GM Takes $5B Hit as Sales Decline in China

General Motors on Wednesday said its profits will take a $5 billion hit due to the poor performance of its Chinese joint ventures. Since 1997, GM has owned 50% of its joint venture with the state-owned SAIC Motor, and it has other joint ventures, including a finance arm. The New York Times reports SAIC-GM manufactures and sells vehicles under brand names including Cadillac and Buick. The ventures used to be a reliable source of equity income for the company, but they've swung to losses in the past year as Chinese manufacturers have gone all in on electric and hybrid cars. More:

• GM's sales: The AP reports the ventures lost $347 million from January through September, compared with a profit of $353 million in the same period of 2023. Sales fell almost 20% in those nine months, bringing GM's market share to 6.8%; it stood at more than 15% in 2015. CNBC reports equity income from GM's operations and joint ventures in China hit a high of more than $2 billion in 2014 and 2015. "The announcement indicates that GM does not expect its Chinese operations to rebound soon," per the Times.
• The financial impact: The Detroit automaker said in a regulatory filing Wednesday that it will cut the value of its equity stake in the ventures by $2.6 billion to $2.9 billion when it reports its results early next year, per the AP. In addition, GM will take $2.7 billion worth of restructuring charges, most of it during the fourth quarter. Still, GM expects to post a full year net profit of $10.4 billion to $11.1 billion.

• The Chinese market: It has become an increasingly difficult one for foreign automakers, with BYD and other domestic companies raising their quality and reducing costs. The country also has subsidized domestic automakers.
• GM's outlook there: CEO Mary Barra said China is a difficult environment because some domestic brands "don't seem to prioritize profitability, they're definitely prioritizing production." She said GM can make money there in a different way, focusing on a new pickup truck and importing premium vehicles.
• How others are faring: The Times reports almost all foreign automakers are having a tough time. Ford spent $881 million restructuring its joint venture in the first nine months of this year, and Volkswagen—for decades the top seller in China—has seen a more than 10% drop in sales there this year. Reuters reports Tesla's year-over-year sales of its China-made electric vehicles are down 4.3%.

(More General Motors stories.)