The poor performance of General Motors’ Chinese joint ventures is forcing the company to write down assets and take restructuring charges totaling more than $5 billion in the fourth quarter of this year.
The Detroit automaker said in a regulatory filing Wednesday that it will reduce the value of its equity stake in the companies by $2.6 billion to $2.9 billion when it reports its results early next year. In addition, GM will incur $2.7 billion in restructuring costs, most of which will come in the fourth quarter.
The non-cash charges will reduce the company’s net income but will not affect adjusted pre-tax profit, GM said in its filing with the U.S. Securities and Exchange Commission.
GM has owned 50% of the joint venture with SAIC General Motors Corp. for years. and has other joint ventures, including a financial branch. The ventures used to be a reliable source of equity income for the company, but have turned to losses in the past year.
The companies lost $347 million from January through September, compared with a profit of $353 million in the same period of 2023. Still, GM expects to post full-year net income of $10.4 billion to $11.1 billion.
China has become an increasingly difficult market for foreign automakers, with BYD and other domestic companies increasing quality and cutting costs. The country has also subsidized domestic car manufacturers.
The main joint venture with SAIC, called SGM, is completing restructuring measures that GM expects will “address market challenges and competitive conditions,” GM said in the filing.
During GM’s third-quarter earnings conference call, Chief Financial Officer Paul Jacobson said the restructuring in China had not yet begun, but sales had increased and inventories had fallen.
CEO Mary Barra said China is a difficult environment because some domestic brands “don’t seem to prioritize profitability, but certainly production.” She said GM can make money there in another way, by focusing on a new pickup and importing premium vehicles.
The shares of General Motors Co. were down 3% before the opening bell Wednesday.
