DETROIT/SEOUL: General Motors said it will close one of its four plants in South Korea and incur an $850 million (SR3.18 billion) impairment charge as part of a restructuring of its money-losing business in Asia’s fourth-biggest economy.
The US automaker said it would decide the future of its remaining South Korean operations within weeks, amid ongoing talks with the government and labor unions on how to cut costs and make the business profitable.
“Time is short and everyone must move with urgency,” GM President Dan Ammann said.
The move is the latest in a series of steps the US automaker has taken to put profitability and innovation ahead of sales and volume. Since 2015 GM has exited unprofitable markets including Europe, Australia, South Africa and Russia.
GM would take charges against profits of $850 million to reflect the South Korean restructuring costs, including $375 million in cash related to employee expenses, the company said in a statement. Most of the financial writedowns would be recorded by the end of the second quarter.
South Korea had for years been a low-cost export hub for GM, producing close to a fifth of its global output at its peak. But sharp rises in labor costs, weakening demand for sedans, which GM Korea mainly produces, and big investments in neighboring China hurt the South Korean business’s competitiveness.
The plant shutdown is part of its broader Asia business restructuring. Excluding profits from China, GM said its Asian operations lost money in 2016. GM Korea posted a total of 1.9 trillion won in net losses between 2014 and 2016.
In recent years, GM ceased manufacturing in Australia and Indonesia, and significantly restructured its Thai operations. It is also winding down efforts to sell cars in India and is turning its manufacturing facilities there into an export hub.
The automaker’s decisions to exit other unprofitable markets have exacerbated problems for GM Korea, which used to build many of the Chevrolet models GM once offered in Europe. Declining sales of small cars in the United States have also hurt demand for Korean-made Chevrolets.
The first step in the South Korean restructuring plan is the closure of GM’s plant in Gunsan, southwest of Seoul, which employs 2,000 out of GM’s 16,000-strong South Korean workforce.
The factory was running at about 20 percent of its full production capacity last year, GM said. The automaker’s three other assembly plants in South Korea built 485,403 vehicles in 2017.
GM sells Chevrolet and Cadillac brand vehicles in Korea, and more than half the vehicles built by GM’s Korean plants are exported.
A GM Korea official said the company planned to start a voluntary retirement program for all its workers, not just those at Gunsan, from Tuesday. The official declined to be named as the decision had not been made public.
Ammann said a decision on investments in new models for the remaining South Korean plants to build depended on the government’s willingness to offer funding or other incentives, and on whether unions would agree to cut labor costs.
“If we are successful in working with our stakeholders to restructure and get to a viable cost structure, we would see an opportunity to invest” in new vehicles, Ammann said.
South Korea’s state-run development bank owns a 17 percent stake in GM Korea. The Detroit automaker owns 77 percent of the operations while GM’s main Chinese partner, SAIC Motor, controls 6.0 percent.
An official at the Korea Development Bank said GM had declined a request for an audit.
“There are some issues to be resolved to find out ways to help the company, such as a shareholder audit, but GM has not listened to us,” the official said, requesting anonymity.
General Motors to shut South Korean plant in move towards profitability
General Motors to shut South Korean plant in move towards profitability
UAE, Saudi Arabia ranked as leading global entrepreneurial ecosystems
RIYADH: The UAE and Saudi Arabia have been ranked first and third respectively in the Global Entrepreneurship Monitor report for 2023-2024.
The report, which assesses the entrepreneurial ecosystems of countries worldwide, is highly regarded by international bodies such as the World Bank, International Monetary Fund and various UN organizations,
Saudi Arabia showed significant progress in its entrepreneurial environment, with its National Entrepreneurship Context Index score increasing from 5.0 in 2019 to 6.3 in both 2022 and 2023.
This reflected the country’s successful efforts to diversify its economy and foster a supportive climate for entrepreneurship, said the report. A notable highlight was increased female entrepreneurship, with eight women starting new businesses for every 10 men in 2023.
The country also has the highest proportion of adults who know an entrepreneur, perceive ease in starting a business, recognize good business opportunities, and believe they possess the necessary skills and experience to start a business.
However, despite high acknowledgment of opportunities and capabilities, there remains a considerable fear of failure, the report concluded.
Additionally, a significant percentage of Saudi entrepreneurs are expected to leverage digital technologies and focus on minimizing environmental impacts and maximizing social impacts, indicating a readiness for future challenges.
Meanwhile, the UAE set a record with its National Entrepreneurship Context Index score of 7.7, the highest in the report’s history.
The report also positioned the UAE as the best environment in the world for starting and conducting new business ventures, surpassing many advanced economies. It also ranked third globally in terms of physical infrastructure.
Significant strides have been made in entrepreneurship education within schools, emphasizing skills like creative thinking, problem solving, opportunity recognition and risk assessment. The country ranked among the top five out of 49 in this aspect.
Saudi Arabia, Azerbaijan discuss climate action cooperation ahead of COP29
- Two ministers discussed opportunities for work and cooperation between their two countries in the field of climate change
JEDDAH: Saudi Arabia’s Minister of Energy Prince Abdulaziz bin Salman met with Azerbaijan’s Minister of Environment and Natural Resources Mukhtar Babayev on Thursday.
Babayev has also been appointed president of the UN COP29 climate talks which will be held in Baku in November.
During the meeting, the two ministers discussed opportunities for work and cooperation between their two countries in the field of climate change. They also talked about joint efforts to achieve the goals of the UN Framework Convention on Climate Change and the Paris Agreement, the Kingdom’s ministry said in a statement.
They reviewed the Kingdom’s efforts and initiatives in dealing with the effects of climate change, such as exploiting renewable energy sources, and managing, reducing and eliminating emissions through the Saudi and Middle East green initiatives.
In addition, the ministers discussed implementing the circular carbon economy approach and its technologies, which was developed by the Kingdom during its G20 presidency and endorsed by leaders, along with other national and regional programs and initiatives.
Saudi Arabia unveils Green Finance Framework in sustainability push
RIYADH: Public and private participation in climate financing in Saudi Arabia is poised to receive a boost with the introduction of the Green Finance Framework.
This initiative, launched by the Ministry of Finance, is aimed at propelling the nation toward its sustainability goals and achieving net-zero emissions by 2060, Saudi Press Agency reported.
The framework is expected to contribute to the efforts aimed at reducing emissions through a circular carbon economy approach, along with positioning Saudi Arabia as a regional leader in sustainable finance.
It was in October 2021 that Saudi Arabia announced its ambitious goal to achieve net-zero emissions by 2060.
With this framework, the Kingdom aims to significantly reduce greenhouse gas emissions by 278 million tonnes annually by 2030, aligning with the commitments under the Paris Agreement.
The Paris Agreement is an international treaty on climate change that was produced in 2015 and compels signatories to work toward limiting the global temperature increase to 1.5 °C above pre-industrial levels.
The Kingdom has been spearheading several initiatives including the Saudi Green Initiative to combat the adverse effects of climate change over the past few years.
On March 27, the Kingdom celebrated its first Saudi Green Initiative Day highlighting the importance of fostering a sustainable legacy for future generations.
The celebration was organized under the theme “For Our Today and Their Tomorrow: KSA Together for a Greener Future” and it highlighted the collaboration of more than 80 public and private sector projects that are part of the SGI.
To date, Saudi Arabia has deployed 2.8 gigawatts of renewable energy to the national grid, powering more than 520,000 homes, with additional projects underway to increase capacity.
Moreover, more than 49 million trees and shrubs have been planted throughout the Kingdom since 2021, and extensive land rehabilitation efforts have been undertaken.
Additionally, energy giant Saudi Aramco, in collaboration with the Kingdom’s Ministry of Energy is building a carbon capture and storage hub in Jubail, which will have 9 million tonnes annual storage capacity upon its completion in 2027.
Closing Bell: Saudi main index slips to close at 12,565
RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Thursday, losing 42.09 points, or 0.33 percent, to close at 12,565.89.
The total trading turnover of the benchmark index was SR10.53 billion ($2.8 billion) as 54 stocks advanced, while 170 retreated.
Similarly, the Kingdom’s parallel market, Nomu, dropped 385.72 points, or 1.43 percent, to close at 26,622.88. This comes as 20 stocks advanced while as many as 42 retreated.
Meanwhile, the MSCI Tadawul Index rose 7.54 points, or 0.47 percent, to close at 1,599.02.
The best-performing stock of the day was Modern Mills for Food Products Co. The company’s share price surged 9.46 percent to SR68.30.
Other top performers include the Mediterranean and Gulf Insurance and Reinsurance Co. as well as Al Yamamah Steel Industries Co.
On the announcements front, Red Sea International Co. announced its annual consolidated financial result for the period ending Dec. 31.
According to a Tadawul statement, the entity’s revenues reached SR1.37 billion in 2023, reflecting an increase of 241 percent when compared to 2022 figures.
The rise in sales is mainly attributed to the strategic acquisition of a 51 percent stake in Fundamental Installation for Electric Work Co., or First Fix, with the recognition in RSI’s consolidated financial statements starting in the final quarter of the year.
Additionally, the company has tactically increased its focus on enhancing its supply chain and adopting competitive pricing strategies while advancing procurement techniques.
On a similar note, the firm’s net profits during the same period hit SR2.17 million, up from a net loss of SR198 million, which was recorded in the same period in 2022.
This rise is mainly linked to positive impact of the First Fix acquisition, in addition to the improvement in revenues and operating performance.
Moreover, Riyadh Steel Co. has also announced its annual financial results for 2023.
A bourse filing revealed that the firm’s net profit reached SR11.14 million in the period ending on Dec. 31, reflecting an increase of 118.8 percent compared to the corresponding period a year earlier.
The increase in net profit is primarily attributable to a reduction in the cost of revenue and secondarily to a rise in other income in comparison to the previous year.
Furthermore, Al-Baha Investment and Development Co. also announced its annual financial results for the period ending on Dec.31.
According to a Tadawul statement, the company’s net profit hit SR4.94 million in 2023, up from the net loss of SR8.09 million that was recorded in 2022.
The increase was owed to a 39 percent surge in the group’s revenues and reduced financing costs by 73 percent, among other reasons.
Saudi Arabia leads the charge toward energy transition: report
RIYADH: Saudi Arabia is emerging as a proactive leader, pioneering green initiatives to mitigate economic challenges posed by the transformation toward sustainability, according to the International Monetary Fund.
A recent report by the IMF highlighted the intricate dynamics at play and underscored the Gulf Cooperation Council and Saudi Arabia’s strategic positioning in this evolving scenario.
Titled “Key Challenges Faced by Fossil Fuel Exporters during the Energy Transition,” the study discussed climate change mitigation efforts in many fossil fuel exporting countries.
As Saudi Arabia and its GCC counterparts continue to lead the charge toward sustainability, they set a precedent for the global community.
By embracing green initiatives, investing in renewable energy, and fostering economic diversification, these nations are paving the way for a sustainable future, balancing economic prosperity with environmental responsibility.
The report emphasized that the Saudi Green Initiative launched in 2021 aimed at combating climate change and reducing carbon emissions.
It explained: “The Green Initiative is centered around three objectives, including targets for increasing the share of renewable energy in electricity generation up to 50 percent by 2030 and the deployment of circular carbon economy technologies, including carbon capture utilization and storage.”
Key challenges
The IMF stressed the need for economic diversification to effectively mitigate the impact of declining fossil fuel revenues.
Highlighting Saudi Arabia’s progress in economic diversification, the report explained: “The non-oil sector growth has accelerated since 2021, reaching 4.8 percent in 2022 spurred by strong domestic demand, especially in the wholesale, retail trade, construction, and transport sectors.”
Similarly, Bahrain, Qatar, and the UAE are diversifying their economies away from hydrocarbons, the study added.
In the UAE, non-hydrocarbon GDP was expected to grow by 5.3 percent in 2022, driven by tourism and FIFA World Cup impacts.
Progress on the Comprehensive Economic Partnership Agreements will further boost trade, attract foreign direct investment, and enhance integration with global value chains, according to the report.
The IMF highlighted that in Saudi Arabia, “the share of high-skilled jobs has increased to more than 40 percent in 2022, and female labor force participation doubled in four years to reach 37 percent in 2022.”
In its report, the Washington-based lender said the governments heavily reliant on revenues from fossil fuel exports face challenges in maintaining fiscal sustainability as these revenues decline.
“Countries with significant exposure to the fossil fuel industry may experience higher financial sector risks, including balance sheet effects, asset devaluation, and increased vulnerability to international market fluctuations,” it said.
The report added that transitioning away from fossil fuels may result in job losses in the fossil fuel industry, necessitating retraining programs and support for affected workers.
It called for structural reforms to address all the issues. “Accelerating structural reforms to diversify export bases and develop alternative industries is critical for mitigating the adverse macroeconomic effects of the energy transition,”the report said.
The IMF stressed the need for coordinated global efforts to overcome all these challenges. “Collaborative efforts can help ensure a smooth transition, mitigate transition costs, and support affected countries in diversifying their economies,” the report said.