Losses in China lead to $5B charge for General Motors as it cuts the value of its assets

General Motors (GM) has announced plans to account for more than $5 billion USD in restructuring and asset write-down charges in its fourth-quarter financial results. This move comes amid the declining performance of its Chinese joint ventures, particularly with SAIC General Motors Corp., where GM owns a 50% stake. The Detroit-based automaker revealed it will reduce the value of its equity stake in these ventures by $2.6–$2.9 billion. Additionally, GM will incur $2.7 billion in restructuring charges, primarily in the fourth quarter.

While these non-cash charges will impact net income, they will not affect GM’s adjusted pretax earnings. The company’s Chinese ventures, once a stable source of equity income, reported a $347 million loss from January to September 2024, in stark contrast to a $353 million profit in the same period last year. Despite these setbacks, GM expects to achieve a full-year net profit of $10.4–$11.1 billion.

China has become an increasingly challenging market for foreign automakers as domestic competitors, such as BYD, continue to improve quality and reduce costs. These companies also benefit from government subsidies. GM’s main joint venture, SAIC General Motors, is undergoing restructuring to address market competition and operational challenges.

During GM’s third-quarter earnings call, CFO Paul Jacobson noted that sales in China were improving, although restructuring efforts had not yet fully commenced. CEO Mary Barra highlighted the challenges of operating in China, where some domestic brands prioritize production over profitability. She outlined GM's strategy to focus on premium vehicle imports and a new pickup truck, targeting profitability rather than high production volumes.

The announcement of these charges caused GM’s shares to fall by 3% on Wednesday morning.