GM to pull of out India market, sell South Africa plant

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Reuters  /  May 18, 2017

DETROIT -- General Motors plans to quit selling vehicles in India by the end of this year and will sell operations in South Africa, the latest steps in a strategy of focusing cash and engineering effort on fewer, more profitable markets.

GM said on Thursday it will take a $500 million charge in the second quarter to restructure operations in India, Africa and Singapore. It will cancel most of a planned $1 billion investment to build a new line of low-cost vehicles in India.

About $200 million of the charge will be a cash expense, GM said. The moves are expected to save $100 million a year in a sector of GM's global business that last year lost about $800 million, the company said.

GM President Dan Ammann told Reuters in an interview that the latest restructuring moves -- and a series of earlier decisions to quit unprofitable markets -- allow GM to focus more money, engineering effort and senior management time on expanding where the company is strong, including China and the North American pickup and SUV business, where GM has a "product onslaught coming."

GM also has said it is investing about $600 million a year to develop autonomous vehicles and transportation services.

"What are we spending our time doing?" Ammann said. "Are we spending time pursuing opportunities or all of our time fixing problems?"

GM, like its Detroit rival Ford Motor Co., has found it increasingly expensive to compete in emerging markets outside of China. GM sold just 49,000 vehicles in India and South Africa combined last year.

CEO Mary Barra traveled to New Delhi in 2015 to announce a plan to invest $1 billion there to build a new line of Chevrolet models developed as part of a Global Emerging Market vehicle program - GEM for short. Since then, auto sales overall in India have slumped, and GM has failed to gain traction against incumbents such as Maruti Suzuki India.

Now, GM plans to stop selling Chevrolet brand vehicles by the end of the year and will produce vehicles only for export at its remaining factory in Talegaon, 75 miles east of Mumbai. The company currently employs about 2,500 workers there.

GM said it would continue work at its design and engineering center near Bangalore.

The $5 billion GEM program, which GM is developing with its Chinese partner Shanghai Automotive Industries Corp, remains on track to account for about 2 million vehicles a year in global sales volume, mainly in Latin America, Mexico and China, Ammann said.

"The market opportunity for GEM has continued to grow," he said.

South Africa operations

In a separate move, GM plans to stop building Chevrolet vehicles in South Africa and sell its South African factory to Japan's Isuzu Motors, along with the 30 percent stake the U.S. automaker owns in a truck venture with Isuzu Motors. Isuzu agreed in February to buy out GM's 57.7 percent stake in a joint venture in Kenya.

GM also will cut an undisclosed number of staff at its GM International Operations headquarters in Singapore. About 200 people work in that operation, the company said.

Since Barra took over GM in 2014, the one-time largest automaker in the world has taken aggressive steps to narrow its focus to China, the highly-profitable North American light truck and SUV market, Latin America, vehicle financing and transportation services that ultimately could use autonomous vehicles.

Despite the restructuring moves, including Barra's decision in March to sell money losing European operations to France's PSA Group, GM's share price has been stuck in a range close around $33 where it went public in 2010 following a government-funded bankruptcy. GM shares closed on Wednesday at $32.42.

Barra and GM's directors are under pressure from David Einhorn's Greenlight Capital, which wants GM to split its common stock into two classes, one that pays dividends and a second that would be valued to reflect the company's potential growth.

Greenlight also has put forward a slate of three new directors. GM's management and incumbent board have rejected Greenlight's proposals. The hedge fund holds 54.8 million GM shares, or about 3.5 percent of the total.

 

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No Turning Bakkie: General Motors to End Sales in South Africa and India

Car & Driver  /  May 18, 2017

General Motors will stop selling cars in South Africa and India and halt a large chunk of its local manufacturing, the company said Thursday.

Chevrolet will exit both markets by the year’s end. Both of GM’s Indian assembly plants will remain online. The Talegaon plant will produce cars exclusively for export to Mexico, Central America, and South America. The Halol plant will be sold to GM’s Chinese joint venture partner, SAIC, after GM announced two years ago that it would shutter the plant. GM stopped all production there just three weeks earlier, according to The Times of India. Aside from building global Chevrolet models like the Cruze and Spark, the Indian plants crank out several rebadged Chinese models (Sail, Tavera, Enjoy) and the newest version of the Captiva. The Talegaon plant has a maximum capacity of 165,000 cars per year.

Isuzu is taking over GM’s position in South Africa. The Struandale plant, which builds the Spark and the compact Utility Bakkie (the South African term for pickup truck), will be sold to Isuzu along with GM’s 30 percent stake in the Isuzu truck plant at Kempston Road. Three Chevrolet models (Cruze, Captiva, Trailblazer) no longer will be imported. Opel’s five-model lineup may remain in the country, GM said, as it continues discussions with PSA Peugeot Citroën, which two months ago agreed to purchase Opel and Vauxhal

GM also said it will pull out of the East African region by selling a 57.7 percent stake to Isuzu and trimming an unspecified number of employees in Singapore, home to the GM International Operations division that oversees all foreign markets save for South America and China.

GM’s consumer websites for both India and South Africa redirected traffic to a single page detailing the pullout in their respective markets. The company said it will keep “around 90” of the 137 Chevrolet and Opel dealers open in South Africa to sell Isuzu’s light commercial trucks and honor all warranties and service. GM did not specify how many dealers it would close in India but said they would “transition to authorized service outlets” and be offered compensation.

The Chevrolet brand was only introduced in India in 2003 after seven years of local GM production. While the 2500-plus employees at the Talegaon plant are likely to be unaffected—in March, their union signed a three-year contract—it’s possible GM may reduce or cancel its 2015 promise to invest $1 billion in Indian manufacturing as part of the company’s Global Emerging Market vehicle program designed for low-cost vehicles sold in China and Latin America. At that time, according to Hindu Business Line, GM also said it would double Indian market share to 3 percent by 2020. But current market share for the fiscal year ending March 31 is below 1 percent despite the country’s auto sales rising above three million cars. The cost of complying with India’s first ever crash-test standards, to be enacted later this year, is another major reason for GM’s pullout, which, like many major automakers, often offers obsolete cars without many modern safety or crash technologies in developing countries.

Aside from a temporary pullout during apartheid, GM has built cars in South Africa since 1926. But flat returns, a fluctuating rand, and struggling sales have dogged GM’s bottom line. Cadillac pulled out of the country in 2010. In 2016, the entire international division, which includes South Africa, posted a 15 percent yearly drop in sales to 673,499. The company will maintain manufacturing and sales operations in Kenya and Egypt.

The cutbacks are part of a broad, long-term sweep by former VW and Volvo exec Stefan Jacoby, who months after taking over the international division in 2013 announced GM would quit Holden manufacturing in Australia and pull Chevrolet from Europe. That same year, he merged two of GM’s separate North Africa and sub-Saharan-Africa divisions together and then merged the new African division with GM’s Middle East division in 2015. Jacoby wasn’t finished, as 2013 also saw GM shut down production in Indonesia, reduce production in Thailand, and reduce sales in Russia to only Cadillac and three high-priced Chevrolet models (Corvette, Camaro, Tahoe). The Saint Petersburg plant currently is idle.

GM said it wants to focus on higher-margin vehicles, particularly SUVs and crossovers, in China, the United States, and other countries “where the outlook for growth is very strong.” The company said it will record a $500 million special charge in the second quarter to pay for the wind-downs and expects to save $100 million per year.

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Engineering News  /  May 19, 2017

The decision by General Motors to pull out of South Africa will “have negative consequences on component suppliers to the company’s existing Chevrolet assembly lines”, says South Africa’s National Association of Automotive Component and Allied Manufacturers (NAACAM) executive director Renai Moothilal.

“We are obviously concerned at the announcement that General Motors will be stopping the production and sale of its vehicles in South Africa.”

Moothilal said on Friday that Naacam did not yet know how many component suppliers would be affected by GM’s shock decision, announced on Thursday.

The decision would see GM South Africa (GMSA) cease Chevrolet production and sales in South Africa by the end of 2017. Isuzu KB one-ton and Isuzu truck production would continue, under the Isuzu Motors South Africa (IMSA) banner.

Isuzu Motors announced on Thursday that it would acquire GMSA’s Port Elizabeth plant from GM, to form IMSA.

Isuzu assembly at GMSA made up around 50% of production at the Port Elizabeth plant.

GMSA total production was well in excess of 2 000 units a month, on average.

Moothilal added that Isuzu Motors’ announcement at least offered a “silver lining” to GM’s decision to depart South Africa.

“We view this as a level of confidence shown in South Africa as a manufacturing destination. We look forward to working with Isuzu to find ways to optimise the use of South African suppliers.”

Moothilal added that it was Naacam’s understanding that GM exited South Africa “on the back of a weak domestic sales outlook, and a general reprioritisation of markets in terms of its global strategy.

“At the same time, the company announced its exit from India. Thus the decision seems to be more GM centric. However, we remain of the view that a flourishing domestic and regional market is vital to the long-term sustainability of the auto manufacturing sector.”

GM also announced on Thursday that it would cease Chevrolet sales in India by the end of 2017. However, its plant at Talegaon would continue as an export hub for a number of markets abroad.

The group added that Isuzu Motors would also acquire its 57.7% shareholding in GM East Africa, assuming management control. GM would also withdraw sales of the Chevrolet brand from the East African market.

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Isuzu's Business in South Africa

Isuzu Press Release  /  May 18, 2017

Plan to make ITSA (Isuzu Truck South Africa) become Isuzu's wholly-owned subsidiary and LCV business completely controlled by Isuzu

Isuzu Motors Limited (headquartered in Shinagawa, Tokyo and headed by Masanori Katayama, President and Representative Director, hereinafter called "Isuzu") and General Motors Company (headquartered in Detroit, the U.S.A. and headed by Mary Barra, Chairman and CEO, hereinafter called "GM") reached an agreement under which GM will transfer the pickup truck business of General Motors South Africa (hereinafter called "GMSA") to Isuzu Truck South Africa (Pty) Limited (hereinafter called "ITSA") in order for Isuzu to reinforce its commercial vehicle and pickup truck business in the South African market.

Before the business transfer, Isuzu will purchase from GMSA a 30% equity stake in ITSA, which assembles and distributes Isuzu commercial vehicles, whereby Isuzu will transform the company into its wholly-owned subsidiary with a new company name of "ISUZU MOTORS SOUTH AFRICA (Tentative)".

Isuzu will further reinforce sales, marketing and after-sales activities for commercial vehicles and pickup trucks to establish a foundation for sustainable, long-term business growth in the South African market.

Outline of the company

Company name ISUZU MOTORS SOUTH AFRICA (tentative) Change of company name Planned in June 2017 Location Johannesburg, South Africa Representative Hiroaki Sugawara Shareholder Isuzu Motors Limited (100%) Description of Business Assembly, sales and after-sales of Isuzu commercial vehicles and pickup trucks for South Africa and surrounding countries *The assembly, sales and after-sales of pickup trucks will start in or after January 2018. Capital 80 million South African Rand (about 650 million Yen)