General Motors has announced cuts to its international operations which it says will save it around USD100m a year.
Among the measures announced will be a withdrawal from selling Chevrolet vehicles in India (its manufacturing there moves to export only) and South Africa, two emerging markets widely viewed in the auto industry as having good growth potential.
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In South Africa, Isuzu Motors is to purchase GM South Africa light commercial vehicle manufacturing operations.
GM said the key restructuring actions in its GM International operations will ‘drive stronger financial performance and focus its capital and resources on business opportunities expected to deliver higher returns’. The same rationale was used by GM to explain the decision to sell its European operations to PSA Group.
The company will focus its GM India manufacturing operations on producing vehicles for export only.
“As the industry continues to change, we are transforming our business, establishing GM as a more focused and disciplined company,” said GM Chairman and CEO Mary Barra. “We are committed to deploying capital to higher return initiatives that will enable us to lead in our core business and in the future of personal mobility.
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By GlobalData“Globally, we are now in the right markets to drive profitability, strengthen our business performance and capitalize on growth opportunities for the long term. We will continue to optimize our operations market by market to further improve our competitiveness and cost base.”
GM said the decisions were made following an extensive review of operations in GM International markets and reflect a series of actions taken to improve global business performance that began in late 2013.
“These actions will further allow us to focus our resources on winning in the markets where we have strong franchises and see greater opportunity,” said GM President Dan Ammann. “We have compelling plans for growth in both the top line and the bottom line as we invest for the future.”
GM Executive Vice President and President, GM International, Stefan Jacoby said the company is running its GM International markets with an enterprise approach and making decisions that are best for the global business.
“In India, our exports have tripled over the past year, and this will remain our focus going forward,” he said. “We determined that the increased investment required for an extensive and flexible product portfolio would not deliver a leadership position or long-term profitability in the domestic market.”
Kaher Kazem, GM India president and managing director, said the focus for the GM India manufacturing base at Talegaon will be export markets, upcoming export vehicle launches and exploring longer-term strategic options.
“GM India’s export business has tripled over the past year,” Kazem said. “Exports will remain our focus going forward as we continue to leverage India’s strong supply base. We recently launched the new Chevrolet Beat hatchback for export to Mexico and Central and South American markets and will launch the Chevrolet Beat sedan later this year for those markets.
“We will support our affected customers, employees, dealers and suppliers,” Kazem said. “Chevrolet owners can be assured that we will continue to honor all warranties and provide comprehensive aftersales support.”
GM India informed employees of the decision today.
In South Africa, Isuzu will acquire GM’s light commercial vehicle manufacturing and GM will cease manufacturing and sales of Chevrolet in the domestic market, subject to local regulatory requirements.
“After a thorough assessment of our South African operations, we believe it is best for Isuzu to integrate our light commercial vehicle manufacturing operations into its African business,” said Jacoby. “We determined that continued or increased investment in manufacturing in South Africa would not provide GM the expected returns of other global investment opportunities.”
Under the improvement actions announced:
- India: GM’s manufacturing facility at Talegaon will continue as an export hub for Mexico and Central and South American markets. GM will cease sales of Chevrolet vehicles in the domestic market by the end of 2017. Existing Chevrolet customers will continue to be supported in the market. Last month General Motors India confirmed that it will cease production at its Halol manufacturing facility as the company consolidates manufacturing at its Talegaon facility.
- South Africa: Isuzu will purchase GM’s Struandale plant and GM’s remaining 30 percent shareholding in the Isuzu Truck South Africa joint venture, with sales through a national dealer network. Isuzu will also purchase GM’s Vehicle Conversion and Distribution Centre and assume control of the Parts Distribution Centre. The company will phase out the Chevrolet brand in South Africa by the end of 2017. GM continues to work with PSA Group to evaluate future opportunity for the Opel brand in South Africa. Importantly, existing Chevrolet and Opel customers will continue to be supported in the market.
- East Africa: As announced on February 28, Isuzu has agreed to purchase GM’s 57.7 percent shareholding in GM East Africa, assuming management control. GM will withdraw sales of the Chevrolet brand from the market.
- Singapore: GM International will streamline its regional headquarters office in Singapore, which will retain responsibility for strategic oversight of the remaining regional business and markets, including Australia and New Zealand, India, Korea and Southeast Asia. This will deliver greater organizational efficiencies while leveraging global resources and in-market expertise.
Across affected markets, GM says it is working with employees, their union representatives and local authorities to provide transition support.
As a result of these actions, GM expects to realize annual savings of approximately USD100m and plans to take a charge of approximately USD500m in the second quarter of 2017. The charge will be treated as special and excluded from the company’s EBIT-adjusted results. About USD200m of the special charge will be cash expenses.
