From GM's perspective, the joint venture was a way to monetize existing R&D investments. The GM-SAIC joint venture was profitable from the start: it is not hard for a car company to be profitable when it does not have to reinvest significantly back into R&D. - ThreadSky

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gluk.bsky.social • 80 days ago

From GM's perspective, the joint venture was a way to monetize existing R&D investments.

The GM-SAIC joint venture was profitable from the start: it is not hard for a car company to be profitable when it does not have to reinvest significantly back into R&D.

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gluk.bsky.social•80 days ago

These profits were reinvested into expanding manufacturing capacity over the years, from a few hundred thousand in the early years to over 4 million at its peak

This meant GM did not have to put that much more incremental capital at risk than the initial registered capital amounts.

gluk.bsky.social•80 days ago

Over the last two decades from 2004 to 2023, off that initial investment, GM generated cumulative equity income of ~$22B.

Even last year (2023), GM earned $446 million on ~1M unit sales.

gluk.bsky.social•80 days ago

This was analogous to a landlord collecting rent checks.

GM had little operational responsibility as again, its main goal for the JV was to monetizing existing R&D selling to Chinese households.

gluk.bsky.social•80 days ago

Chinese buyers loved GM and American cars.

Buick was a best-selling brand, as it was associated with upper class and literal royalty in Shanghai in the 1930s.

https://www.mofba.org/2020/06/30/buick-the-last-emperor-s-automobile-of-choice/

gluk.bsky.social•80 days ago

Last week, GM announced that it was going to be taking $5B in charges on its China joint ventures, split between a writedown of $2.7B on its China JVs + another $2.6-2.9B in retructuring charges related to "plant closures and portfolio optimization".

https://www.reuters.com/business/autos-transportation/gm-take-more-than-5-billion-charges-china-operations-2024-12-04/

gluk.bsky.social•80 days ago

The writedown is a non-cash charge and the restructuring costs are presumably going to be covered by ongoing sales as the operations wind down.

The $5B represents cumulative equity income from around mid-2018 to today.

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