GM to Pull Out of South Africa : Cites Losses, Unwillingness of Regime to Dismantle Apartheid

In a move hailed by anti-apartheid activists as the most important American withdrawal from South Africa so far, General Motors said Monday that it will pull out of that strife-torn country by year’s end and sell its auto assembly operations there to local managers.

Acknowledging that it has failed in its well-publicized effort to foster change by remaining in South Africa, GM said the unwillingness of the South African government to dismantle its apartheid system of racial discrimination and segregation--along with growing pressure on corporations in this country to pull out--were major factors in its decision.

The deterioration of the South African economy and the fact that GM has been losing money on its operations there for at least three years are believed to have made the decision easier.

‘Disappointed in the Pace’

“We have been disappointed in the pace of change in ending apartheid,” GM Chairman Roger B. Smith said in a statement. “This slowness of progress in ending apartheid has contributed importantly to the imposition of sanctions and other actions by governments at all levels in the United States.”

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

Opponents of apartheid in the United States applauded the action by GM--the world’s largest industrial company and until recently the largest American employer in South Africa--as a major victory for the divestiture movement in this country.

Because GM has been a leader among those who have argued that American corporations should stay in South Africa in order to work for change from within, anti-apartheid leaders viewed GM’s announcement as a sign that the American business community is giving up on the South African government.

‘Most Significant’ Pullout

“It’s the most significant U.S. corporate pullout ever, not only because GM is one of the largest employers there, but also because this is an admission that GM’s efforts to work from within for change have been met by a stone wall from the South African government,” said Timothy K. Smith, executive director of the Interfaith Center on Corporate Responsibility, a New York-based coalition of religious groups that own stock in corporations. “It is the push that will turn the number of U.S. companies pulling out into a flood.”

Jennifer Davis, executive director of the New York-based American Committee on Africa, an anti-apartheid group, added that the recent passage by Congress of sanctions against the South African government over President Reagan’s veto may have finally forced GM to cut its losses in South Africa.

“GM opposed sanctions very strongly, and I think the passage indicated to them that the pressure in the United States was going to grow and not disappear,” she noted.

“Now, I imagine this will shake up the whole American business community in South Africa,” she said. “Some smaller companies that are still there . . . will no longer be able to point to GM as justification for staying.”

No Official Comment

Meanwhile, Eli Bitzer, first secretary in the South African Embassy in Washington, said his government had no comment on GM’s announcement.

GM joins a growing list of American businesses that have recently announced plans to pull out of South Africa, including Coca-Cola, which last month became the first American company to express plans to sell its operations to local black investors. So far this year, 22 American companies have pulled out and another six have announced plans to withdraw from the country, according to the Investor Responsibility Research Center, a Washington-based group that monitors American investment in South Africa.

But because of its size and visibility, GM has been perhaps the biggest corporate target of the anti-apartheid movement in the United States. In 1971, it became the first American company to be faced with a church-sponsored, shareholder resolution calling for divestment of South African operations, and its shareholders have voted on--and defeated--similar proposals every year since.

A Force for Reform

GM has responded by aggressively promoting itself as a force for reform within the country. The Rev. Leon Sullivan, a black minister from Philadelphia who authored a code of corporate conduct for American companies doing business in South Africa, is on GM’s board, and GM has received praise for adhering to the so-called “Sullivan Principles” that call for non-discrimination in business dealings.

GM’s Smith also helped form a council last year of more than 100 American businesses that has demanded specific changes in South Africa’s racial policies. And last May, GM announced that it would no longer sell vehicles to the South African military or police forces, ending the most controversial aspect of its role in the country.

Nonetheless, GM’s decision to withdraw clearly signals defeat for its policy of working for change from within. “This is extremely significant because GM has headed up the effort to stave off the divestment movement and argued most strongly that they could do the most by staying,” Davis said.

In South Africa Since 1926

GM, which has operated in South Africa since 1926, said it is now negotiating with a newly formed group of its South African managers for the purchase of its Port Elizabeth assembly complex for an undisclosed price. A GM spokesman said he does not know whether any of the company’s black managers are involved in the buyout talks. GM currently employs about 2,800 workers, 60% of whom are nonwhite, in Port Elizabeth, South Africa’s auto-making center and a stronghold of labor unrest on the country’s southern coast.

While political pressure to pull out has been growing, the economic incentives for GM to write off its investment in South Africa have also been mounting. With the South African economy in a tailspin, car and truck sales have been plunging over the last few years, making it increasingly difficult for GM to justify remaining in the country.

GM’s sales fell more than 20% in 1985 to just 35,000 units; so far this year, its sales are off another 12%. The layoffs that have resulted have cut employment from the 1981 peak of more than 5,000 to the current 2,800, reducing GM to the second-largest American employer in the country behind Mobil.

Will Remain a Supplier

GM’s withdrawal may not be total. Company spokesman George Schreck said GM’s West German subsidiary, Adam Opel AG, and its Japanese affiliates, Isuzu Motors Ltd. and Suzuki Motor Co., will continue to supply key components to the new South African company that takes over GM’s operations.