GM to record two non-cash charges worth over $5 billion on China JV; shares drop

Investing.com -- General Motors (NYSE:GM ) said it anticipates incurring over $5 billion in non-cash charges and writedowns related to the restructuring of its joint venture operations with SAIC Motor Corp. in China, according to a federal filing made on Wednesday.

The automaker expects to reduce the value of its joint-venture assets in China by between $2.6 billion and $2.9 billion. Additionally, it estimates $2.7 billion in restructuring costs tied to measures such as “plant closures and portfolio optimization,” the filing stated.

GM shares fell almost 1% in premarket trading Wednesday.

Although the company had previously revealed its intentions to overhaul its China operations, it did not provide further specifics about the planned plant closures in this update.

In the statement, GM reiterated its focus on operational efficiency and cost management, emphasizing its commitment to improving its performance in China.

“As we have consistently said, we are focused on capital efficiency and cost discipline and have been working with SGM to turn around the business in China in order to be sustainable and profitable in the market. We are close to finalizing our restructuring plan with our partner, and we expect our results in China in 2025 to show year-over-year improvement,” the statement read.

The company also expressed confidence that the joint venture can be restructured without requiring additional cash investments from GM.

Most of the $2.7 billion in restructuring charges will be recognized as non-cash, special item charges during the fourth quarter, impacting net income but not adjusted earnings before interest and taxes, a key performance metric tracked by investors.

Once a significant profit driver, GM’s operations in China have become a challenge in recent years. Increased competition from state-supported domestic automakers and changing consumer preferences for electric vehicles have reshaped the market.

In its peak years of 2014 and 2015, GM’s equity income from its Chinese ventures exceeded $2 billion. However, the company’s market share in China has since declined, dropping from about 15% in 2015 to 8.6% last year—its lowest level since 2003. Equity income from these operations has also plummeted by 78.5% since 2014, according to regulatory filings.

This year, GM has posted three consecutive quarterly losses in equity income from its Chinese operations, amounting to $347 million, including a $137 million loss in the third quarter.

Source: Investing.com