GM pulls out of SA, sells plant to Isuzu
Chevrolet vehicles will not be sold in SA after 2017
General Motors announced on Thursday it was disinvesting from SA.
The US company, whose vehicles have been built in SA since 1926, said it was selling its Struandale vehicle assembly plant in Port Elizabeth to Japanese commercial vehicle company Isuzu. The price of the buyout was not revealed.
From 2018, Isuzu Motors SA will build and distribute only its own brand. Chevrolet vehicles will not be sold in SA after 2017.
National Union of Metalworkers of SA (Numsa) general secretary Irvin Jim said he was shocked by the decision and said the union would take legal advice on how to proceed.
He said General Motors SA (GMSA) “has already shut down the plant”, but the company said that was not the case and that it continued to build vehicles.
Trade and Industry Minister Rob Davies, while regretting the disinvestment, said it was not surprising, given that GMSA had been on a downward sales path for some years. He said the annual Struandale vehicle production was well short of the 50,000 required to gain full access to government’s automotive production and development programme (APDP).
In 2016, GMSA built 34,000 vehicles and the figure was not expected to rise in 2017. The plant has capacity to build at least 100,000 vehicles.
All three vehicle ranges produced at Struandale — the Chevrolet Spark car, Chevrolet Utility bakkie and the Isuzu KB 1-tonne bakkie — are built in uneconomically small numbers and it has been apparent for some time that drastic rationalisation was required.
GMSA executives have hinted previously that Isuzu would be the beneficiary. The Japanese company is particularly anxious to rival other bakkie producers, which have found rich export pickings in Africa. Ford Southern Africa has turned around its fortunes since concentrating its resources on building the Ranger bakkie and Toyota SA’s main product is the Hilux.
Production of the Chevrolet Spark and Utility will end in 2017. Assembly of heavy Isuzu trucks at GMSA’s Kempston Road facility in Port Elizabeth, will be transferred to Struandale.
This will be the second time GM has disinvested from SA.
The first time was in the 1980s, when, blaming apartheid and sanctions pressure, it sold its operations to local shareholders, who created Delta Motor Corp and continued to build GM vehicles. A buyback clause in the sale allowed GM to return after the fall of apartheid.
However, the company’s fortunes have never come close to previous levels. Its position has been made even more precarious by the US parent company’s recent decision to sell the Opel brand to the French PSA group, which controls Peugeot and Citroën. Opel cars, which are imported into SA, are an important part of GMSA sales.
MD Ian Nicholls said yesterday GMSA and Isuzu had begun discussions with the Department of Trade and Industry to determine if Isuzu Motors SA would be deemed a new manufacturing enterprise or the continuation of an existing one.
As a new investor, it would qualify for considerably more APDP investment incentives.
He said that talks had begun with GMSA’s 1,800 employees — of whom 1,500 are at Struandale — on potential job losses. Nicholls said it was too early to say what the effect might be, but Jim said 500 Struandale workers worked on Chevrolet production lines.
Shrinking production volumes resulted in the company cutting 100 Struandale jobs in 2016 through a voluntary severance scheme.
GM is ending its activities across the whole of sub-Saharan Africa. Isuzu is buying out GM’s share in a Kenyan truck joint venture. GM international vice-president Ritch Schaafsma said on Thursday although GM was effectively leaving the region, it would keep its options open for a possible return. Unlike the previous SA disinvestment, however, there was no buyback clause with the new owner of GM’s local operations.
Isuzu sees considerable immediate potential for African sales. GMSA exports of Isuzu into Africa have so far been a fraction of those achieved by other SA-made bakkie brands.
Isuzu executive Haruyasu Tanshige said his company aimed for major growth across the region.
Nicholls said the current 132 GM dealers in SA would be cut to 90 by Isuzu. These would continue to service Chevrolets for at least the duration of their warranties and would also look after Opels until a new distribution network was established.
Schaafsma said components exports programmes agreed by GMSA, most notably for catalytic converters, would run to their contracted conclusion. Some of these are due to continue to 2024.
GMSA is one of seven major vehicle manufacturers in SA, alongside Toyota, Volkswagen, Ford, Nissan, BMW and Mercedes-Benz. Chinese manufacturer BAIC announced a R11bn investment plan in 2016.