fbpx

Join our community of traders FOR FREE!

  • Learn
  • Improve yourself
  • Get Rewards
Learn More

General Motors share price up, to close Indonesian manufacturing plant

General Motors Co is set to discontinue manufacturing operations in Indonesia, retreating from one of the fastest developing markets in Southeast Asia, after more than 70 years in the country.

The largest US car maker is expected to close its only plant in Indonesia at Bekasi, leaving around 500 people without jobs. The facility is located 16 km away from the capital Jakarta.

GM entered the Indonesian car market back in 1938 and it was the first non-domestic car manufacturer, but to date the company has been struggling to compete with Japanese car manufacturers, which entered the market around 1968.

Last year GM accounted for only 1% of the total vehicles sold in Indonesia, with 11 000 units versus the 578 000 vehicles sold by market leader Toyota, which combined with fellow Japanese manufacturers had more than 90% of the market, according to LMC Automotive.

The facility in Bekasi rolled out its first vehicle in 1995 and was shut down 10 year later. However, GM decided that its going to start production again and poured $150 million in the re-construction process, which was completed in 2012 and output started a year later with capacity of 40 000 units per year. The company sells several of its Chevrolet models, including Spark, Aveo and Orlando, with Spin being the most popular in the country.

However, last years production at the plant was far less than the maximum and came in at less than 10 000, including 8 412 Spin models, GMs model intended to compete with Toyotas best selling Avanza.

Additionally, GM is set to replace Michael Dunne, head of Indonesian operations, with the regions chief financial officer Pranav Bhatt.

“We could not ramp up Spin production to boost the volume as we had expected … although the product was really good,” GM Executive Vice President Stefan Jacoby said in a interview for Reuters. “The logistics chain of the Spin was too complex; we had low volume so we could not localize the car accordingly, and from the cost point of view we were just not competitive.”

GM gained 0.29% on Wednesday and closed at $37.86 in New York, marking a one-year increase of 4.88%. The company is valued at $60.97 billion. On Thursday the stock edged up 0.32% to $37.98 ahead of the bell.

According to the Financial Times, the 16 analysts offering 12-month price targets for GM have a median target of $43.00, with a high estimate of $51.00 and a low estimate of $28.00. The median estimate represents a 13.58% increase from the last closing price.

TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover Forex, Price Action and Social Trading.

Related News