General Motors to close its vehicle manufacturing plant in South Korea


South Korea was for years a low-priced export hub for GM, producing close to a fifth of its global output at its peak.

General Motors has chose to close one of its plants in South Korea, Yonhap News Agency reported on Tuesday.

South Korea's government expressed "deep regret" over the factory's closure. But it appears all sides are playing a game of brinksmanship, the US automaker waiting to see what stakeholders, including its unions, might be willing to offer.

In order to stay, GM said it will need to see significant progress by the end of February in its talks with the union, government and Korea Development Bank, which owns 17 percent of the automaker's business there.

GM Korea operates two more vehicle plants in Korea, in Bupyeong west of Seoul and Changwon in South Gyeongsang Province, and employs 14,200 workers, swelling to 300,000 if subcontractors are included. The plant builds the Chevrolet Cruze compact vehicle and the Chevrolet Orlando compact SUV.

Kaher Kazem, CEO of GM Korea, said the company is "committed to supporting all of our affected employees through this transition".

In 2008, before the global recession, small cars were in favor due to $4 per gallon gasoline, and GM touted its Korean operations as a competitive strength, especially for the launch of the Cruze. GM Korea had recorded huge losses of almost Dollars 1.8 billion between 2014-2016, claims an article from the CNBC. Declining sales of small cars in the USA have also hurt demand for Korean-made Chevrolets. GM Korea has made 10 million vehicles since it was set up in 2002.In 2017, it sold 132,377 units in Korea and exported 392,170 vehicles to 120 markets around the world.

But aggressive labor unions, combined with weak local sales and other factors have forced GM to rethink that strategy.

A spokesman at GM Korea was not immediately available for comment.

"Time is short and everyone must move with urgency", GM President Dan Ammann told Reuters.

Experts also warned that the issue should not be politicized, with South Korea's local government elections coming up in June. GM has since 2015 exited unprofitable markets in rapid succession, including Europe, Australia, South Africa and Russian Federation.

"(The government) can not commit to financial aid when it's unclear how much, and for low long, the company will invest".

There are several challenges for Korea as it looks to maintain its position as a global automotive manufacturing powerhouse. The company could be planning to beef up its auto design studios in MI to pick up the slack, or it could be downplaying sedans globally, focusing its attention on more profitable trucks and SUVs. But with sales slowing, manufacturers are now beginning to target export opportunities. The Buick Encore, for example, is built in South Korea and shipped to USA dealers. Korean government and labor officials can't escape the role China will play as they try to negotiate any deal with GM.