General Motors (GM) is undergoing a significant restructuring of its joint venture operations with SAIC Motor Corp. in China. The Detroit automaker estimates that the restructuring will cost more than $5 billion in non-cash charges and writedowns. This revelation came in a federal filing made by GM on December 4.
The company expects to write down the value of its Chinese joint venture operations by approximately $2.6 billion to $2.9 billion. In addition, GM anticipates $2.7 billion in restructuring charges, including plant closures and portfolio optimization.
While specific details about affected locations and facilities have not been provided, GM emphasized that the goal is to improve efficiency and profitability. The company stated, “We are focused on capital efficiency and cost discipline,” and is collaborating closely with SAIC Motor (SGM) to ensure sustainability in the Chinese market. GM expressed confidence in year-over-year improvement in its performance by 2025.
Despite the financial impact, GM asserts that it can achieve the restructuring without new cash investments. The company will recognize most costs as non-cash special item charges during the fourth quarter. Although these charges will affect GM’s net income, they will not impact adjusted earnings before interest and taxes (EBIT), a key metric for Wall Street.
The market downturn is evident as U.S.-based brands like Buick and Chevrolet experience significant sales drops. In contrast, joint ventures with SAIC Motor and Wuling Motors perform better, accounting for approximately 60% of GM’s 2.1 million vehicles sold in China last year.
Before this year, GM had reported only two quarterly losses in its Chinese operations since 2009: a $167 million loss in Q1 2020 due to COVID-19 and an $87 million loss in Q2 2022. However, in 2024, the company faced three consecutive quarters of equity income losses in China, totaling $347 million, including a $137 million loss in Q3.
The outlook for GM’s Chinese operations will depend on the effectiveness of its restructuring plan, ability to navigate competitive pressures, and capacity to capitalize on the growing EV market. Stabilizing and returning to profitability in China will be crucial as the company adapts to a rapidly evolving automotive landscape.
