On November 17, 2022, employees work on the Buick Envision SUV at General Motors’ Dongyue Assembly Plant (officially known as SAIC GM Dongyue Automobile Co., Ltd.) in Yantai, Shandong Province, China.
Tang Ke | Visual China Group | Getty Images
Detroit – general motors We look forward to rebuilding our joint venture with the company. SAIC Motor Corporation The Detroit automaker disclosed in a federal filing Wednesday morning that it will cost more than $5 billion in non-cash charges and writedowns in China.
GM said it expects to write down the value of its China joint venture by $2.6 billion to $2.9 billion. The company also expects to incur an additional $2.7 billion in restructuring costs, including “factory closures and portfolio optimization,” according to the filing.
GM previously announced plans to restructure its operations in China, but did not provide additional details about the expected closures.
“As we have consistently stated, we are focused on capital efficiency and cost discipline, and we are working with SGM to rebuild our business in China to be sustainable and profitable in the market. We are nearing the finalization of our restructuring plan. GM said in an emailed statement that it expects its performance in China to improve year over year.
GM said it believes the joint venture “has the ability to rebuild without new cash investment” from the U.S. automaker.
The majority of the restructuring charges are expected to be recognized as non-cash special item expense during the fourth quarter. That means they affect the automaker’s net income, but not its adjusted earnings before interest and taxes, a key metric that Wall Street monitors.
GM’s China operations have grown into profit-driving businesses over the past decade as competition from government-backed domestic automakers intensifies, fueled by nationalism, and a generational shift in consumer perceptions of the auto industry and electric vehicles takes hold. From then on, it became a responsible business.
GM’s equity income from its China operations and joint ventures peaked at more than $2 billion in 2014 and 2015.
GM’s market share in China, including joint ventures, plummeted from about 15% in 2015 to 8.6% last year, falling below 9% for the first time since 2003. GM’s equity income from operations has also declined, at 78.5% since its peak in 2014, according to regulatory filings.
Sales of GM’s U.S.-based brands such as Buick and Chevrolet fell more than sales of its joint ventures with SAIC and Wuling Motors. Of the 2.1 million vehicles sold in China last year, joint venture models accounted for about 60%.
Before this year, GM’s only quarterly losses in China since 2009 were a $167 million loss in the first quarter of 2020 and an $87 million loss in the second quarter of 2022 due to the coronavirus pandemic. .
The Detroit automaker reported three consecutive quarters of losses this year for equity earnings from its China operations, totaling $347 million. This includes a loss of $137 million in the third quarter.
