GM's overhaul in Korea may impact global production

Adjust Comment Print

Major U.S. automaker General Motors (GM) has made a decision to close one of its four plants in South Korea, which employs about two-thousand workers.

"The future of the business is in the hands of the stakeholders", Ammann said. "If you're working at GM and your part of the business isn't contributing to the company, you can be sure someone is noticing".

Over the last three years, the automaker has wasted little time shedding itself of unprofitable markets. The Detroit automaker has also pulled back in Russian Federation and India in the past three years. GM Korea sold 132,377 vehicles in its home market previous year while exporting roughly 390,000 vehicles to 120 global markets, according to Automotive News. The facility in Gunsan, located about 110 miles south of the South Korean capital of Seoul, includes an assembly plant as well as a stamping facility that makes body panels.

The GM deadline of the end of this month was seen as an "ultimatum" posed to the Moon administration ahead of the local elections in June, when jobs and wage issues will likely become sensitive political agenda.

"Korea is a hard place to reduce capacity. Very, very bad trade deal", he said. "It's certainly a bold move for GM that sends a clear message that things have to change if plants are going to survive there".

However, a viable option is being chalked out for significant product-related investments in South Korea and the company expects full support of the labor union, the South Korean government and key GM shareholders to preserve thousands of jobs.

The South Korean government expressed deep concerns over the decision by the automobile company to shut down Gunsan plant, saying the KDB will meet with GM to check the GM Korea's operations.

An export hub for sedans, and a design/research center for small auto technology, GM's South Korean operations have been hurt foremost by the global shift toward larger vehicles such as SUVs and crossovers. "As we are at a critical juncture of needing to make product allocation decisions, the ongoing discussions must demonstrate significant progress by the end of February, when GM will make important decisions on next steps", said Barry Engle, GM executive vice president and president of GM International.

One researcher at a state-run think tank here said, "It was impossible to keep the Gunsan plant running after such low productivity and declining sales".

GM said in a statement it would take an $850 million charge to reflect the restructuring costs, including $375 million (270.25 million pounds) in cash related to employee expenses.

At the end of 2016, GM Korea had 7.53 trillion won of assets, 7.521 trillion won in liabilities, and a debt-to-equity ratio of 867 percent. "They're doing it now when they can afford it". "Based on strategic bookkeeping, GM took all the money from GM Korea and now is asking for money from the Korean government", said Lee Hang-koo, a senior researcher at the Korea Institute for Industrial Economics & Trade. GM controls 77 percent of its Korea operations, while Chinese partner SAIC owns a 6 percent stake. "The automaker is much more focused on profitability and financial sustainability, leading to the closure of multiple operations across the globe", said Karl Brauer, automotive analyst with Kelley Blue Book.

Bloomberg and the Associated Press contributed.

Comments