General Motors Co. (GM) has disclosed in a recent Form 8-K filing with the Securities and Exchange Commission that it anticipates incurring charges of approximately $5 billion in the fourth quarter of fiscal year 2024. These charges are associated with the restructuring of its joint venture in China with SAIC Motor Corp., Ltd.
GM holds a significant equity stake in SAIC General Motors Corp. Ltd. (SGM), a 50-50 joint venture with SAIC Motor Corp., Ltd., and also has an interest in SAIC-GMAC Automotive Finance Co. Ltd. SGM operates its automotive business in China through numerous other joint ventures with GM.
On December 2, 2024, GM's Board of Directors' Audit Committee concluded that a material impairment of GM's investment in SGM was necessary. The committee assessed that the significant decline in value of GM's investments in certain Chinese joint ventures is not temporary, considering the recent completion of a new business forecast and specific restructuring measures being finalized by SGM. These steps are being taken to address existing market challenges and competitive pressures.
GM is currently evaluating the effects of SGM's planned restructuring and recent strategies aimed at stabilizing market share and enhancing profitability. The company expects to record an impairment of its equity interest in the Chinese joint ventures, ranging from $2.6 billion to $2.9 billion, in the fourth quarter.
Additionally, GM will incur further equity losses of around $2.7 billion due to SGM's restructuring strategy. These losses encompass impairment charges related to plant closures and portfolio optimization undertaken by the Chinese joint ventures.
These charges are anticipated to be non-cash and will be classified as special items for adjusted EBIT considerations.
