GM's Indonesia closure highlights automakers' emerging markets woes

By Bernie Woodall

DETROIT (Reuters) - General Motors Co's decision to shutter a car factory in Indonesia comes as global automakers rethink the timing and scope of investments in emerging markets once touted as engines of growth.

Global automakers poured billions into Brazil, Russia, India, China and other emerging markets during the past few years. For now, some key emerging markets are a drag on sales and profits.

Ford Motor Co , General Motors Co , Toyota Motor Corp <7203.T> and Korean automakers Hyundai Motor Co <005380.KS> and Kia Motors Corp <000270.KS> said slumps in Brazil, Russia, India and other emerging markets dented profits last year.

 

Ford took an $800 million one-time charge to fourth-quarter earnings in an accounting change because of the volatile currency in Venezuela. GM wrote down $194 million of the value of its assets in Russia, and cut production there.

Toyota says vehicle sales in Asia fell 11 percent in the latest quarter, mainly because of weak demand in Thailand and Indonesia.

India has suffered a two-year decline in sales since Ford and Renault-Nissan announced big investments in the country.

Fiat Chrysler Automobiles NV had planned to launch its Jeep brand in India in 2013. Now, the company says it plans to wait until the third quarter of this year.

"India is just waking up,"  says Vikas Sehgal, global head of automotive at investment bank Rothschild.  He says India will grow in the long run.

Industry executives say they still expect emerging markets to drive global vehicle sales growth in the long run, an inevitable outcome of growing population and rising incomes.

"We want to expand sharply in emerging markets,"  Ford Chief Executive Mark Fields said during a recent presentation to analysts. Ford has two new car plants in India, and it plans to launch four more in the Asia-Pacific region, including two in India and two in China.

GM says more than half of global vehicle sales growth by 2030 will come from emerging markets. IHS forecast that sales in India, Brazil and Russia will rise 40 percent by 2020 to more than 12 million vehicles. The company also has said that the bulk of about $700 million in restructuring costs forecast for this year will be spent in South America and in Asia-Pacific operations.

"These are not investments made with a four-year perspective," says Xavier Mosquet, managing director at Boston Consulting Group. "You have to make it with a 20-year perspective."

(Reporting by Bernie Woodall; editing by Andrew Hay)