Peter Palmer: General Motors Restructuring International Markets To Strengthen Global Business

General Motors has announced “key restructuring actions” for its international business to increase overall financial health. The move comes as GM is looking to focus capital and resources on opportunities expected to yield higher returns, according to a press release from the automaker.

“As the industry continues to change, we are transforming our business, establishing GM as a more focused and disciplined company,” said Mary Barra, GM Chairman and Chief Executive Officer.

Moving & Shaking

The new plan involves changing GM’s Talegaon manufacturing base in India to produce vehicles for export only. The facility will supply vehicles to Mexico and other Central and South American markets. Chevrolet sales in the region will stop at the end of the year, but GM will support existing customers. In South Africa, Chevrolet will disappear by the end of 2017 as well, but like in India, GM will support existing customers.

In South Africa, the biggest moves come with Isuzu, who will acquire GM’s Struandale plant and GM’s remaining 30 percent in the Isuzu Truck South Africa joint venture. Isuzu will also purchase GM’s Vehicle Conversion and Distribution Centre and assume control of the Parts Distribution Centre. At the end of February, Isuzu agreed to purchase GM’s 57.7 percent shareholding in GM East Africa, and like India and South Africa, Chevrolet sales will cease in that market.

“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.”

The Isuzu DMAX and Chevrolet N300 Pickup are part of GM’s lineup for its International Operations’ Aid & Development Program to help non-governmental organizations work on projects in remote areas. Photo: General Motors.

Extensive Reviews

According to GM, these decisions were made following extensive reviews of the company’s international markets starting in 2013. Stefan Jacoby, GM Executive Vice President and President of GM International, shared how taking an “enterprise approach” has proven beneficial.

“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.”

A similar conclusion was reached in South Africa.

“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,” Jacoby said. “We determined that continued or increased investment in manufacturing in South Africa would not provide GM the expected returns of other global investment opportunities.”

“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,” Barra added.

Carlos Tavares, Chairman of the Managing Board of PSA (left), and Mary T. Barra, GM Chairman and Chief Executive Officer (right), at a press conference in Paris announcing the agreement under which GM’s Opel/Vauxhall subsidiary and GM Financial’s European operations will join the PSA Group. At the moment, GM and the PSA Group are determining the possible direction for Opel in South Africa. Photo: General Motors.

Special Arrangements

GM is working with employees, their union representatives, and local authorities to provide transition support in the affected markets. GM says the company will record an annual savings of approximately $100 million and plans to take a charge of approximately $500 million in the second quarter of 2017. The charge will be treated as special and excluded from the company’s EBIT-adjusted results. About $200 million of the special charge will be cash expenses, according to a press release from the automaker.

“Globally, we are now in the right markets to drive profitability, strengthen our business performance, and capitalize on growth opportunities for the long term,” Barra said. “We will continue to optimize our operations market by market to further improve our competitiveness and cost base.”

Carl Anthony is Managing Editor of Automoblog and resides in Detroit, Michigan.

Photos & Source: General Motors.