Market reacts and staff redundancy expected as GM folds operations in SA

Last laugh. Employees at GMSA head office in Port Elizabeth will be redundant following confirmation that the company will cease operations in SA by end of 2017.

On Thursday, the world woke up to news that GM will cease operations in SA by end of 2017.

The announcement of exiting SA and India on Thursday followed a March 5 announcement that GM was exiting Europe by selling its Opel brand to the French maker of Peugeot and Citroën‚ PSA for $2.3bn, according to its website.

And an analyst has put blame on the declining economy following amongst others, the junk status by leading international rating agencies.

“After a thorough assessment of our South African operations‚ we believe it is best for Isuzu to integrate our light commercial vehicle manufacturing operations into its African business‚” GM’s vice-president of its international operations‚ Stefan Jacoby‚ said in a statement on Thursday morning.

“We’re determined that continued or increased investment in manufacturing in SA would not provide GM the expected returns of other global investment opportunities.”

“From 2018‚ Isuzu dealers will provide aftersales and service support to Chevrolet and Opel customers until the details of our discussions with PSA have been finalised.”

GM said in its statement that Isuzu would purchase GM’s Struandale plant and its remaining 30% in Isuzu Truck SA‚ with sales through a national dealer network. Isuzu will also purchase GM’s vehicle conversion and distribution centre and assume control of the parts distribution centre.

“The decision to cease operations is precisely what the status of our economy depicts. Political instability, declining rand and ill-prepared Government policies contributed to this decision, “noted an economist, who preferred anonymity.

The decision will affect thousands of employees at Struandale‚ Port Elizabeth.

Meanwhile, the Minister of Trade and Industry Rob Davies on Thursday said he has learnt of the announcement by General Motors (GM) South Africa (Pty)Ltd to cease some of their operations in South Africa with “regret and concern”.

In a statement following the announcement that GM was folding its operations and leaving South Africa, Davies said he was concerned for the numerous employees whose jobs and livelihood will be directly and indirectly affected.

“Minister Davies notes that the decision by General Motors is part of a broader, international strategic position by the company to exit certain markets and focus the organisation on target markets and products,” said Sidwell Medupe, the spokesman for the department of trade and industry.

The department said the move to exit some markets was evident through, among others, the decision to pull out of Australia in 2013, where there was a joint venture with Holden.

GM also pulled out of Europe in 2017 (Opel/Vauxhall brand sold to Peugeot SA). It also closed its plants in Indonesia in 2015 and Halol, India in April 2017.

The department also cited recent pronouncements by GM CEO Mary Barra that the focus of the organisation will in future be orientated towards the development and production of autonomous vehicles, electrification and connectivity.

“It should also be noted that the emerging global geo-political dynamics might have a bearing on some business decisions being made such as the recent confirmation of additional investment in the US coupled with further move of some parts production from Mexico,” said Davies.

General Motors has had a presence in South Africa since 1926, under various brands such as Buick, Chevrolet, GMC, ISUZU, Oakland, Oldsmobile and Vauxhall.

Given the intense competition in the South African market, especially after 1994, GM has had some difficulties including, not meeting the initial annual minimum production volume of 50,000 units. Sales have been on a downward trend for the past 5 years and exports remained low at about 2,000 vehicles per annum with a maximum of 3,500 units.

“Therefore whilst 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,” said Davies.

“Although we do not welcome this decision, we believe that the future of the industry is positive as automotive industry stakeholders are finalising a master plan for South Africa with a view to growing domestic vehicle production volume and local value addition and an announcement on the final program can be expected early 2018, latest, and will cover the period post 2020.”

He, however, stressed that the department would continue to work with all stakeholders to mitigate the impact of this exit.

“These initiatives include encouraging the strengthening of the presence, including vehicle assembly, of ISUZU who has been partnering GMSA in South Africa,” Davies said.

The minister also said he remained confident that recently announced investments in Coega could save jobs in automotive production in the Nelson Mandela Bay Metropolitan area.

He said anticipated investments and localisation by the remaining vehicle producers would have a positive effect.

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