GM takes $5.6B charge for China turnaround
Published: 09:01 04 Dec 2024 EST
General Motors Company (NYSE:GM) has warned of a "material loss in value" of its investments in China, forcing it into taking an accounting charge of up to $5.6 billion.
Before the full potential impact can be calculated, the Chevrolet, Buick and Cadillac maker said it was making a "temporary impairment" of its stake in its China joint venture of between $2.6 billion and $2.9 billion for the final quarter of 2024 and recognizing additional equity losses of roughly $2.7 billion due to the cost of restructuring.
GM, which has a 50% ownership with China's state-owned SAIC Motor Corp and an associated motor finance company, said in a SEC filing that its audit committee submitted a report this week that showed "a material impairment" of the company’s interest in the JV was required.
This was based on "a determination that a material loss in value of our investments in certain of the China JVs is other than temporary in light of the finalization of a new business forecast and certain restructuring actions that SGM is finalizing that are expected to be taken to address market challenges and competitive conditions".
In other words, it needs a significant restructuring to deal with the tough market in China, leading to drop in big drop in value for the JV and is not expected to recover soon.
Non-cash impairment charges for the restructuring plan related to plant closures and "portfolio optimization", most of which are expected to be recorded in the current quarter.
GM chief executive Mary Barra said in October that restructuring in China would begin to show "evidence of a turnaround" this year, "with a significant reduction in dealer inventory and modest improvements in sales and share".
Shares in GM were down 0.5% pre-market on Wednesday.
