Business Essentials for Professionals


General Motors To Shut Operations In Australia, NZ And To Sell Off Its Thai Plant

General Motors To Shut Operations In Australia, NZ And To Sell Off Its Thai Plant
United States based auto giant General Motors Co is leaving more markets apart from its home market and China.
The company has announced that it will stop sales, design and engineering operations in Australia and New Zealand while also stop production of its Holden brand by 2021.
The manufacturing operations and plants of the company in Thailand will be bought by China's Great Wall Motor Co Ltd, GM also said. The company will also sell off an engine factory in Thailand to the Chinese auto company by the end of the current year.
The turnaround strategy adopted by the company entails it retreating from all of the unprofitable making markets while completely focusing on its business in the United States, China, Latin America and South Korea.
By restructuring the company’s business and operations outside of China so that the profit margins of the company reach mid-single digits "does represent a $2 billion improvement" compared with 2018's, said GM’s Chief Financial Officer Dhivya Suryadevara while talking to analysts last week.
During its earnings presentation last week, GM had forecast no profits for 2020 while reporting a better-than-expected fourth-quarter earnings even though the company was hit during the quarter by a strike by the United Auto Workers that went on for 40 days.
However analysts said that GM is effectively giving up on a chance of expanding its business in Southeast Asia by selling off its plants and production operations in Thailand to the Great Wall.
GM is "focusing on markets where we have the right strategies to drive robust returns, and prioritizing 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.
GM said that there will be a loss of 1,500 jobs in Thailand and 828 in Australia and New Zealand because of the changes apart from hitting the company with cash and non-cash charges of $1.1 billion.
Since taking over the reign of the company in 2014, the focus of Barra has been to increase profit margins even at the cost of losing out of sale volumes and global presence.
The company had sold off its European Opel and Vauxhall businesses to Peugeot SA in 2017 and had also exited the South African and some other African markets as well under Barra ‘s leadership.
GM has also exited the markets of Vietnam, Indonesia and India since 2017. A GM vehicle plant in India will be bought by Great Wall and the deal is expected to get completed by the second half of the current year.
GM President Mark Reuss said in a statement that the company could not justify making continued investments in Australian Holden brand because of plummeting businesses and because it is a right hand drive vehicles meant for Australia and New Zealand where right hand driving in is the norm.
The Great Wall plans to target the Thailand market for selling of the cars that would be manufactured at GM’s Thai factory, the Chinese company which is the biggest sport-utility vehicle maker of China, said. Other markets of ASEAN bloc countries and Australia will also be targeted, the company has said.
"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 news agency Reuters.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc