World News | Losses in China Lead to USD 5 Billion Charge for General Motors as It Cuts Value of Its Assets
Get latest articles and stories on World at LatestLY. The poor performance of General Motors' Chinese joint ventures is forcing the company to write down assets and take a restructuring charge totalling more than USD 5 billion in the fourth quarter of this year.
Detroit, Dec 4 (AP) The poor performance of General Motors' Chinese joint ventures is forcing the company to write down assets and take a restructuring charge totalling more than USD 5 billion in the fourth quarter of this year.
The Detroit automaker said in a regulatory filing Wednesday that it will cut the value of its equity stake in the ventures by USD 2.6 billion to USD 2.9 billion when it reports its results early next year.
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In addition, GM will take USD 2.7 billion worth of restructuring charges, most of it during the fourth quarter.
The noncash charges will reduce the company's net income, but they will not affect adjusted pretax earnings, GM said in the filing with the US Securities and Exchange Commission.
GM for years has owned 50 per cent of its joint venture with SAIC General Motors Corp. and has other joint ventures, including a finance arm. The ventures used to be a reliable source of equity income for the company, but have swung to losses in the past year.
The ventures lost USD 347 million from January through September, compared with a profit of USD 353 million in the same period of 2023. Still, GM expects to post a full year net profit of USD 10.4 billion to USD 11.1 billion.
China has become an increasingly difficult market for foreign automakers, with BYD and other domestic companies raising their quality and reducing costs. The country also has subsidised domestic automakers.
The main joint venture with SAIC, called SGM, is finishing restructuring actions that GM expects will “address market challenges and competitive conditions,” GM said in the filing.
On GM's third-quarter earnings conference call, Chief Financial Officer Paul Jacobson said restructuring in China had not yet started, but sales were up and inventory was down.
CEO Mary Barra said China is a difficult environment because some domestic brands “don't seem to prioritise profitability, they're definitely prioritising production.” She said GM can make money there in a different way, focusing on a new pickup truck and importing premium vehicles.
Shares of General Motors Co. slid 3 per cent before the opening bell Wednesday. (AP)
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