Can GM Korea Be Salvaged? Stay Tuned
Can General Motors’ struggling South Korean operations be saved? That’s the question government officials have been discussing with the automaker this week.
GM announced last week that it plans to close its Gunsan plant, which has only been operating at 20% of capacity. The future is also in doubt for the automaker’s other three South Korean factories.
Now, GM is asking South Korea to help pay for $2.8 billion in investments over the next 10 years. In addition, GM wants South Korea’s state-run bank to participate in a deal that would swap $2.7 billion of GM Korea’s debt into equity.
Government and bank officials have criticized GM Korea for not providing enough information about its finances and why it has been struggling. But they say they will move quickly to consider the subsidiary’s turnaround plan and funding request.
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GM Korea employs about 16,000 people. The head of its union said a strike would be likely if GM ends its operations there. For now, though, union leaders say they will focus on pressuring the government to keep factories from closing.
Between 2014 and 2016, GM Korea lost $1.8 billion dollars. Losses for 2017 are also expected to be grim. Although South Korea is the world’s 10th largest auto market, GM’s domestic sales there have fallen dramatically, including a 27% hit in 2017. Exports are also down, thanks in part to GM’s recent pullouts from unprofitable markets in western Europe, India, South Africa, and Russia.
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