General Motors Co. is facing challenges in the Chinese market, leading to layoffs and a planned structural overhaul in partnership with SAIC. The Detroit automaker is acknowledging that its sales in China are unlikely to return to their peak levels of 2017, prompting a reassessment of its operations in the world’s largest car market.
The company is cutting staff in Chinese market-related departments, including research and development, as part of its efforts to realign its strategy. GM and SAIC will soon discuss potential capacity cuts and other changes to redirect American nameplates sold in China. This shift marks a significant change for GM, which previously saw substantial profits in China but is now facing increased competition and overcapacity in the market.
The new strategy involves a focus on producing electric vehicles, upscale models, and importing premium vehicles. GM will continue to manufacture less expensive vehicles and EVs locally through its joint venture with SAIC Motor Corp. and Wuling Motors, with some models being exported from China. The company is also considering reductions in factory capacity and additional job cuts to align with lowered sales expectations.
In recent financial filings, GM highlighted the challenges posed by Chinese automakers prioritizing market share gains over profits, making it difficult to maintain sales volumes. The company is working with its local partners to revamp its operations in China and address potential losses in the near term. GM aims to return its Chinese business to sustained profitability before its 30-year contract with SAIC expires in 2027.
The SAIC-GM partnership, which produces Buick, Cadillac, and Chevrolet vehicles, is a key focus of the restructuring efforts. GM aims to strengthen the financial position of this partnership to support its own operations and vehicle development programs. The company is also looking to enhance the performance of its second partnership, SAIC-GM-Wuling Automobile Co. Ltd., which focuses on small and inexpensive vehicles, including electric models like the Hongguang Mini EV.
Despite these efforts, GM reported losses in its Chinese business in the most recent quarter, totaling $104 million. The company had hoped to cut production and return to profitability earlier in the year. GM’s Chief Financial Officer, Paul Jacobson, hinted at a reorganization during an investor presentation, emphasizing the need to restore profitability and sustainable cash flow in China.
GM’s long-standing presence in China, dating back to 1997, has seen its sales decline significantly in recent years. The company’s sales peaked at 4 million in 2017 but dropped to 2.1 million in 2020. While all of GM’s U.S. brands experienced declines in China, the SAIC-GM-Wuling partnership showed more resilience due to its focus on compact EVs.
Looking ahead, GM plans to shift its focus in China towards more premium vehicles targeting upscale buyers, in line with CEO Mary Barra’s strategic vision. The company recognizes the importance of remaining competitive in the Chinese market and is committed to restoring profitability and sustainable growth in the region.
