American automaker General Motors (GM) has incurred a total cost loss of over $5 billion (approximately 7 trillion won) as it begins restructuring its struggling China business division.
On the 4th (local time), GM submitted documents to the Securities and Exchange Commission (SEC) estimating that the restructuring of its China operations will result in costs of $2.6 billion to $2.9 billion (3.7 trillion to 4.1 trillion won), including a $2.7 billion (3.8 trillion won) write-down of assets from its Chinese joint ventures.
The costs will be reflected as non-cash special items in GM’s fourth-quarter earnings report. While these will affect net income, they will not impact earnings before interest and taxes (EBIT), which Wall Street closely monitors, CNBC noted.
GM has operated in the Chinese market through joint ventures with Shanghai Automotive Industry Corporation (SAIC), producing vehicles under brands such as Buick, Chevrolet, and Cadillac. In 2018, GM sold 2 million vehicles in China, but has since been hit by escalating US-China trade tensions and the rise of low-cost Chinese car brands. Its market share, which was about 14% in 2019, has sharply declined to around 6% this year. Sales through November this year dropped 59% year-on-year to approximately 370,000 units.
In a statement, GM said, "We are in the final stages of completing our restructuring plan to secure sustainable profitability in the Chinese market," and added, "We expect performance in China to improve by 2025." This year, the China business division has recorded losses for three consecutive quarters, totaling $347 million.
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