Reuters reports that General Motors told investors on Wednesday that it expects non-cash charges of $2.6 billion to $2.9 billion in restructuring costs and $2.7 billion for reduced value for the SAIC-GM Chinese joint venture. That totals over $5 billion in charges on SAIC-GM, which will be recorded in the firm’s Q4 2024 earnings report.
General Motors has lost money in its Chinese operations for three quarters in a row, with an 18 percent decline in the first three quarters of 2024. The SAIC-GM partnership builds Chevy, Buick, and Cadillac models for the Chinese market, which faces increasingly tough competition from Chinese domestic brands.
“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,” a General Motors spokesperson said in a statement. “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.”
Although it might appear to be a black hole for GM’s profitability, the automaker remains committed to the Chinese market. “We’re committed to maintaining cash stability there at a point where it’s self-sustaining. That means not needing any capital from outside,” said General Motors CFO Paul Jacobson in August. “I don’t necessarily accept the notion that we’re struggling to make money there.” In the same month as Jacobson’s comments, SAIC-GM appointed a new president and started cutting its Chinese workforce.
In September, General Motors CEO Mary Barra outlined how she plans to make the company profitable in the Chinese market in the near future. It’s all about moving upmarket and pushing more profitable vehicles rather than achieving profitability through high volume.
“You can’t have a race to the bottom,” Barra said in September. “I think GM can play especially with the strength of our Cadillac brand and our Buick brand. I think in some cases we were later than we should have been to get the right portfolio of EVs there.” Additionally, General Motors will sell premium imports like the Chevy Corvette, Chevy Tahoe, GMC Yukon, GMC Hummer EV, and Cadillac Celestiq through the high-end The Durant Guild platform.
Comments
A race to the bottom? New vehicles are out of reach for most people. Shoot, the median age currently for home buyers is 56 years old. You have to have a lifetime of savings to afford a house and new car now. You out of touch Boomers are making life unaffordable for the rest of us. Make things more affordable or just GTFO of the way.
We said the same thing about OUR parents generation. Tough sh*t. Inflation and the atrocities that followed and are still happening like absurd prices, began with the Chinese pandemic.
The big difference now is that the hedge funds/WEF folks you all gave your retirement money to are buying up all the assets so they can build all the wealth and force the younger generations to rent/lease/subscribe everything from them. That’s what, “You’ll own nothing and you’ll be happy” means.
Yet, the younger generation doesn’t seem to mind paying $6 for a Starbucks latte 5 days a week or going out to lunch and dinner everyday, or having a manicure/pedicure every 6 weeks, or paying for the latest and greatest IPhone, or spending $600 for a designer purse.
Which millennials do you know? The ones who live off dadys money and “make a living” as influencers? Most of us out here struggle to put food on the table and have used android phones, saying that as a 29YO whos got an engineering degree and still barely managed to afford a house.
It would be HILARIOUS if it wasn’t sad when you see all these houses on the market for stupid high prices and they haven’t updated anything since the 1990s. The prices being asked for houses that need COMPLETELY renovated are nutty,
By me in northern NJ, they buy them to tear them down. In their place they sell these fancy duplex townhouse like homes. So they buy for the price of one and sell for the price of two. Jeez man I wish I could have money like this and make a living doing this.
Drive by restaurants during lunch/dinner time, or Starbucks in the morning. They’re packed with people, many with cars idling in line 15 cars deep. It is absolutely mind boggling what it costs to eat out nowadays. I can pack my lunch for an entire week for not much more than what people spend in one day for lunch. People nowadays live in an instant gratification world.
Hey we didn’t get to buy a house for $70k, work when pensions were a real thing, or have health insurance worth mentioning. If eating out makes us feel a little better then so be it.
Screw that! This millennial loves his Keurig Machine. Pay $25 for a box of 80 pods of Cafe Bustelo and I am set. And if I am in the office, they have a nice cold brew tap the company pays for. I haven’t walked into a Starbucks in years unless its to use their bathroom.
Welcome to pottersville. Democrats dream.
What just happened to the CEO of Unitedhealthcare today……….
Unfortunately reason doesn’t get through to the wickedly greedy and the alternative is violence. The wealthy getting even wealthier at the expense of everyone else doesn’t work and will lead to a violent backlash. Just ask the headless King Louie in France
Make things affordable or get out of the way? Doesn’t sound like anyone needs to get out of your way, you’re not moving.
Okay Gretta .
Also, China is a failing market. Their dawning demographic collapse is the worst in recorded history. It’s only going to get worse. Given the escalating threat of war, they could seize gm’s assets in China any time they want.
Many know this which is why companies like Apple are keeping their China factories for China and India factory for elsewhere. That way should the Chinese government need a distraction for their people (i.e. a war) and nationalize foreign assets like you mention, they can sever their Chinese operations and keep operating their India, Vietnam, Mexico, etc. factories for the rest of the world. COVID, in this regard, should have opened the eyes of many companies the dire need to de-risk away from a bad actor that has made no qualms of burning them down to serve their own needs.
FIRST story I saw when firing up Google Chrome. This is a big one. And Mary, oh puhleeze. First the EV obsession, now the China obsession. Ditch both.
GM, here’s what’s going on, China is using you for engineering and manufacturing expertise. They will dangle a carrot in front of you and lead you to the gulag where they will then put you once they’ve used you up for every last little thing. Want to be a success in China? Dump all production on that country, flood their competing markets so their neighbors and export customers can’t afford Chinese vehicles and wait till they need to IMPORT GM vehicles to maintain their economy.
The folks running this company are typically in their 60s and 70s and have more than enough money to retire on now. They don’t give a f..k about the future of the company. It will be someone else’s problem when SHTF.
With volume dropping like a stone in China, this is just the start of asset write downs for them. In five years it’s entirely possible they’ll have minimal to no presence in the Chinese market. And that’s not even considering worsening geopolitical tensions.
Not Good. I’d rather go blind!
John : Sorry to read of your frustration. When Boomers were younger, they didn’t have cell phones, costly Cable TV services, etc. Big monthly savings.
A vacation for many of us during our younger days was usually some form of camping and those who chose to see Europe stayed in youth hostels. Visting islands a rarity. We drove used cars or relied on public transportation. Dining meant fast food or diners.
I could go on, but you get the picture. We lived cheap. Sacrifice and save like crazy. It’ll happen for you.
Thank you sir, appreciate it.
Back when camping was cheap! I got a game for Super Nintendo and you played that until next Christmas, where my nephew who is 9 has hundreds.
Man I can’t believe I sound like this at 40.
I used to buy my SNES and NES games at flea markets for $5. Even rare ones. I remember I was building a Mega Man game collection and it took me 4 years to find Megaman X3. Fast forward to today and I still do stuff like this even without flea markets. Buy toys for my kid at garage sales or even a large bottle of Dove body wash at a dollar store. My fancy Maharastran wife calls me a beggar for it but who cares?
I wish the non cash write down could be explain in laymen terms. Where do this $5 billion come from, GM states it will not put any money up for this $5 billion hit. Just a little above my head, I am not convince that GM can write this down and not have to pay money for it. It need to be explain in eight grade arithmetic.
Signing over assets to the Chinese.
Pitiful..
Steve is right on target with his assessment!!!
All the above comments obviously belong to a specific age group. My grandpa used to be worried about lots of things he could not change or influence. Luckily for him he did not have access to the information bombardment happening nowadays, that saved him a lot of grief.
Steve, you did it again: “Most of us out here struggle to put food on the table”. Speak for yourself if you have that problem, which I doubt is the case for the commenters on this site.
If you’re struggling to put food on the table how about getting a 2nd job instead of wasting time spilling your guts on the web .
I always have the latest iphone, pods and data plan for banger-trash music AND the newest video games … AND the best weed money can buy. But I don’t have money for rent and food.
That’s why I’m still in single mom’s basement.
Any advice ?
I think that you already know the answer.
“I don’t necessarily accept the notion that we’re struggling to make money there.”<— I said this before and I will say it again. This statement right here sums it up. Choosing to stick your head in the sand until the problem is too great you start feeling it in the rest of your exposed body is dangerous and downright reckless.
The reality of the situation is, as John mentioned, the Chinese economy is suffering (the rampant deflation occurring there is a very bad telltale sign for those who keep wishing to ignore it. Despite inflation being well dreaded, small amounts of it means a healthy economy but deflation mean a rupturing economy with deep structural issues and in many cases, very difficult to get out of a deflationary spiral) and I see it first hand in the construction industry as I had (note the HAD part) several clients which were Chinese developers. They are having a massive demographics problem as the icing on the cake, and government is going to look for a distraction to save face (which unfortunately, comes in the form of a war). Start thinking of this reality because Darwin will be doing another round for those that didn't prepare for the possibility.