By Nora Eckert

DETROIT (Reuters) -General Motors told shareholders on Wednesday that it would record two non-cash charges totaling more than $5 billion on its joint venture in China, one related to the restructuring of the operation and another reflecting its reduced value.

GM’s China division, once a profit engine for the Detroit company, is now losing money. The company has struggled to compete with carmakers in China, the world’s largest auto market, who have charged past U.S. and European rivals, partly buoyed by government subsidies.

The company expects a charge of $2.6 billion to $2.9 billion for restructuring costs, and a charge of $2.7 billion for reduced joint-venture value.

Some of the charges are related to “plant closures and portfolio optimization,” it said. GM’s Chief Financial Officer Paul Jacobson said the restructuring efforts are in their final stages during an analyst conference on Wednesday.

The finance chief said GM is seeking to be profitable in China next year and believes its joint venture can restructure without additional funds.

The charges were a “tough decision” that will allow it to be “profitable on a smaller scale,” Jacobson said.

The U.S. automaker’s shares fell about 1%.

GM partners with SAIC Motors in China to build Buick, Chevrolet and Cadillac vehicles.

The company’s board determined that the non-cash charges were necessary amid “certain restructuring actions” with the joint venture, according to a company filing.

GM has not disclosed details of the restructuring.

Most of the charges will be recorded in the company’s fourth-quarter earnings, reducing net income but not adjusted results, a GM spokesperson said.

‘UNTENABLE’ MARKET

CEO Mary Barra has been transforming GM’s operations in China, and told investors in October that by the end of the year, there would be “a significant reduction in dealer inventory and modest improvements in sales and share.”

The automaker lost about $350 million in the region in the first three quarters of this year.

In March, Reuters reported that SAIC aimed to cut thousands of jobs, including at its joint venture with GM.

Barra warned in July that the China market was becoming untenable for many corporations who were losing money.

Stiff competition from Chinese manufacturers and a price war have already had visible effects.

Sales at SAIC-GM slumped 59% in the first 11 months of this year to 370,989 units, while local new energy vehicle champion BYD (SZ:) sold more than 10 times that number in the same period. The GM venture peaked in 2018, selling an annual 2 million cars.

Some analysts were skeptical that the joint venture can restructure without more cash from GM, and warned that the China market may not be viable for the automaker.

“Headwinds in China remain too great to create meaningful profitability,” Bernstein analysts said in a research note.

Volkswagen (ETR:), overtaken in 2022 by BYD as the best-selling brand in China, is trying to deepen ties with Chinese partners including Xpeng (NYSE:) Motor and SAIC, for EV technology to offset flagging sales in its biggest market. The German automaker and SAIC agreed to extend their joint venture contract by a decade to 2040.

Japanese carmaker Nissan (OTC:) Motor is cutting 9,000 jobs and slashing its manufacturing capacity due to slipping sales in China and the U.S.

GM’s rival Ford Motor (NYSE:) is transforming its presence in China to become a vehicle export hub, though some analysts are urging Detroit’s automakers to cut their losses and exit the world’s largest auto market altogether.

By Ananya Mariam Rajesh and Nicholas P. Brown

(Reuters) – Foot Locker (NYSE:) executives said on Wednesday they are working closely with Nike (NYSE:) to emphasize its newer styles, including Vomero and Air DT Max shoe models, amid “softness” in demand for the sneaker giant’s products as the holiday shopping season begins.

“We’ll work through some of this short-term turbulence and play the long game for sure,” said Foot Locker Chief Commercial Officer Frank Bracken on a call with investors.

In both 2022 and 2023, Foot Locker purchased 65% of its athletic merchandise from one major supplier: Nike. But in recent years, the iconic footwear brand has seen trendy competitors like On and Hoka slowly eat away its market share.

Shares of Foot Locker fell as much as 20% on Wednesday after the sporting goods retailer lowered its annual sales and profit forecasts on softening demand for shoes. It now expects annual sales to drop between 1% and 1.5%, compared with its prior forecast of a 1% rise to a 1% fall.

Nike Vomero shoes sell for $160 to $180, and next year the company is expected to launch a new Vomero 18 running shoe with extra cushioning. Nike has also launched the Air DT Max, priced at $170, which claims to provide more cushioning and impact protection when playing sports.

In September, the world’s largest sportswear maker named company veteran Elliott Hill as its new CEO, embarking on a business revamp that could help it regain holding with retailers and fight competition from brands perceived as more fashionable.

“Elliott and his teammates I think are absolutely taking the right actions for the brand and the overall marketplace,” Foot Locker CEO Mary Dillon said on the earnings call.

The retailer has also recently expanded a Home Court partnership — known to house the latest drops from major brands — with Nike to rebuild sales.

Hill, who took the helm in October, previously said he would seek to repair Nike’s relationships with major retail partners. In addition to Foot Locker, Nike sells its sneakers to Dick’s Sporting Goods (NYSE:) and Nordstrom (NYSE:), among others.

Ahead of a shorter holiday season, Dick’s Sporting Goods said last week that it would stock plenty of basic favorites, such as Nike fleece clothing, for last-minute shoppers.

But when discussing sneakers, the retailer’s financial chief said he saw opportunities to expand Nike competitors such as On Holding and Deckers Outdoor (NYSE:)’s Hoka sneakers.

Foot Locker executives also said on Wednesday they would open more doors and increase their stock of hot selling products On and Hoka.

“We do expect things to be promotional as we think through the rest of the shortened holiday season here,” said Foot Locker CFO Mike Baughan.

By Lucia Mutikani

WASHINGTON (Reuters) -U.S. services sector activity slowed in November after posting big gains in recent months, but remained above levels consistent with solid economic growth in the fourth quarter.

The Institute for Supply Management survey on Wednesday also showed businesses are worried about potential tariffs on imports from President-elect Donald Trump’s incoming administration, warning of higher prices. Economists have echoed similar sentiments.

Trump has said he would impose a 25% tariff on all products from Mexico and Canada and an additional 10% tariff on goods from China on his first day in office.

“Many businesses fled to the sidelines in terms of capital spending plans in advance of the election,” said Stephen Stanley chief U.S. economist at Santander (BME:) U.S. Capital Markets. “I am generally optimistic about the medium-to-long-term outlook for business investment, but firms are likely to take their time before reengaging, waiting to see the details of tax, regulatory, and trade policy from the incoming administration.” 

The ISM said its nonmanufacturing purchasing managers index slipped to 52.1 last month after surging to 56.0 in October, which was the highest level since August 2022.

Economists polled by Reuters had forecast the services PMI would ease to 55.5. A PMI reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of the economy. The ISM views PMI readings above 49 over time as generally indicating an expansion of the overall economy.

The economy appears to have retained its momentum from the third quarter, with consumer spending rising at a brisk clip in October. Spending likely remained strong in November as auto sales surged last month. Construction spending also picked up in October, though business spending on equipment likely softened. 

The Atlanta Federal Reserve is currently forecasting gross domestic product will rise at a 3.2% annualized rate this quarter. The economy grew at a 2.8% pace in the third quarter.

Despite the moderation in services PMI, more businesses reported growth last month relative to October. Among the 14 industries reporting expansion were wholesale trade, finance and insurance as well as construction and utilities. Only three industries, including mining, reported contraction.  

Tariffs were top of mind for several businesses. Some in the construction industry said while they expected an increase in homebuilding, “the unknown effect of tariffs clouds the future.” Others in the information sector feared that “tariffs will affect prices for electronics and components in 2025.”

Similar sentiments were expressed by some providers of professional, scientific and technical services, who warned of a negative impact on inventories and higher prices in the hospital supply chain, adding that “what we saw during COVID-19 with startup U.S. production is a warning sign.”

Others in the transportation and warehousing industry said they were “holding capital projects until the (Trump) cabinet is complete.” 

The ISM survey’s new orders measure fell to 53.7 from 57.4 in October. Nonetheless, domestic demand remains solid.

STRONG AUTO SALES

Data late on Tuesday showed motor vehicle sales increased to a seasonally adjusted annualized rate of 16.5 million units in November, the highest level since May 2021, from a pace of 16 million units in October. Oxford Economics estimated the rise in auto sales left consumer spending, adjusted for inflation, on track to exceed a 3% growth pace in the fourth quarter.

Consumer spending, which accounts for more than two-thirds of the economy, grew at a 3.5% rate in the third quarter.

Stocks on Wall Street were trading higher. The dollar slipped against a basket of currencies. U.S. Treasury yields fell.

“Some of the increase in vehicle sales over the past couple of months is inflated because of replacement demand following the recent hurricanes,” said Ryan Sweet, chief U.S. economist at Oxford Economics. “We expect this support to fade in December and the road ahead for vehicle sales is paved by fundamentals. The good news is that fundamentals will remain decent.”

Historically low layoffs and solid wage gains as well as high household net worth are driving consumer spending.

The survey’s prices paid measure for services inputs was little changed at 58.2. Rising prices for services like transportation, financial services and insurance have stalled progress in lowering inflation to the U.S. central bank’s 2% target.

The survey’s measure of services employment slipped to 51.5 from 53.0 in October. This measure has not been a good predictor of services payrolls in the government’s closely watched employment report. 

Economists were equally dismissive of the release on Wednesday of the ADP National Employment Report, which showed private payrolls rose by 146,000 jobs in November after advancing by a downwardly revised 184,000 in October. Economists had forecast private employment would increase by 150,000 positions after a previously reported jump of 233,000 in October.

Nonfarm payrolls are expected to have accelerated in November after almost stalling amid disruptions from Hurricanes Helene and Milton as well as strikes by factory workers at Boeing (NYSE:) and another aerospace company.

Payrolls likely increased by 200,000 jobs in November after rising by only 12,000 in October, the lowest number since December 2020, a Reuters survey showed.

“The ADP tends to count striking workers and workers who couldn’t be paid because of weather as employed, whereas the BLS (Bureau of Labor Statistics) would not,” said Abiel Reinhart, an economist at J.P. Morgan.

“The implication for November then is also that ADP wouldn’t show a bounce-back from the end of the Boeing strike and hurricane effects. Those effects are driving our forecast for a large 275,000 gain in total payrolls in Friday’s BLS report.”