GM is entering a standoff with the South Korean government and its labour union as it begins to shut down local manufacturing in a bid to cut massive losses.
The Asian country has been a profitable business for the American car maker, at one point producing up to one fifth of its global exports, but a decline in small car sales and the ever-increasing power of automotive manufacturing in China saw GM Korea record $2.3 billion in losses from 2014 to 2016.
GM says it will now shutter its Gunsan plant located southwest of capital Seoul and responsible for the production of the Chevrolet Cruze sedan and unusual Orlando MPV. The production facility ran at just 20 per cent capacity throughout 2017, producing a total of 33,982 vehicles, and staffs approximately 2000 workers.
Closing the site will incur GM an almost $1.1 billion impairment charge in writedowns.
But the move has been met with backlash by the country's government and worker union that has recently made jobs a priority and increased wages. GM says it expects help from its stakeholders to make manufacturing feasible.
"Time is short and everyone must move with urgency," GM president Dan Ammann told Reuters.
General Motors says it requires funding or incentives to build new models in the country otherwise it faces exiting altogether.
"If we are successful in working with our stakeholders to restructure and get to a viable cost structure, we would see an opportunity to invest," Ammann said.
"The future of the business is in the hands of the stakeholders".
But the government and Korean Development Bank, which owns 17 per cent of GM Korea and has been requesting access to company’s balance sheets, says it is not receiving the required information to progress talks.
"There are some issues to be resolved to find out ways to help the company, such as a shareholder audit, but GM has not listened to us," an anonymous official said.
GM Korea exports vehicles to 120 countries around the world but the growing irrelevance of the models in a changing market might lead to the closure of operations entirely.
The Holden Astra sedan is also built at the Gansan production plant that could see the imported car live a short shelf life here. Holden says sales have been ‘good’ for the small sedan which has moved just under 4000 units since it went on sale in July last year, but won’t say if it will be affected by the closure.
“Holden’s product plan remains unchanged at this time,” Holden product communications manager Mark Flintoff told TMR.
Recent tightening of GM's global belt has seen local manufacturing cease in Australia, Indonesia, South Africa and parts of Europe. The big American bow tie has given the country’s stakeholders until the end of February to comply and is already planning on rolling out a voluntary redundancy scheme to all of its 16,000 workers across four different sites.
"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," GM executive vice president Barry Engle said in a statement.
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