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    Shares of American Eagle plunge 13% as company issues weak holiday guidance

    American Eagle cut its full-year sales forecast and issued holiday guidance that came in below expectations.
    The apparel retailer saw strong demand during back-to-school but said consumers are pulling back between key moments.
    American Eagle’s Aerie brand saw strong growth, with comparable sales up 5%, on top of 12% in the year-ago period.

    A shopper walks by an American Eagle store on November 21, 2023 in Glendale, California.
    Justin Sullivan | Getty Images

    American Eagle shares dropped about 13% in extended trading Wednesday after the company reported third-quarter earnings in which it issued weak holiday guidance and cut its full-year forecast. The company said it’s contending with value-seeking consumers who are only willing to spend during key shopping moments. 
    The apparel retailer narrowly missed Wall Street’s expectations on the top line, but beat on the bottom line. 

    Here’s how American Eagle performed during its fiscal third quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

    Earnings per share: 48 cents adjusted vs. 46 cents expected
    Revenue: $1.29 billion vs. $1.30 billion expected

    The company’s reported net income for the three-month period that ended Nov. 2 was $80 million, or 41 cents per share, compared with $96.7 million, or 49 cents per share, a year earlier. Excluding one-time charges related to restructuring and impairment costs, American Eagle posted an adjusted profit of 48 cents per share. 
    Sales dropped to $1.29 billion, down about 1% from $1.3 billion a year earlier. 
    While it was narrow, Wednesday’s miss is the third quarter in a row that American Eagle has not met Wall Street’s sales targets.
    In a statement, CEO Jay Schottenstein touted a “strong” back-to-school shopping season but said demand remains inconsistent between major shopping events. 

    “We have entered the holiday season well positioned, with our leading brands offering high-quality merchandise, great gifts and an outstanding shopping experience across channels,” Schottenstein said. “Key selling periods have seen a positive customer response, yet we remain cognizant of potential choppiness during non-peak periods.” 
    Consumers coming out for key shopping moments followed by sales sharply dropping off has been a consistent theme across the retail industry. Foot Locker cited a similar dynamic when reporting earnings earlier Wednesday, as did Dollar Tree.
    For its holiday quarter, American Eagle is expecting comparable sales to be up around 1%, with total sales down about 4%, including an $85 million impact from having one less selling week and a later start to the holiday shopping season. The outlook is below the 2.2% comparable sales growth StreetAccount was looking for and the 1% sales decline LSEG had expected. 
    As a result, American Eagle is now expecting comparable sales to grow by 3% for the full year, down from prior guidance of 4% growth and below StreetAccount’s estimate of 4.1%. It’s now expecting full-year sales to be up 1%, down from previous guidance of between 2% and 3% and below LSEG expectations of 2.5% growth. 
    Similar to other retailers, American Eagle had taken a cautious approach to the back half of the year as it contended with uncertainty around the 2024 election and the overall macroeconomic environment. But unlike its competitors, it has kept that cautious tone.
    Both Abercrombie & Fitch and Dick’s Sporting Goods, which issued cautious outlooks earlier this year, reversed their previous mood when reporting earnings earlier this month. 
    Despite the underwhelming outlook and sales miss, American Eagle is seeing strong demand for its Aerie brand. Third-quarter revenue for Aerie came in at an all-time high for the company, and comparable sales grew 5%, on top of 12% growth from the year-ago period. More

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    More employers add 401(k) plan match for workers paying student loans

    More companies are choosing to offer a 401(k) plan match to workers who are paying off their student loans.
    A recent law, Secure 2.0, allowed employers to essentially treat student loan payments like a 401(k) contribution for the purposes of offering a match, starting in 2024.
    Large companies such as Kraft, Workday, News Corp., and Comcast are early adopters.
    Most employers are not yet offering or planning to offer the benefit, though.

    Morsa Images | Digitalvision | Getty Images

    Companies can now offer their workers a “match” on their student loan payments in the form of a contribution to their 401(k) plan — and a small but growing number of employers are taking advantage of the option.
    Traditionally, companies have only paid a 401(k) match to workers based on their voluntary contributions to the workplace retirement plan. A worker choosing to save 3% of their annual pay in a 401(k) might get a 3% match from their employer, for example.

    Now, companies can treat a worker’s student loan payments like an elective 401(k) plan contribution.
    Federal law allows employers to give a match based on a worker’s payments toward student debt. Workers generally don’t have to contribute to the 401(k) plan to qualify for the funds.
    The measure, part of a package of retirement changes dubbed Secure 2.0, kicked in starting in 2024.

    Kraft, Workday among companies adding the benefit

    The policy’s goal is to help workers tackle two competing financial obligations: paying down debt and simultaneously saving for retirement.
    More than 100 companies have implemented the benefit to date, covering almost 1.5 million eligible employees, according to data from Fidelity, the nation’s largest 401(k) plan administrator.

    They include “some of the largest firms in the U.S.,” such as Kraft, Workday and News Corp., Jesse Moore, senior vice president and head of student debt at Fidelity, said in an e-mail.
    “Many more [are] showing strong interest in offering it in 2025,” Moore said.

    About 5% of employers have already added the benefit, according to forthcoming survey results from Alight, one of the largest U.S. retirement plan administrators.
    An additional 12% of employers say they are “very likely” to adopt it in 2025, while 29% are “moderately likely” to do so, according to Alight. It polled 122 employers, with a total of 11 million workers, in September.
    Interest in the benefit has grown largely due to Secure 2.0, Rob Austin, head of thought leadership at Alight, said in an e-mail.

    Financial help and worker retention

    Comcast is among the employers adding a student loan-401(k) match benefit in 2025. A Comcast spokesperson said offering the benefit will help workers “manage their long-term financial wellness” in a tax-efficient way.
    About 90,000 U.S. employees are eligible for the match, on up to 6% of their eligible annual earnings, the spokesperson said.
    More from Personal Finance:Student loan borrowers may find bankruptcy harder under TrumpCollege enrollment falls 5% for 18-year-old freshmen’Dynamic pricing’ was a top contender for word of the year
    Some companies also see the match program as a way to attract and retain college graduates in competitive fields, experts said.
    “We’ve heard from many employees that they struggle with student loans,” especially those early in their careers, the Comcast spokesperson said. “We’re trying to build a value proposition that meets [workers’] needs.”
    The student loan measure is also available to companies that sponsor other types of workplace retirement plans, such as 403(b) or governmental 457(b) plans or SIMPLE IRAs, according to the Internal Revenue Service.

    How the student loan benefit works

    Thomas Barwick

    The maximum amount of “qualified student loan payments” is generally the annual salary deferral, or contribution, limit, according to Brian Dobbis, retirement solutions lead at Lord Abbett, a money manager. That 401(k) limit is $23,000 in 2024 for workers under age 50.
    Here’s a general example: A 30-year-old participates in a 401(k) plan in 2024. The worker chooses to contribute $18,000 to the plan. If they also pay $8,000 toward their student loans that year, only $5,000 ($23,000 minus $18,000) of those repayments is eligible to be matched, Dobbis said.
    The worker’s ultimate match amount is dictated by employers’ respective match cap, commonly set around 3% to 6% of a worker’s annual salary.
    Of course, companies may structure the benefit somewhat differently from one another.

    Companies had the benefit prior to Secure 2.0

    Employers had begun offering a 401(k)-linked student loan benefit even before Secure 2.0.
    Abbott, a health-care technology company, has provided a similar benefit since 2018, through its “Freedom 2 Save” program, which was thought to be the first of its kind. The company secured a private letter ruling from the IRS to be able to do so.
    More companies have followed since.
    In 2022, for example, about 1% of all 401(k) plans were offering or planned to offer a match based on student loan payments, according to an annual survey by the Plan Sponsor Council of America, a trade group. By 2023, that share had increased to about 2%, according to the group’s latest poll, of 709 employers, set to be published this month.

    “Pharmaceutical companies are among the earliest adopters, most likely because Abbott pioneered this idea, and competitors followed,” said Austin of Alight.
    The share jumped most — to almost 5% in 2023 from 2% in 2022 — among the largest firms, or those with more than 5,000 employees, PSCA found.
    It seems there has been “increased interest” among firms with a big cohort of college-educated workers, said Hattie Greenan, PSCA’s research director.
    “We will continue to see this number slowly increase as those companies look for ways to differentiate their benefits packages to compete for top talent, and as some of the administrative complexities are worked out,” Greenan said.

    Why many firms aren’t adding a student loan match

    Morsa Images | Digitalvision | Getty Images

    However, most companies are still sitting on the sidelines.
    For example, 55% of employers say they are “not at all likely” to add the provision in 2025, according to Alight’s survey.
    There are a few reasons businesses may not want to implement the measure, said Ellen Lander, founder of Renaissance Benefit Advisors Group, based in Pearl River, New York.

    For one, employers may already offer a different education benefit to their workforce. Further, companies, especially those with many higher earners, may not feel they need the benefit if there isn’t evidence of lagging 401(k) participation even among those with student debt, she said.
    Some employers may already make a non-elective contribution to workers each year, such as a profit-sharing contribution, even to workers who don’t participate in the company 401(k), Lander said.
    Lander said one of her clients viewed the student loan policy as “unfair,” since it applied to only a certain subset of workers, i.e., those with student debt.
    She said none of her clients have yet chosen to adopt it.
    “I would hope every client is discussing it with their consultant,” Lander said. “To me, it’s something you should definitely consider. And then you need to get into the weeds: Do you need it?”
    Disclosure: Comcast owns CNBC parent company NBCUniversal. More

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    Powell says he’s not worried about the Fed losing its independence under Trump

    Fed Chair Jerome Powell said Wednesday he isn’t worried that President-elect Donald Trump will try to politicize the central bank once he takes office in January.
    There are safeguards in the congressional legislation that created the central bank that will help preserve it from political influences, he said during an appearance in New York.
    Powell provided no clues as to which way he’s leaning on the near-term path for interest rates, though he did note that the Fed can afford to be cautious because of the strength of the U.S. economy.

    Jerome Powell, chairman of the US Federal Reserve, right, speaks during the New York Times DealBook Summit at Jazz at Lincoln Center in New York, US, on Wednesday, Dec. 4, 2024. 
    Yuki Iwamura | Bloomberg | Getty Images

    NEW YORK — Federal Reserve Chair Jerome Powell said Wednesday he isn’t worried President-elect Donald Trump will try to politicize the central bank once he takes office in January.
    The question of Fed independence has come up over the past several months, amid reports that Trump may try to pull strings on monetary policy both by legislation and possibly by installing a “shadow chair” who could undermine Powell’s authority.

    However, Powell said there are safeguards in the congressional legislation that created the Fed that will help preserve it from political influences.
    “What does independent mean? It means we can make our decisions without them being reversed,” he told CNBC’s Andrew Ross Sorkin during an on-stage interview at the New York Times’ DealBook Summit.
    “That gives us the ability to make these decisions for the benefit of all Americans at all times, not for any particular political party or political outcome,” he added. “We’re supposed to achieve maximum employment and price stability for the benefit of all Americans and keep it out of the politics completely.”
    Powell provided no clues as to which way he’s leaning on the near-term path for interest rates, though he did note that the Fed can afford to be cautious. As he has said before, Powell said the U.S. economy is “the envy of other large economies around the world,” which affords the Fed the ability to be patient as it contemplates future rate moves.
    The Fed’s next rate decision comes in two weeks. Markets are placing about a 75% probability that the Federal Open Market Committee will cut its key borrowing rate by a quarter percentage point. The expectation is that the Fed then skips the January meeting before cutting a few more times in 2025.

    During his first stint in office, Trump hurled sharp criticism at the Fed and Powell, whom he nominated. In the months leading up to this year’s election, Trump advocated for allowing the president a say when the the central bank is making decisions on interest rates.
    Though many presidents have tried to exert influence over the Fed, Trump was the most public about it. Still, Powell said he believes there’s strong support in Congress to keep the Fed’s decision-making apart from the political swirl in Washington.
    “I think there is very, very broad support for that set of ideas in Congress in both political parties on both sides of the Hill, and that’s what really matters,” he said. “It’s the law of the land, and I’m not concerned that there’s some risk that we would lose our statutory independence.”
    The Trump transition team did not immediately respond to a request for comment.

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    Trump nominates Jared Isaacman, private astronaut and Shift4 CEO, for NASA chief

    President-elect Donald Trump on Wednesday nominated Jared Isaacman, a private astronaut and the billionaire CEO of Shift4, to be the next NASA administrator.
    Isaacman has led two private spaceflights through SpaceX, including the company’s first spacewalk in September.
    “It is the honor of a lifetime to serve in this role and to work alongside NASA’s extraordinary team to realize our shared dreams of exploration and discovery,” Isaacman wrote in a statement.

    Inspiration4 mission commander Jared Isaacman, founder and chief executive officer of Shift4 Payments, stands for a portrait in front of the recovered first stage of a Falcon 9 rocket at Space Exploration Technologies Corp. (SpaceX) on February 2, 2021 in Hawthorne, California. 
    Patrick T. Fallon | Afp | Getty Images

    President-elect Donald Trump on Wednesday nominated Jared Isaacman, the billionaire CEO of Shift4 who has led two private spaceflights, to be the next head of NASA.
    “Jared will drive NASA’s mission of discovery and inspiration, paving the way for groundbreaking achievements in Space science, technology, and exploration,” Trump wrote in a post on social media.

    Isaacman accepted Trump’s nomination to be NASA administrator in a statement: “Having been fortunate to see our amazing planet from space, I am passionate about America leading the most incredible adventure in human history.”
    “It is the honor of a lifetime to serve in this role and to work alongside NASA’s extraordinary team to realize our shared dreams of exploration and discovery,” Isaacman said.
    Isaacman said he plans to leave Shift4 once he’s confirmed as NASA administrator. In a letter to Shift4 employees, Isaacman wrote he intends “to remain CEO until my confirmation” and “retain the majority of my equity interest,” but will reduce his shareholder voting power.

    Jared Isaacman, Mission Commander, steps out of the manned Polaris Dawn mission’s “Dragon” capsule after it splashed down off the coast of Dry Tortugas, Florida, after completing the first human spaceflight mission by non-government astronauts of the Polaris Program.
    – | Afp | Getty Images

    The National Aeronautics and Space Administration is currently led by Administrator Bill Nelson, nominated in 2021 by President Joe Biden. Nelson did not immediately respond to CNBC’s request for comment.
    Nelson, a former U.S. Senator, currently oversees NASA’s nearly $25 billion budget. During his tenure, the space agency launched the first uncrewed mission under its top priority, the multi-billion dollar Artemis moon program. But subsequent planned crewed missions, ultimately aiming to return U.S. astronauts to the lunar surface, have been heavily delayed and over budget.

    Read more CNBC space news

    Isaacman has led two private spaceflights through SpaceX, in 2021 and 2024, commanding a pair of crews on multiday trips around the Earth.
    His spaceflight ambitions have fostered an increasingly close relationship with SpaceX CEO Elon Musk, who has become an influential figure in Trump’s administration planning.
    Isaacman has previously criticized NASA’s Artemis architecture, particularly the program’s heavy spending on its expendable SLS rockets and the agency’s decision to award a second crewed lunar lander contract to Jeff Bezos’ Blue Origin.
    “Spend billions on lunar lander redundancy that you don’t have with SLS at the expense of dozens of scientific programs. I don’t like it,” Isaacman wrote in a post earlier this year.

    Polaris Dawn commander Jared Isaacman emerges from SpaceX’s Dragon capsule during a spacewalk on Sept. 12, 2024.

    In addition to running payments company Shift4, Isaacman has been leading an effort called the Polaris Program — a trio of missions with increasingly ambitious goals.
    The first mission in that program, Polaris Dawn, launched earlier this year and saw Isaacman conduct a brief spacewalk from SpaceX’s Dragon capsule — the company’s first such extravehicular activity, or EVA, in space.
    “Back at home we all have a lot of work to do, but from here, Earth sure looks like a perfect world,” Isaacman said during the spacewalk after emerging from the capsule. More

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    ESPN hopes to reach more casual sports fans with Disney+ integration

    Disney unveiled an ESPN tile on Disney+ on Wednesday.
    ESPN is making about 100 live games available for Disney+ subscribers who aren’t signed up for ESPN+.
    ESPN is developing two sports studio shows just for Disney+ geared to casual sports fans.

    SportsCenter at ESPN Headquarters.
    The Washington Post | The Washington Post | Getty Images

    ESPN is coming to Disney+. Now, the sports network wants to make sure Disney+ users come to ESPN.
    Walt Disney debuted a dedicated ESPN tile Wednesday on Disney+ for people who subscribe to ESPN+, its sports streaming platform, to watch programming without leaving the Disney+ application. Next fall, when ESPN launches its yet-to-be-named “flagship” service, those subscribers will get full access to all ESPN content through the ESPN tile on Disney+.

    Disney is making about 100 live games available to Disney+ members without a corresponding ESPN subscription. Those events will span college football and basketball, the National Basketball Association and WNBA, the National Hockey League, Major League Baseball, tennis, golf, the Little League World Series, and UFC, ESPN Chairman Jimmy Pitaro said in an interview.
    Next week’s alternate “Simpsons” telecast of the NFL’s “Monday Night Football” game between the Cincinnati Bengals and Dallas Cowboys will also be available to Disney+ subscribers, as well as five NBA Christmas games.
    “Now when you subscribe to Disney+, you’ll have access to kids and family, general entertainment if you’re a Hulu subscriber, and sports,” said Pitaro. “Our goal is to serve sports fans anytime, anywhere.”
    ESPN will also include some of its studio programming — such as “College Gameday,” “Pardon the Interruption” and certain podcasts that include video — on Disney+ for non-ESPN subscribers. Some ESPN sports-related films and documentaries will also appear on Disney+ married to whatever sports season is active, Pitaro said.
    ESPN’s programming will also be integrated within the Disney+ search, similar to Hulu’s integration earlier this year. If a Disney+ subscriber who isn’t an ESPN customer clicks on something that requires an ESPN subscription, the user will be prompted to sign up within the app.

    New content for Disney+

    ESPN is also creating two studio shows specifically for Disney+, Pitaro said. The first will be a daily “SportsCenter” just for Disney+ subscribers, which will air live on Disney+ at a set time and then remain on the platform for on-demand viewing.
    The second is a women’s sports show that may air weekly or several times a week. Both programs are in development and will be made for a more casual sports fan, said Pitaro.
    “Our research shows there’s very little overlap between people watching Disney+ and ESPN linear,” said Pitaro.
    Disney+ has a strong female audience that Pitaro hopes will tune into the weekly’s women’s show, which he first alluded to in an interview with CNBC Sport in October.
    ESPN+ has about 30,000 live games each year and costs $11.99 per month when purchased separately from Disney+. A Disney+, Hulu and ESPN+ bundle (with ads) costs $16.99 per month.
    Disclosure: Comcast, which owns CNBC parent NBCUniversal, is a co-owner of Hulu.

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    Foot Locker shares tumble 15% as it issues gloomy holiday outlook, sees ‘softness’ at Nike

    Foot Locker is feeling the holiday blues after seeing weak consumer demand and steep promotions across the sneaker marketplace.
    The company fell short of Wall Street’s expectations on the top and bottom lines and cut its full-year guidance.
    “Consumer spending trends softened following the peak Back-to-School period in August, and the promotional environment was more elevated than anticipated,” CEO Mary Dillon said in a news release.

    Foot Locker store location on 34th street in New York City.
    Courtesy: Foot Locker

    Foot Locker slashed its full-year guidance on Wednesday after reporting a rough set of quarterly results that could be a warning sign for its largest brand partner Nike.
    The sneaker giant fell short of Wall Street’s expectations on the top and bottom lines and blamed the miss on soft consumer demand and elevated promotions across the marketplace. The company also saw “softness” at Nike, CEO Mary Dillon told CNBC in an interview. 

    “There are definitely some brands that we’re seeing comp gains, and then, you know, we’re also contending with some more recent softness out of Nike,” said Dillon. “Given their size and scale, it kind of makes sense that it would have an impact.” 
    Foot Locker shares dropped 15% in premarket trading after it posted the results.
    Here’s how Foot Locker did in its third fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

    Earnings per share: 33 cents adjusted vs. 41 cents expected
    Revenue: $1.96 billion vs. $2.01 billion expected

    In the three months ended Nov. 2, Foot Locker swung to a loss of $33 million, or 34 cents per share, compared with earnings of $28 million, or 30 cents per share, a year earlier. Excluding one-time items related to impairment charges for its atmos brand and other expenses, Foot Locker reported earnings of $31 million, or 33 cents per share. 
    Sales dropped to $1.96 billion, down about 1.4% from $1.99 billion a year earlier. 

    Dillon explained that consumers are showing up for key shopping moments, such as back-to-school and the recent stretch between Thanksgiving and Cyber Monday, but pulling back in between those events, making the peaks and valleys sharper than expected. Foot Locker is also dealing with slow demand for Nike, which is trying to turn around its business after relying too heavily on the same styles to drive sales. 
    Nike veteran Elliott Hill took the helm of the company less than a month ago, and Wall Street has not yet heard his strategy. Given Foot Locker’s performance during its third quarter, Nike could post another set of less-than-stellar quarterly results when it reports on Dec. 19.
    Nike is Foot Locker’s largest brand partner, accounting for about 60% of sales. If Nike is struggling, Foot Locker will inevitably suffer, too. 
    “It’s not like across the board with all brands. Frankly … I would just say that there’s some that are more promotional, but in total, the category is pretty promotional,” said Dillon. “There’s an elevated promotional level in this category that we hadn’t forecasted to be as it is.” 
    She reiterated that Foot Locker’s relationship with Nike and its new CEO is “very strong” and expects the slow demand to be a blip as Hill gets his footing. 
    “We have a great relationship with him [and] feel very confident about where he and his team are going,” said Dillon. “I think we’re going to work through all that, that’s the thing.”

    Rough guidance

    Given the tough situation with Nike and the pressures facing Foot Locker’s lower-income consumer, the company slashed its guidance for the full year and issued a disappointing holiday forecast.
    For the holiday quarter, Foot Locker expects sales to be down between 1.5% and 3.5%, compared to a gain of about 2% in the year-ago period. The company said the previous fiscal year had an additional sales week.
    Foot Locker’s guidance range is mostly worse than the 1.6% decline that analysts had expected, according to LSEG. The company also anticipates comparable sales will rise between 1.5% and 3.5%, largely below expectations of 3.4% growth, according to StreetAccount. 
    For the full year, Foot Locker now expects sales to fall between 1% and 1.5%, compared to previous guidance of down 1% to up 1%. Analysts were expecting a decline of 0.4%, according to LSEG.
    The retailer also cut its comparable sales outlook for the full year and now anticipates comps will grow between 1% and 1.5%, compared to previous guidance of 1% to 3%. Analysts expected the metric would climb 1.8%, according to StreetAccount. 
    Foot Locker also lowered its full-year earnings outlook and now expects adjusted earnings per share to be between $1.20 and $1.30, below Wall Street expectations of $1.54. Foot Locker previously expected earnings to be between $1.50 and $1.70 per share. 
    The company attributed the revised guidance, in part, to elevated promotions and the shorter year, which is expected to impact sales by about $100 million. 
    Despite the slashed guidance and gloomy holiday outlook, there were some bright spots during the period. For the second quarter in a row, Foot Locker’s comparable sales grew compared to the previous year, with a 2.4% increase. That’s below the 3.2% analysts expected, according to StreetAccount, but it’s one indicator that Dillon’s turnaround plan is continuing to show signs of life.
    Champs, which has been dragging down Foot Locker’s overall business, also posted positive comparable sales at 2.8% growth, as did WSS, which saw an increase of 1.8%.
    During the quarter, Foot Locker’s gross margin also improved by 2.3 percentage points, thanks to fewer promotions than during the year-ago period, and it saw the highest conversion it has all year, said Dillon. 
    The former Ulta Beauty boss added the company is planning to continue to use its cash on hand to finance its store refurbishment programs and is feeling “really good” about the progress it’s made.
    “It is a bit of a tale of two worlds, which is that we feel like what we’re doing is really working well, but in the marketplace that we’re seeing right now, we think this is the right call,” said Dillon of the decision to cut guidance. “It doesn’t shake our confidence in where we’re heading with the Lace Up Plan and it doesn’t shake our confidence that these are the right things to do.” More

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    GM expects more than $5 billion impact from China restructuring, including plant closures

    General Motors expects a restructuring of its joint venture operations with SAIC Motor Corp. in China to cost more than $5 billion in charges and writedowns.
    The restructuring charges for the “SGM” joint venture are anticipated to include “plant closures and portfolio optimization,” according to the filing.
    GM said most of the costs are expected to be recognized as non-cash, special item charges during the fourth quarter.

    Employees work on Buick Envision SUVs at General Motors’ Dong Yue assembly plant, officially known as SAIC-GM Dong Yue Motors Co., Ltd., on Nov. 17, 2022, in Yantai, Shandong Province of China.
    Tang Ke | Visual China Group | Getty Images

    DETROIT – General Motors expects a restructuring of its joint venture operations with SAIC Motor Corp. in China to cost more than $5 billion in non-cash charges and writedowns, the Detroit automaker disclosed in a federal filing Wednesday morning.
    GM said it expects to write down the value of its joint-venture operations in China by between $2.6 billion and $2.9 billion. It also anticipates another $2.7 billion in charges to restructure the business, including “plant closures and portfolio optimization,” according to the filing.

    GM, which previously announced plans to restructure the operations in China, did not disclose any additional details about the expected closures.
    “As we have consistently said, we are focused on capital efficiency and cost discipline and have been working with SGM to turn around the business in China in order to be sustainable and profitable in the market. We are close to finalizing our restructuring plan with our partner, and we expect our results in China in 2025 to show year-over-year improvement,” GM said in an emailed statement.
    GM said it believes the joint venture “has the ability to restructure without new cash investments” from the American automaker.
    A majority of the restructuring costs is expected to be recognized as non-cash, special item charges during the fourth quarter. That means they will impact the automaker’s net income, but not its adjusted earnings before interest and taxes – a key metric monitored by Wall Street.

    GM’s operations in China have shifted from a profit engine to liability in the past decade as competition grows from government-backed domestic automakers fueled by nationalism, and as a generational shift in consumer perceptions of the automotive industry and electric vehicles takes hold.

    Equity income from GM’s Chinese operations and joint ventures peaked at more than $2 billion in 2014 and 2015.
    GM’s market share in China, including its joint ventures, has plummeted from roughly 15% as recently as 2015 to 8.6% last year — the first time it has dropped below 9% since 2003. GM’s equity income from the operations have also fallen, down 78.5% since peaking in 2014, according to regulatory filings.
    GM’s U.S.-based brands such as Buick and Chevrolet have seen sales drop more than its joint venture sales with SAIC Motor, Wuling Motors and others. The joint venture models accounted for about 60% of its 2.1 million vehicles sold last year in China.
    Prior to this year, the only quarterly losses for GM in China since 2009 were a $167 million shortfall during the first quarter of 2020 due to the coronavirus pandemic and an $87 million loss during the second quarter of 2022.
    The Detroit automaker has reported three consecutive quarterly losses in equity income for its Chinese operations this year, totaling $347 million. That includes a loss of $137 million during the third quarter. More