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GM Pulls Back Overseas and Drops an Australian Mainstay -- WSJ

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02/18/2020 | 02:48am EDT

By Mike Cherney

SYDNEY- -- General Motors Co. will scale back operations in Australia, New Zealand and Thailand, its latest move to reduce exposure in tough overseas markets while investing more in autonomous and electric vehicles.

GM said Monday that it will stop selling and designing Holden vehicles in Australia and New Zealand by 2021, marking the end of a brand that began in the 1850s as a leather and saddle company and now has some 1.6 million vehicles on the road. GM also said it would stop selling Chevrolet vehicles in Thailand by the end of 2020, and is selling a manufacturing plant in Thailand to Great Wall Motor Co., a Chinese company.

The move comes shortly after GM and other Detroit auto makers offered tepid outlooks for 2020, following almost a decade of steady sales growth around the world. China's once-booming car market is expected to contract this year and the U.S. market could also see a big decline. Investors, meanwhile, are betting that electric-vehicle maker Tesla Inc. will capture a bigger slice of the market in coming years.

GM said it would record total cash and noncash charges of $1.1 billion tied to the pullback from Australia, New Zealand and Thailand, and that those charges would be primarily incurred in the first quarter. More than 500 people in Australia and New Zealand are expected to lose their jobs, company officials said.

Holden has been part of GM for nearly 100 years, but the brand has struggled despite the heritage. In January, Holden captured 3.7% of the Australian new-vehicle market, compared with 5.1% from the same month last year, according to the Federal Chamber of Automotive Industries. Industrywide, Australian new-vehicle sales declined more than 12% in January.

Holden's top-selling vehicle in Australia in December 2019 was the Colorado, a pickup-style vehicle known as a "ute" in Australia. Still, it was only the 15th bestselling vehicle in the country, which was topped by another pickup truck, the Toyota HiLux.

GM said it couldn't come up with a plan that would make Holden competitive and deliver an appropriate return on investment, citing the highly fragmented market for vehicles in countries where motorists drive on the left side of the road. Holden closed its last Australian car factory in 2017, around the same time as other global auto makers such as Ford Motor Co. and Toyota Motor Corp.

"We chased down every conceivable option, every strategy, every plan," GM Holden Interim Chairman and Managing Director Kristian Aquilina said Monday. "We tried everything to keep Holden going until it was evident it would take good money after bad."

GM said it planned to have a small specialty-vehicle business in Australia and New Zealand, but didn't offer details on which of its brands it may sell. For existing Holden customers, it said it would honor all warranties and servicing offers made at the time of sale, and that it would provide spare parts for at least 10 years. Officials didn't specify how much investment would have been required to justify continuing Holden's operations.

During a Feb. 5 investor conference, GM executives said they aimed to improve operating profit in the company's international operations -- which includes South America, the Middle East and a handful of Asian markets, but not China -- by $2 billion in coming years. The division lost more than $1 billion last year.

Over the course of Chief Executive Mary Barra's six-year tenure, GM has exited or scaled back operations in many foreign markets, including India and Europe, where GM sold its Opel and Vauxhall brands to French car maker PSA Group in 2017. Ms. Barra has said she wants to focus on markets where GM has a dominant position, notably North America and China.

The company is shrinking its global footprint in part to free up capital for bets on electric and autonomous vehicles and other advanced technologies. GM is among the most aggressive traditional auto makers in pursuing battery-powered vehicles, with plans to have about 20 electric-vehicle models on sale globally within three years. It also has been spending roughly $1 billion a year to develop driverless cars through its San Francisco-based Cruise subsidiary.

--Mike Colias contributed to this article.

Write to Mike Cherney at mike.cherney@wsj.com


Stocks mentioned in the article
ChangeLast1st jan.
COLORADO S.A. 3.09% 48.97 End-of-day quote.0.00%
FORD MOTOR COMPANY -8.59% 4.42 Delayed Quote.-48.06%
GENERAL MOTORS COMPANY -7.36% 19.26 Delayed Quote.-43.22%
GREAT WALL MOTOR COMPANY LIMITED 3.76% 4.97 End-of-day quote.1.43%
TESLA, INC. -4.73% 495.91 Delayed Quote.25.26%
TOYOTA INDUSTRIES CORPORATION -3.54% 5180 End-of-day quote.-3.90%
TOYOTA MOTOR CORPORATION -4.35% 6501 End-of-day quote.-4.06%
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