GM joint venture waves off fears after big losses

GM China has called its China business a "good asset" in an effort to dispel market expectations that the Detroit-based carmaker may give up the world's biggest vehicle market, which may erode the confidence of investors and car buyers in its prospects.

"GM is working closer than ever with our joint venture partner SAIC to restore the business in China to make it profitable and sustainable," said GM China in a statement on Thursday.

The statement came after GM told shareholders on Wednesday that it would record two non-cash charges totaling more than $5 billion on its Chinese joint venture, SAIC-GM, which produces Buick, Chevrolet and Cadillac models.

Specifically, the Detroit-based company expects a charge of $2.6 to $2.9 billion for restructuring costs and a charge of $2.7 billion for reduced joint venture value.

The news attracted wide media coverage in the United States and China, even resulting in speculation on social media that GM may exit the world's largest vehicle market, as it has been strategically giving up non-profitable markets like India.

GM's operations in China, primarily via its two joint ventures SAIC-GM and SAIC-GM-Wuling, used to be very profitable. SAIC-GM saw its annual sales hit 1 million units in 2010 and exceed 2 million units in 2017.

But sales have been falling over the past few years due to the rise of domestic rivals and its failure to introduce competitive products. Its sales slumped to 1 million units in 2023 and fell to only 370,000 units in the first 11 months of this year.

The other joint venture, SAIC-GM-Wuling, was a star in the NEV sector, with its two-seater Wuling Hongguang MINI EV the best-seller in its segment.

The carmaker, which primarily produces Wuling and Baojun-branded vehicles, is gradually going out of favor. It has not come up with models with a similar appeal as car buyers are moving up to larger and more expensive vehicles.

SAIC-GM-Wuling was not related to the $5 billion charge about which GM told its shareholders.

In its statement, GM China said its restructuring efforts have started to produce promising results in terms of its market share and sales volume.

"We have been taking steps to reduce our inventories, align our production to demand, protect our pricing and reduce fixed costs," it said.

"In the third quarter, both sales and market share posted quarter-on-quarter growth, and the NEV portfolio outsold ICE models for the first time. In November, we achieved a month-on-month sales increase, the fifth sequential growth in a row."

GM China said its dealer inventory has been reduced by more than 50 percent since the start of the year, "which will allow us to better manage our pricing and costs".

SAIC-GM sold 56,241 vehicles in November, still a 35.36 percent drop from the same month of 2023, according to statistics SAIC filed to the Shanghai Stock Exchange.

GM China did not say when the restructuring efforts will be completed but in an analyst conference on Wednesday, GM's Chief Financial Officer Paul Jacobson said they are in their final stages.

He said GM is seeking to be profitable in China in 2025 and believes its joint venture can restructure without additional funds.