General Motors has announced it will stop selling vehicles in India later this year along with plans to ditch operations in South Africa.
It’s the latest move in Mary Barra’s plan to focus GM’s cash on engineering and fewer, yet, more profitable markets. The company will take a $500 million hit in Q2 in order to restructure operations in India and Africa and will cancel a $1 billion investment to build cheap cars in India.
According to GM, its decision is expected to save $100 million a year in a part of the world where it lost roughly $800 million last year.
GM’s manufacturing in India will transition to exclusively produce vehicles for export to Mexico and South America; while GM South Africa will sell its Struandale plant and its 30 percent stake in the Isuzu Truck South Africa joint venture, along with vehicle and parts distribution channels. Chevrolet will cease to exist in both markets by the end of the year.
“In India, our exports have tripled over the past year, and this will remain our focus going forward,” said Stefan Jacoby, President of GM International.
Despite the enormity of the Indian market GM sold just 49,000 vehicles in India and South Africa combined last year.
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“After a thorough assessment of our South African operations, we believe it is best for Isuzu to integrate our light commercial vehicle manufacturing operations into its African business,” he added. “We determined that continued or increased investment in manufacturing in South Africa would not provide GM the expected returns of other global investment opportunities.”
“We determined that continued or increased investment in manufacturing in South Africa would not provide GM the expected returns of other global investment opportunities.”
As part of the restructuring, GM also will shed an undisclosed number of jobs at GM International HQ in Singapore, but it can’t be many, only 200 people work there.
The move allows the Detroit automaker to focus its time, money and effort on developing products and technology for markets where the company is strong, namely North America and China. More importantly, though, Barra is hoping to move the needle on GM’s stagnant share price and fend off investors clamoring for dividends.
GM stock hasn’t strayed far from it’s $33 public debut price in 2010 despite the company’s run of record profits and the decision to sell off its perpetually loss-making European operations to PSA.
