GM to Sell S. Africa Plants; Apartheid, Financial Woes Cited

General Motors Corp. announced today that it is pulling out of South Africa, selling its operations to a group headed by management there. GM Chairman Roger B. Smith attributed the move both to financial losses and South Africa’s slowness to abolish apartheid.

“Decisions about our investment in South Africa have depended on an assessment of the economic, social and political environment in that area,” Smith said.

“GMSA (General Motors South African Ltd.) has been losing money for several years in a very difficult South African business climate and, with the current structure, we could not see our operations turning around in the near future,” Smith said in a prepared statement.

Smith earlier had said that GM was “struggling desperately” in South Africa because of the nation’s economy and that the company’s sales and market share have dropped substantially in the last year.

“Our aim is to enable the new owners to start from a strong position, to continue to provide job opportunities for the employees and to continue to serve our customers,” Smith said in today’s announcement.

GMSA is a wholly owned subsidiary that produces cars, trucks, auto parts and locomotives.

3,000 to Continue Working

The 3,000 GM employees at GMSA’s two South African plants will continue to assemble cars after the sale, but the highest-ranking GM executive there, Robert White, a managing director, will return to the United States, GM spokesman Ronald Theis said.

Theis said the sale should be consummated by the end of the year. He said GM was releasing no information on price or the individuals in the group expected to purchase the operation.

Because the plants will continue operating, industry analyst Gary Glaser at First Boston Corp. in New York said he interpreted GM’s move as political.

“They like to avoid resistance by consumers and investors in the United States to their continued involvement in South Africa. The decision was simply helped by the poor market conditions,” Glaser said, adding that GM’s South African operation is relatively small and that the sale will have little impact on GM’s balance sheet.

GM is suffering from losses not stemmed by deep-discount sales incentives it offered from late August to early October to clear out its inventory backlog in the United States.

Operating Loss Expected

The No. 1 U.S. auto maker is expected to show a third-quarter operating loss ranging from $100 million to $1 billion when results are released later this week. No. 2 Ford is expected to show a profit.

Smith said the proposed sale also was a result of the South African government’s slowness in eliminating apartheid.

“The ongoing economic recession in that country, along with this lack of progress, has made operating in the South African environment increasingly difficult,” Smith said.

U.S. corporations operating in South Africa have long been the center of the debate on how to exert pressure on the government to change the apartheid system.

In a related development, the chairman of the Royal Dutch Shell group’s South African subsidiary said late Sunday night that the oil company “is not about to disinvest” and is not even contemplating such a move, as was reported in the London Daily Telegraph.