Employees work on Buick Envision SUVs at General Motors’ Dong Yue assembly plant, officially known as SAIC-GM Dong Yue Motors Co., Ltd., on Nov. 17, 2022, in Yantai, Shandong Province of China.
Tang Ke | Visual China Group | Getty Images
DETROIT – General Motors expects a restructuring of its joint venture operations with SAIC Motor Corp. in China to cost more than $5 billion in non-cash charges and writedowns, the Detroit automaker disclosed in a federal filing Wednesday morning.
GM said it expects to write down the value of its joint-venture operations in China by between $2.6 billion and $2.9 billion. It also anticipates another $2.7 billion in charges to restructure the business, including “plant closures and portfolio optimization,” according to the filing.
GM, which previously announced plans to restructure the operations in China, did not disclose any additional details about the expected closures.
“As we have consistently said, we are focused on capital efficiency and cost discipline and have been working with SGM to turn around the business in China in order to be sustainable and profitable in the market. We are close to finalizing our restructuring plan with our partner, and we expect our results in China in 2025 to show year-over-year improvement,” GM said in an emailed statement.
GM said it believes the joint venture “has the ability to restructure without new cash investments” from the American automaker.
A majority of the restructuring costs is expected to be recognized as non-cash, special item charges during the fourth quarter. That means they will impact the automaker’s net income, but not its adjusted earnings before interest and taxes – a key metric monitored by Wall Street.
GM’s operations in China have shifted from a profit engine to liability in the past decade as competition grows from government-backed domestic automakers fueled by nationalism, and as a generational shift in consumer perceptions of the automotive industry and electric vehicles takes hold.
Equity income from GM’s Chinese operations and joint ventures peaked at more than $2 billion in 2014 and 2015.
GM’s market share in China, including its joint ventures, has plummeted from roughly 15% as recently as 2015 to 8.6% last year — the first time it has dropped below 9% since 2003. GM’s equity income from the operations have also fallen, down 78.5% since peaking in 2014, according to regulatory filings.
GM’s U.S.-based brands such as Buick and Chevrolet have seen sales drop more than its joint venture sales with SAIC Motor, Wuling Motors and others. The joint venture models accounted for about 60% of its 2.1 million vehicles sold last year in China.
Prior to this year, the only quarterly losses for GM in China since 2009 were a $167 million shortfall during the first quarter of 2020 due to the coronavirus pandemic and an $87 million loss during the second quarter of 2022.
The Detroit automaker has reported three consecutive quarterly losses in equity income for its Chinese operations this year, totaling $347 million. That includes a loss of $137 million during the third quarter.