Poor performance by General Motors' (GM) joint ventures in China has led to a US$5 billion charge.
Its equity stake was written down between $2.6 billion and $2.9 billion, and restructuring charges totalled $2.7 billion.
GM's Chinese joint ventures, particularly with SAIC General Motors Corp., have been losing money. Between January and September 2024, they lost $347 million compared to a profit of $353 million in 2023.
It has been difficult for GM to maintain profitability in China because of increased competition from domestic automakers like BYD and government subsidies.
GM's CEO, Mary Barra, said some domestic brands prioritise production over profitability. While these challenges remain, GM expects a net profit of $10.4 billion to $11.1 billion for the full year.
GM is restructuring its business to address these market challenges and to increase profitability. A new pickup truck is being developed, as well as premium vehicles being imported.
Paul Jacobson, the company's CFO, noted that while restructuring hadn't yet begun, sales were up and inventory levels were down.
The announcement caused GM's share price to drop 3% before the market opened. Although the charges are non-cash, they will reduce GM's net income but not its adjusted pre-tax earnings.
The company remains committed to its long-term strategy in China, with the goal of navigating the competitive landscape and improving its financial performance.
“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 finalising our restructuring plan with our partner, and we expect our results in China in 2025 to show year-over-year improvement,” GM said in an emailed statement cited by CNBC.