General Motors Co <GM.N> is retreating from more markets outside of the United States and China, saying on Sunday that it will wind down sales, design and engineering operations in Australia and New Zealand and retire the Holden brand by 2021.
It also said China's Great Wall Motor Co Ltd <601633.SS> had agreed to buy GM's Thailand car manufacturing plant and an engine factory, a transaction expected to be completed by the end of 2020.
In rearranging its global operations, GM is accelerating its retreat from unprofitable markets, becoming more dependent on the United States, China, Latin America and South Korea.
GM Chief Financial Officer Dhivya Suryadevara told analysts during a Feb. 5 presentation that restructuring GM's international operations outside of China so they produce profit margins in the mid-single digits "does represent a $2 billion (1.53 billion pounds) improvement" compared with 2018's.
Ahead of that presentation, GM forecast flat profit for 2020 and reported a better-than-expected fourth-quarter earnings in the face of a $3.6 billion hit from a 40-day United Auto Workers strike.
With the proposed sale of its Thailand plant to Great Wall, GM is giving up an opening to expand its operations in Southeast Asia.
GM is "focusing on markets where we have the right strategies to drive robust returns, and prioritising global investments that will drive growth in the future of mobility," especially in electric and autonomous vehicles, GM Chair and CEO Mary Barra said in a statement.
The changes will lead to cash and non-cash charges of $1.1 billion, as well as the loss of 1,500 jobs in Thailand and 828 in Australia and New Zealand, GM said.
Barra has prioritised profit margins over sales volume and global presence since taking over in 2014.
In 2017, Barra sold GM's European Opel and Vauxhall businesses to Peugeot SA <PEUP.PA> and exited South Africa and other African markets.
Since then, Barra has decided to pull GM out of Vietnam, Indonesia and India. Great Wall agreed in January to buy a GM vehicle plant in India, a transaction expected to be completed by the second half of 2020.
Like Britain, Australia and New Zealand are right-hand drive markets. With sales of GM's Australian Holden brand plummeting, the company could not justify the investment to continue building right-hand drive vehicles, GM President Mark Reuss said in Sunday's statement.
GREAT WALL GOING ABROAD
Great Wall, one of China's biggest sport-utility vehicle makers, said it will sell cars from the Thai manufacturing plant in Thailand, other ASEAN bloc countries and Australia as it seeks global expansion amid a slowing domestic market.
"Such an acquisition could give Great Wall quick access to the ASEAN market, and Thailand is a good choice for its production base amid the country's established supply chain in the automotive industry," Shi Ji, analyst at Haitong Internation told Reuters.
The firm, which is building a car plant with BMW <BMWG.DE>, sold 1.06 million cars last year, including 65,175 units for export.
"There is no choice, if we don't go global, we will not survive," Wei Jianjun, chairman of the Baoding-based automaker, said last year when Great Wall opened its first full assembly plant in Russia. In January, Great Wall signed an agreement to buy GM's car plant in India. The companies said they expected the transaction would be completed by the second half of 2020.
Great Wall rival Geely [GEELY.UL] is also looking to expand its car sales across the ASEAN region with Malaysia-based brand Proton.
(Reporting by Hilary Russ, Joe White and Yilei Sun; Editing by Christopher Cushing and Richard Pullin)
