General Motors has announced it is having to take a restructuring charge of more than $5bn (€4.8bn) and write down assets in the fourth quarter of this year because of the poor performance of its joint ventures with China.
In a regulatory filing, the Detroit car maker said it would cut the value of its equity stake in the ventures by $2.6bn (€2.5bn) to $2.9 billion (€2.8bn) when it reports its results early next year. In addition, GM will take $2.7bn (€2.6bn) worth of restructuring charges, most of it during the fourth quarter.
The non-cash charges will reduce the company's net income, but they will not affect adjusted pre-tax earnings, GM said in the filing with the US Securities and Exchange Commission.
GM has owned 50% of its joint venture with SAIC General Motors Corp. for years and has other joint ventures, including a finance arm. The ventures used to be a reliable source of equity income for the company, but have made losses in the past year.
The ventures lost $347m (€331m) from January through to September, compared with a profit of $353m (€337m) in the same period of 2023. However, GM expects to post a full-year net profit of $10.4bn (€9.9bn) to $11.1bn (€10.6bn).
China has become an increasingly difficult market for foreign car makers, with BYD and other domestic companies raising their quality and reducing costs. The country is also subsidising its own domestic car makers.
The main joint venture with SAIC, called SGM, is finishing restructuring actions that the American car maker expects will "address market challenges and competitive conditions", GM said in the Wednesday filing.
On GM's third-quarter earnings conference call, Chief Financial Officer Paul Jacobson said that restructuring in China had not yet started but, he said, sales were up and inventory was down.
CEO Mary Barra said China was a difficult environment because some domestic brands "don't seem to prioritize profitability, they’re definitely prioritizing production". She said that GM could make money there in a different way, focusing on a new pickup truck and importing premium vehicles.
Shares in General Motors were down 3% before Wednesday's opening bell.