G.M.’s Ailing China Business Will Deal It a $5 Billion Blow
The New York Times
General Motors and other foreign automakers are selling fewer cars and losing lots of money in China, where domestic electric and hybrid cars have taken off.
General Motors said on Wednesday that it would take a more than $5 billion hit to its profit as it restructures its ailing operations in China, which have been losing money as its car sales there have dropped sharply.
G.M. and SAIC Motor, a state-owned company, operate a 50-50 joint venture, SAIC-GM, that is based in Shanghai and produces and sells vehicles under several brand names, including Cadillac and Buick. Founded in 1997, the venture once grew steadily and generated considerable profits.
But over the last several years, the business has lost market share to Chinese manufacturers that invested heavily in electric and hybrid cars, which have come to account for more than half of all vehicles sold in China.
G.M. said in a regulatory filing that it would report an expense of $2.6 billion to $2.9 billion in the fourth quarter to reflect the reduction in the value of G.M.’s investment in its Chinese joint venture on its balance sheet. Another $2.7 billion expense, most of which will be recognized in the fourth quarter, will reflect G.M.’s share of the cost of restructuring measures the joint venture will take.
In the first nine months of the year, G.M. lost $347 million on its Chinese operations. Its sales in the country fell nearly 20 percent in that period, while its market share dropped to 6.8 percent, from 8.6 percent a year earlier and more than 15 percent in 2015.
The announcement indicates that G.M. does not expect its Chinese operations to rebound soon.
