The poor performance of General Motors’ joint ventures in China is forcing the company to write down assets and take restructuring costs totaling more than $5 billion in the fourth quarter of this year.
The A car manufacturer from Detroit said in a regulatory filing Wednesday that it would reduce the value of its equity stake in those ventures by $2.6 billion to $2.9 billion when it reports results early next year. In addition, GM will take on $2.7 billion worth of restructuring costs, most of it during the fourth quarter.
The non-cash charges will reduce the company’s net income but will not affect adjusted pre-tax earnings, GM said in a filing with the U.S. Securities and Exchange Commission.
GM has owned a 50% joint venture with SAIC General Motors Corp. for years. and has other joint ventures, including a financial arm. The ventures used to be a reliable source of equity income for the company, but have posted losses in the past year.
Ventures lost $347 million from January to September, compared with a profit of $353 million in the same period in 2023. Still, GM expects to announce net profit for the full year of 10.4 to 11.1 billion dollars.
China has become an increasingly difficult market for foreign car manufacturers, with BYD and other domestic companies, raising their quality and reducing costs. The country also has subsidized domestic car manufacturers.
The master joint venture with SAIC, called SGM, completes restructuring actions that GM expects will “address market challenges and competitive conditions,” GM said in the filing.
At GM’s third-quarter earnings conference call, Chief Financial Officer Paul Jacobson said restructuring in China had not yet begun, but sales were up and inventories were down.
CEO Mary Barra said China is a difficult environment because some domestic brands “don’t seem to prioritize profitability, they definitely prioritize production.” She said GM can make money there in a different way, focusing on the new pickup truck and importing premium vehicles.
Shares of General Motors slipped 3% before the open on Wednesday.
