General Motors (GM) has taken a write-down of more than 5 billion dollars on its business in China. This highlights the shrinking market position of the US automaker in a once important sales market, where Western manufacturers are increasingly being displaced by cheaper and technologically more advanced local competitors.
On Wednesday, GM announced that due to a reassessment of business prospects and planned restructuring measures, there has been a "significant loss of value" in investments in certain joint ventures in China.
The company will write down the value of its investments in Chinese joint ventures with SAIC Motor Corp and China FAW Group by up to $2.9 billion. Additionally, restructuring costs amounting to $2.7 billion will be recorded. Planned measures include factory closures, job cuts, and a reduction of the model range in China.
The market share of GM's joint ventures in China fell from about 14 percent in 2019 to around 6 percent this year - a decline that is greater than for most international manufacturers. GM recorded losses in China in the first three quarters of this year and also expects negative figures in the fourth quarter. However, the company anticipates an improvement in results starting in 2025.
Analyst James Picariello from BNP Paribas Exane described the restructuring as "drastic" but saw it as necessary to compete against Chinese providers like BYD. Other international manufacturers like Toyota, Honda, and BMW are also struggling with losses in China. Volkswagen recently sold its plant in Xinjiang after coming under pressure for its presence in a region with allegations of human rights violations.
GM's CEO Mary Barra announced in October that the restructuring measures would show initial results by the end of the year. However, analysts are skeptical whether Western car manufacturers in China will ever again reach their previous market shares and profits.
“A major comeback of Western manufacturers in the Chinese market should not be expected. This negative trend is, in our opinion, irreversible,” explained Patrick Hummel, analyst at UBS.
