General Motors is retreating from more markets outside of the United States and China, saying on Sunday that it will wind down sales, design and engineering operations in Australia and New Zealand and retire the Holden brand by 2021.
GM also said that China's Great Wall Motor Co. had agreed to buy its Thailand manufacturing plant. The automaker said it also plans to pull the Chevrolet brand from Thailand, a major pickup market.
Holden, one of Australia's most iconic brands, with some 1.6 million vehicles on the road, began in the 1850s as a leather and saddle maker. It has been part of GM's brand portfolio for nearly 100 years.
The company expects to incur net cash charges of about $300 million in connection with the changes, and total cash and non-cash charges of $1.1 billion.
In rearranging its global operations, GM is accelerating a retreat from unprofitable markets, notably Europe, while becoming more dependent on the United States, China, Latin America and South Korea.
In large markets where GM doesn't benefit from significant scale -- namely Japan, Russia, Europe and now Australia -- it said it will continue to pursue a niche presence by selling profitable, high-end imported vehicles.
GM Chief Financial Officer Dhivya Suryadevara told analysts during a Feb. 5 presentation that restructuring GM's international operations outside of China so they produce profit margins in the mid-single digits "does represent a $2 billion improvement" compared with 2018.
Ahead of that presentation, GM forecast flat profit for 2020 and reported a better-than-expected fourth-quarter earnings in the face of a $3.6 billion hit from a 40-day United Auto Workers strike.
With the proposed sale of the Thailand plant to Great Wall, GM is giving up an opening to expand operations in Southeast Asia.
'The right thing'
GM is "focusing on markets where we have the right strategies to drive robust returns, and prioritizing global investments that will drive growth in the future of mobility," especially in electric and autonomous vehicles, GM Chairman and CEO Mary Barra said in a statement.
“I’ve often said that we will do the right thing, even when it’s hard, and this is one of those times,” Barra added.
She has prioritized profit margins over sales volume and a global footprint since taking over in 2014.
In 2017, GM sold its Opel and Vauxhall business units in Europe to Peugeot SA and exited South Africa and other African markets.
Since then, Barra has decided to pull GM out of Vietnam, Indonesia and India.
In earlier moves, GM withdrew the Chevrolet brand from Europe in 2015 and left Russia the same year.
Like Britain, Australia and New Zealand are right-hand drive markets. With sales of GM's Australian Holden brand plummeting, the company could not justify the investment to continue building right-hand drive vehicles, GM President Mark Reuss said in Sunday's statement.
Reuss ran Holden in 2008 and 2009, but since then GM's market share has fallen from almost 13 percent to 4.1 percent, the company said in a statement.
GM ended Holden manufacturing in 2017. GM imports the majority of the Holden models it sells in Australia, mostly from South Korea and Thailand.
Even when GM stopped manufacturing Holden models -- adorned with a "lion and stone wheel" logo -- in Australia, GM and brand officials maintained it was "going to be a part of the fabric" of the "country for a very long time."
Yet the cost of maintaining a separate brand in such a small and fractured market, increasingly dominated by Asia automakers, proved too daunting, even for an automaker with GM's global scale.
GM has 828 employees in Australia and New Zealand and another 1,500 in Thailand, the company said.
Withering away
The move stoked anger in Australia, where GM Holden long ranked among the country's best-selling car companies after the first locally made mass-production car rolled off the assembly line with a Holden badge in 1948.
Australian Prime Minister Scott Morrison said on Monday he was disappointed and angry at the decision, although not surprised.
"Australian taxpayers put billions into this multinational company. They let the brand just wither away on their watch," he told reporters in Melbourne.
Great Wall, one of China's biggest SUV makers, said it will sell vehicles from the Thai manufacturing plant in Thailand, other ASEAN countries and Australia as the Baoding-based automaker seeks to expand globally amid a slowing domestic market.
In January, Great Wall signed an agreement to buy a GM plant in India. The companies said they expect the transaction would be completed by the second half of 2020.
Bloomberg contributed to this report.
