GM financial strategies. What financial strategies should General Motors utilize to finance its new growth strategy?

What financial strategies should General Motors utilize to finance its new growth strategy?

GM Accelerates Transformation of International Markets
• GM to cease Holden sales, design and engineering operations by 2021, plans to focuson growth opportunities in specialty vehicle business
• GM and Great Wall Motors sign binding term sheet for sale of Thailand manufacturingplant
• Chevrolet to cease domestic sales in Thailand by end of 2020
DETROIT – General Motors (NYSE: GM) is taking decisive action to transform itsinternational operations, building on the comprehensive strategy it laid out in 2015 tostrengthen its core business, drive significant cost efficiencies and take action in marketsthat cannot earn an adequate return for its shareholders.
GM announced today that it would wind down sales, design and engineering operations inAustralia and New Zealand and retire the Holden brand by 2021. The company will focus itsstrategies for the market on the GM specialty vehicle business. The company also announcedthat it had signed a binding term sheet with Great Wall Motors to purchase GM’s Rayongvehicle manufacturing facility in Thailand; and would withdraw Chevrolet from the domesticmarket in Thailand by the end of 2020.
“I’ve often said that we will do the right thing, even when it’s hard, and this is one of thosetimes,” said GM Chairman and CEO Mary Barra. “We are restructuring our internationaloperations, 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, especiallyin the areas of EVs and AVs.
“While these actions support our global strategy, we understand that they impact peoplewho have contributed so much to our company. We will support our people, our customersand our partners, to ensure an orderly and respectful transition in the impacted markets.”GM President Mark Reuss said the company explored a range of options to continue Holdenoperations, but none could overcome the challenges of the investments needed for thehighly fragmented right-hand-drive market, the economics to support growing the brand,and delivering an appropriate return on investment.
“At the highest levels of our company we have the deepest respect for Holden’s heritage andcontribution to our company and to the countries of Australia and New Zealand,” said Reuss.“After considering many possible options – and putting aside our personal desires toaccommodate the people and the market – we came to the conclusion that we could notprioritize further investment over all other considerations we have in a rapidly changingglobal industry.
“We do believe we have an opportunity to profitably grow the specialty vehicle business andplan to work with our partner to do that,” he concluded.
GM also undertook a detailed analysis of the business case for future production at theRayong manufacturing facility in Thailand. Low plant utilization and forecast volumes havemade continued GM production at the site unsustainable. Without domestic manufacturing,Chevrolet is unable compete in Thailand’s new-vehicle market.
GM Senior Vice President and President GM International Steve Kiefer said these decisionsbuilt on the announcement in January that GM would sell its Talegaon manufacturing facilityin India; significant restructuring actions implemented in Korea; and investment in andcontinued optimization of South American operations.
“These are difficult decisions, but they are necessary to support our goal to have the GMInternational region on the pathway to growth and profitability,” said Kiefer.
“GM is well positioned in our GM International core markets: South America, the Middle Eastand Korea.”
GM International Operations Senior Vice President Julian Blissett said that as well asimplementing plans in international core markets, GM was continuing to optimizepartnerships in markets like Uzbekistan, by transferring assets and building strong supplychains to reduce costs in growth markets.
“In markets where we don’t have significant scale, such as Japan, Russia and Europe, we arepursuing a niche presence by selling profitable, high-end imported vehicles – supported by alean GM structure,” said Blissett.
“We will continue to implement these critical business strategies, while delivering a dignifiedand respectful transition in impacted markets.”
In Australia, New Zealand, Thailand and related export markets, customers can be assuredthat GM will honor all warranties and continue to provide servicing and spare parts. Localoperations will also continue to handle all recall and any safety-related issues, working withthe appropriate governmental agencies.
As a result of these actions in Australia, New Zealand and Thailand, the company expects toincur net cash charges of approximately $300 million. The company expects to record total cash and non-cash charges of $1.1 billion. These charges will primarily be incurred in thefirst quarter and continuing through the fourth quarter of 2020. These charges will beconsidered special for EBIT-adjusted, EPS diluted-adjusted and adjusted automotive freecash flow purposes.
Cautionary Note on Forward-Looking Statements: This press release contains forward-lookingstatements that represent our current judgment about possible future events. In making thesestatements we rely on assumptions and analysis based on our experience and perception of historicaltrends, current conditions and expected future developments as well as other factors we considerappropriate under the circumstances. We believe these judgments are reasonable, but thesestatements are not guarantees of any events or financial results, and our actual results may differmaterially due to a variety of important factors, both positive and negative. A list and description ofthese factors can be found in our Annual Report on Form 10-K and our subsequent filings with theU.S. Securities and Exchange Commission. We caution readers not to place undue reliance onforward-looking statements. We undertake no obligation to update publicly or otherwise revise anyforward-looking statements, whether as a result of new information, future events or other factorsthat affect the subject of these statements, except where we are expressly required to do so by law.General Motors (NYSE: GM) is a global company committed to delivering safer, better and moresustainable ways for people to get around. General Motors, its subsidiaries and its joint ventureentities sell vehicles under the Chevrolet, Buick, GMC, Cadillac, Holden, Baojun, and Wuling brands.More information on the company and its subsidiaries, including OnStar, a global leader in vehiclesafety and security services, and Maven, its personal mobility brand, can be foundat http://www.gm.com.