GM announced today that it would wind down sales, design and engineering operations in Australia and New Zealand (ANZ) and retire the Holden brand by 2021. The company will focus its strategies for the ANZ market on the GM specialty vehicle business. The company also announced that it had signed a binding term sheet with Great Wall Motors to purchase GM’s Rayong vehicle manufacturing facility in Thailand and would withdraw Chevrolet from there by the end of 2020.
“I’ve often said that we will do the right thing, even when it’s hard, and this is one of those times,” said Mary Barra, GM Chairman and CEO. “We are restructuring our international operations, 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 the areas of EVs and AVs. While these actions support our global strategy, we understand that they impact people who have contributed so much to our company. We will support our people, our customers and our partners, to ensure an orderly and respectful transition in the impacted markets.”
GM President Mark Reuss said the company explored a range of options to continue Holden operations, but none could overcome the challenges of the investments needed for the “highly fragmented right-hand-drive market”, the economics to support growing the brand, and delivering an appropriate return on investment.
“At the highest levels of our company we have the deepest respect for Holden’s heritage and contribution to our company and to the countries of Australia and New Zealand,” said Reuss. After considering many possible options – and putting aside our personal desires to accommodate the people and the market – we came to the conclusion that we could not prioritise further investment over all other considerations we have in a rapidly changing global industry. We do believe we have an opportunity to profitably grow the specialty vehicle business and plan to work with our partner to do that.”
GM said it also undertook a detailed analysis of the business case for future production at the Rayong manufacturing facility in Thailand. Low plant utilisation and forecast volumes have made continued GM production at the site unsustainable. Without domestic manufacturing, Chevrolet is unable to compete in Thailand’s new vehicle market.
Steve Kiefer, GM Senior Vice President and President at GM International, said these decisions built on the announcement in January that GM would sell its Talegaon manufacturing facility in India, significant restructuring actions implemented in Korea, and investment in and continued optimisation of South American operations.
“These are difficult decisions, but they are necessary to support our goal to have the GM International region on the pathway to growth and profitability,” said Kiefer. “GM is well positioned in our GM International core markets: South America, the Middle East and Korea.”
Julian Blissett, International Operations Senior Vice President at GM, said that as well as implementing plans in international core markets, GM was continuing to optimise partnerships in markets like Uzbekistan by transferring assets and building strong supply chains to reduce costs in growth markets.
“In markets where we don’t have significant scale, such as Japan, Russia and Europe, we are pursuing a niche presence by selling profitable, high-end imported vehicles – supported by a lean GM structure,” said Blissett. “We will continue to implement these critical business strategies, while delivering a dignified and respectful transition in impacted markets.”
In Australia, New Zealand, Thailand and related export markets, GM said that it will honour all warranties and continue to provide servicing and spare parts. Local operations will also continue to handle all recall and any safety-related issues, working with the appropriate governmental agencies.
As a result of these actions in Australia, New Zealand and Thailand, the company said it expects to incur net cash charges of approximately US$300 million, along with recording total cash and non-cash charges of US$1.1 billion. These charges will primarily be incurred in the first quarter and continuing through the fourth quarter of 2020, and will be considered special for EBIT-adjusted, EPS diluted-adjusted and adjusted automotive free cash flow purposes.