM has been working on turning around its operations in China to ensure sustainability and profitability in the market. The company mentioned that they are close to finalizing their restructuring plan with SAIC Motor and expect to see year-over-year improvement in their results in China by 2025. GM emphasized that the joint venture has the ability to restructure without new cash investments from the American automaker.
Paul Jacobson, GM’s CFO, stated during a UBS conference that the companies are nearing finalization of the restructuring plan and expect the actions to make the operations profitable on a smaller scale by next year without additional capital investment. GM’s operations in China have faced challenges in recent years as competition from government-backed domestic automakers has increased, coupled with shifting consumer perceptions towards the automotive industry and electric vehicles.
The restructuring comes as GM’s market share in China has declined from 15% in 2015 to 8.6% last year, impacting the company’s equity income from its Chinese operations. The automaker has reported three consecutive quarterly losses in equity income for its Chinese operations this year, totaling $347 million, including a loss of $137 million in the third quarter.
The move reflects GM’s efforts to realign its operations in response to changing market dynamics and consumer preferences in China. The restructuring is expected to have far-reaching implications for both the company and consumers in the automotive industry. It remains to be seen how the restructuring plan will unfold and whether it will successfully position GM for future growth in the Chinese market.
