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Isuzu to Take Over as GM Exits South Africa

Date:2017-05-19 Source:bloomberg

www.chinatrucks.com: General Motors Co., which initially started vehicle production in South Africa in 1926, plans to sell its manufacturing plant in the country to Japanese truckmaker Isuzu Motors Ltd. as part of a worldwide reorganization to focus on more profitable businesses.

Isuzu to Take Over as GM Exits South AfricaThe General Motors factory in Cape Town, South Africa, circa 1956

Isuzu will take over GM’s commercial-vehicle factory in the coastal city of Port Elizabeth and will also buy the U.S. automaker’s 30 percent share of a truck manufacturing joint venture, GM said in a statement on Thursday. The company didn’t disclose financial details of the transaction. GM will also stop selling Chevrolet cars in the country.

“We determined that continued or increased investment in manufacturing in South Africa would not provide GM the expected returns of other global investment opportunities,” Stefan Jacoby, president of international operations, said in the statement.

The move comes as part of Chief Executive Officer Mary Barra’s review of the business following its plan to sell European operations to Peugeot maker PSA Group. The company also announced a scaling back of its Indian operation, which will now only be used for exports. GM sold a majority stake in its East African business in the Kenyan capital of Nairobi to Isuzu in February.

Isuzu to Take Over as GM Exits South Africa

At Mary Barra’s GM, It’s Profit Before All Else. Auto manufacturing is one of the bright spots in the South African economy, which last year expanded at the slowest pace since a 2009 recession. The government’s auto-incentive program has attracted companies including Toyota Motor Corp., Volkswagen AG and BMW AG to set up and invest in factories, which produce vehicles mainly for sale abroad. In August, a Chinese state-owned car manufacturer agreed to build an 11 billion-rand ($813 million) auto plant in South Africa, the biggest investment in a vehicle-production facility in the country in four decades.

“While it is regrettable to see General Motors exit South Africa, market performance leading to cuts in profitability, coupled with recent global initiatives, have created the conditions to make such a move likely,” Trade and Industry Minister Rob Davies said in a statement. “Although we do not welcome this decision, we believe that the future of the industry is positive.”

Automaker industry representatives are working on a strategic plan to increase South African vehicle production and an announcement on the initiative is expected by early 2018, he said.

After starting production of Chevrolets in South Africa in 1926, GM divested its holdings in the country in 1985 and then revived activities in 1997. GM said it is continuing to work with PSA on the prospects for the Opel brand in the country.

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