DETROIT (AP) In the fourth quarter of this year, General Motors had to write down assets and incur a restructuring charge of over $5 billion due to the poor performance of its Chinese joint ventures.
In a regulatory statement on Wednesday, the Detroit automaker stated that when it releases its results early next year, it will reduce the value of its equity holding in the ventures by $2.6 billion to $2.9 billion. Additionally, GM will incur restructuring expenses totaling $2.7 billion, the majority of which will occur in the fourth quarter.
GM stated in the statement with the U.S. Securities and Exchange Commission that although the noncash charges will lower the company’s net income, they will not have an impact on adjusted pretax earnings.
In addition to other joint ventures, such as a finance arm, GM has long held a 50% stake in its partnership with SAIC General Motors Corp. The company’s projects were formerly a consistent source of equity revenue, but within the past year, they have turned a loss.
From January to September, the ventures lost $347 million, while over the same time period in 2023, they made $353 million. Nevertheless, GM anticipates reporting a full-year net profit between $10.4 billion and $11.1 billion.
Because BYD and other Chinese automakers are improving their quality and cutting prices, China has become a more challenging market for foreign automakers. The nation has also provided homegrown automakers with subsidies.
According to the filing, GM anticipates that the restructuring efforts being completed by SGM, the primary joint venture with SAIC, would address market issues and competitive conditions.
Paul Jacobson, GM’s chief financial officer, stated on the company’s third-quarter results conference call that while sales were up and inventory was down, restructuring in China had not yet begun.
China is a challenging environment, according to CEO Mary Barra, because some Chinese firms appear to put output before profitability. She claimed that by concentrating on a new pickup truck and importing high-end automobiles, GM can generate revenue there in a different way.
General Motors Co. stock fell 3% prior to Wednesday’s opening bell.
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