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GM pursues profit, pulls out of Australia, New Zealand and Thailand

Tue, 02/18/2020 - 13:10

General Motors Co. is shutting down its Australian and New Zealand operations. The latest restructuring of its global business, said to cost the US auto manufacturer $1.1 billion, also includes the selling of a plant in Thailand

Around 600 jobs will be lost in Australia and New Zealand, with roughly 1,500 jobs affected by the sale in Thailand, according to GM.

The car company said in a statement Sunday that it will wind down sales, engineering and design operations for its historic Holden brand in Australia and New Zealand in 2021. GM frames the move as a retreat from unprofitable markets. According to the car company, Australia, New Zealand and Thailand have failed to produce adequate returns on investments.

A strategic exit

GM has stated it will scale back operations in all three countries to selling more specialized vehicles. The same plan is also in the works for Japan, Russia and Europe, where “we don’t have significant scale.”

The company confirms that it will honor all warranties in the markets, and it will continue to provide service and parts. Safety recalls will be handled via local operators.

The auto maker also told analysts this month that restructuring GM's international operations outside of China to produce profit margins in the mid-single digits would represent "a $2 billion improvement" on two years ago.

Barra backs out

CEO Mary Barra says the company wants to focus on markets where it can drive strong returns, and that GM will support its employees and customers in the transition. Barra, who took the helm at GM back in 2014, has historically prioritized profit margins over sales volume and global presence, a response to more agile, innovative rivals such as Tesla.

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Under Barra’s leadership, GM has sold off its European Opel and Vauxhall businesses, and exited African markets as well as Vietnam, Indonesia and India.

Anger in Australia

The move has provoked an angry reaction from Australian consumers and politicians. Prime Minister Scott Morrison said on Monday he was disappointed and angry at the decision, if 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.

GM Holden has been one of the Australia’s best-selling car companies since 1948. Due to cultural commonalities with the UK, Australia and New Zealand are right-hand drive markets and this has played a part in GM’s flight. With sales of new cars continuously falling, GM President Mark Reuss said that the company could not justify the investment in manufacturing right-hand drive models.

Great Wall goes global, picks up Thai plant

GM will sell its Rayong factory in Thailand to China’s Great Wall Motors and pull the Chevrolet brand from Thailand . The transaction will be complete by the end of 2020. Great Wall, one of China's biggest vehicle manufacturers, said it plans to use the Thai factory as a base from which to sell cars in Southeast Asia and Australia. This is part of its global strategy to expand into new markets to offset falling domestic consumption. Great Wall also signed an agreement in January to buy GM's car plant in India and is building a car plant with BMW in China.

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The domestic car market in Thailand is dominated by Japanese auto companies and Great Wall will have to diversify to compete. According a report from reuters, the Chinese company may consider also build pickup trucks and SUVs in Thailand. The Baoding-based auto manufacturer sold 1.06 million cars last year, including 65,175 units for export.

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