GM to stop selling vehicles in once promising India, exit South Africa
General Motors is planning to stop selling all cars in India and shed its operations in South Africa by the end of this year, a move that continues the automaker's retreat from parts of the world where its profits are lagging so it can focus on profitable regions.
The Detroit automaker said Friday (NZT) that it will transform its business in India into an export-only operation and will sell its operations in South Africa to Isuzu. GM said its will stop selling its Chevrolet brand in both markets by the end of 2017.
GM wants to focus more financial resources on regions of the world where it is profitable, especially North America and China, and focus on developing autonomous cars. It will likely need those resources more as a seven-year growth period of US industry sales comes to an end.
"As the industry continues to change, we are transforming our business, establishing GM as a more focused and disciplined company," GM CEO Mary Barra said in a statement.
READ MORE: Ford to cut 1400 jobs
"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."
The announcement follows GM's decision to sell its European division to French automaker PSA Groupe in April, the automaker's decision to discontinue sales of mainstream Chevrolet models in Europe in 2015, to exit Russia in 2015 and end Holden manufacturing in Australia in 2016.
GM's willingness to back out of difficult markets is a radical departure for an automaker that for years has focused on maintaining its position as one of the world's largest automakers.
"Recent actions by General Motors demonstrate clearly it is not the GM of old," said Michelle Krebs, executive analyst for Autotrader. "Today's GM management is correctly focused on profits, not sales volume and market share. It has shown a willingness to cut its losses if there's no clear path to profitability and market dominance."
GM also is the second automaker this week to announce restructuring actions amid declining US industry sales, pressure from shareholders to shore up stock prices and shareholder dividends, and the growing need to invest heavily to develop autonomous vehicles.
Ford announced plans on Thursday (NZT) to cut 1400 salaried workers out of 15,000 in various departments in North America and Asia.The decision to stop selling vehicles in India is especially bold. Just a few years ago most automotive analysts were predicting that the "BRIC" countries - Brazil, Russia, India and China - would be engines of growth for global automakers for years to come.
China, of course, has emerged as the largest global market for new vehicle sales. China's auto market, the world's largest, grew to 28 million vehicles in 2016 and will likely climb 5 per cent in 2017 to 29.4 million vehicles, according to the China Association of Automobile Manufacturers.
The auto industry in Brazil, in contrast, has been in freefall as the country's economy has gone into a tailspin and the country has dealt with political turmoil.
In India, industry sales have been growing. Total industry sales increased 7 per cent in 2016 to 3.3 million, according to LMC Automotive, and sales there are expected to increase 8 per cent annually over the next seven years to 6.2 million by 2025. Still, auto sales fell at the end of last year as the country made changes to its monetary policy.
In India, GM said it will transform its plant in Talegaon, in the province of Pune, into an export hub for Mexico and Central and South American markets and will stop selling any vehicles to consumers there. The automaker only sold 29,000 vehicles in India last year. While GM will continue to operate its plant in India, where the automaker employs about 5000, it will reduce its workforce by about 8 per cent, or 400 employees.
"In India, our exports have tripled over the past year, and this will remain our focus going forward," GM President Dan Ammann said in a statement.
Morgan Stanley Adam Jonas, in a report earlier this week, said Ford also is struggling in India.
"Ford's Indian business appears to be a drag on international operations and we would look for partnerships or strategic moves to address such areas to minimise losses and to focus management attention on the bigger picture," Jonas said.
In South Africa, Isuzu will purchase GM's Struandale plant in Port Elizabeth and GM's remaining 30 per cent stake 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. GM also said it is in discussions with PSA Group, which has agreed to purchase Opel in Europe, to purchase or acquire the Opel brand in South Africa.
"Globally, GM firmly believes there are opportunities where it can achieve greater return on investment - in specific vehicle segments and markets where the outlook for growth is very strong," GM said in a statement issued by its operations in South Africa.
- Detroit Free Press/TNS