General Motors has announced plans to restructure its GM International Operations (GMIO) business unit. The move will see the automaker withdraw from several markets. The move is being painted as a way to “drive stronger financial performance and focus its capital and resources on business opportunities expected to deliver higher returns.”
Specifically, the automaker will phase its Chevrolet brand out of India and South Africa by the end of 2017, while transitioning GM India to a production hub only for export to other markets.
“As the industry continues to change, we are transforming our business, establishing GM as a more focused and disciplined company,” said GM Chairman and CEO Mary Barra. “We are committed to deploying capital to higher return initiatives that will enable us to lead in our core business and in the future of personal mobility.
“Globally, we are now in the right markets to drive profitability, strengthen our business performance and capitalize on growth opportunities for the long term. We will continue to optimize our operations market by market to further improve our competitiveness and cost base.”
The automaker states that the decisions were made following an extensive review of operations in GM International markets and reflect a series of actions taken to improve global business performance that began in late 2013.
“These actions will further allow us to focus our resources on winning in the markets where we have strong franchises and see greater opportunity,” said GM President Dan Ammann. “We have compelling plans for growth in both the top line and the bottom line as we invest for the future.”
GM Executive Vice President and President, GM International, Stefan Jacoby said the company is running its GM International markets with an enterprise approach and making decisions that are best for the global business.
“In India, our exports have tripled over the past year, and this will remain our focus going forward,” he said. “We determined that the increased investment required for an extensive and flexible product portfolio would not deliver a leadership position or long-term profitability in the domestic market.”
In South Africa, Isuzu will acquire GM’s light commercial vehicle manufacturing and GM will cease manufacturing and sales of Chevrolet in the domestic market, subject to local regulatory requirements.
“After a thorough assessment of our South African operations, we believe it is best for Isuzu to integrate our light commercial vehicle manufacturing operations into its African business,” said Jacoby. “We determined that continued or increased investment in manufacturing in South Africa would not provide GM the expected returns of other global investment opportunities.”
The restructuring will specifically involve the following actions.
GM will maintain vehicle and engine production operations in India while ceasing to sell Chevrolet vehicles in the country.
GM’s manufacturing facility at the GM Talegaon plant will continue as an export hub for Mexico and Central and South American markets. GM will cease sales of Chevrolet vehicles in the domestic market by the end of 2017. Existing Chevrolet customers will continue to be supported in the market.
GM will completely exit South Africa, including sales and manufacturing operations.
Isuzu will purchase the GM Struandale plant and GM’s remaining 30 percent shareholding in the Isuzu Truck South Africa joint venture. Isuzu will also purchase GM’s Vehicle Conversion and Distribution Centre and assume control of the Parts Distribution Centre. The company will phase out the Chevrolet brand in South Africa by the end of 2017. GM continues to work with PSA Group, the upcoming owner or Opel, to evaluate future opportunity for the Opel brand in South Africa. Importantly, existing Chevrolet and Opel customers will continue to be supported in the market.
As announced on February 28th, Isuzu has agreed to purchase GM’s 57.7 percent shareholding in GM East Africa, assuming management control. GM will withdraw sales of the Chevrolet brand from the market.
GM International will streamline its regional headquarters office in Singapore, which will retain responsibility for strategic oversight of the remaining regional business and markets, including Australia and New Zealand, India, Korea and Southeast Asia. This will deliver greater organizational efficiencies while leveraging global resources and in-market expertise.
The automaker says that it’s working with employees, their union representatives and local authorities to provide transition support across affected markets.
As a result of these actions, GM expects to realize annual savings of approximately $100 million and plans to take a charge of approximately $500 million in the second quarter of 2017. This charge will be treated as special and excluded from the company’s EBIT-adjusted results. About $200 million of the special charge will be cash expenses.