GM Records $5.3 Billion Charges on China Joint Ventures
General Motors recently announced that they would be taking a hit in the fourth quarter, with a whopping $5.3 billion in charges related to their joint venture with the SAIC Group in China. This move comes as part of a larger restructuring process that includes plant closures and a focus on optimizing their portfolio.
The impairment charges, amounting to $2.6 billion to $2.9 billion, indicate a loss in the value of GM’s investments in the China joint ventures, which the company believes to be more than just a temporary setback. On top of this, an additional $2.7 billion in equity losses will be recognized as part of SGM’s restructuring plan, which also involves plant closures and portfolio optimization.
In a recent SEC filing, General Motors detailed how their Audit Committee identified a need for a significant impairment in their 50-50 joint venture with SAIC Motor Corp. GM also has a stake in SAIC-GMAC Automotive Finance Company Limited.
The company attributes these impairment charges to a revised business forecast and restructuring actions at SGM aimed at stabilizing market share and enhancing profitability in China, where GM has been experiencing a decline in sales and increasing competition. These charges are classified as non-cash and will be treated as special items for EBIT-adjusted purposes.
In addition to these changes, General Motors is also preparing to sell its stake in the Ultium Cells battery plant, a joint venture with LG Energy Solution in South Korea, for around $1 billion. This plant, initially announced in 2020, represents a substantial investment between GM and LG Energy Solution totaling $2.6 billion.
Last month, the Detroit-based automaker stated that it would lay off nearly 1,000 employees globally, with a majority of the workforce reductions taking place in the United States. This marks the third round of workforce reductions since August, following previous layoffs in the software department and at a manufacturing plant in Kansas.
These recent moves by General Motors are reflective of the company’s efforts to navigate challenging market conditions and position itself for future growth and profitability.
