- GM is taking urgent steps to fix its ailing South Korean business.
- The carmaker isn’t yet ready to exit the market or sell GM Korea, as it did with Opel in Europe in 2017.
- The first step toward rightsizing the operation is the closure of an underutilized factory.
General Motors is moving quickly to fix its business in South Korea.
After CEO Mary Barra highlighted problems with GM Korea on the carmaker’s fourth-quarter earnings call, the company announced on Monday that it would shutter its plant in Gunsan by May, citing capacity utilization of just 20% for the past three years.
GM expects the closure to account for an $850-million special charge that it will report at the end of the second quarter. (Gunsan builds just two vehicles, the Cruze compact sedan and the Orlando, a compact hatchback.)
Given Barra’s bold moves to streamline GM operations globally, including selling Opel in 2017 and withdrawing from the Russian market, it initially looked as though the company was preparing to call it a day in Korea. Barra’s focus has been to maximize GM’s return on invested capital, and she stressed that Korea was a serious problem area when she spoke with Wall Street analysts about the company’s strong Q4 and full-year 2017 results.
GM isn’t ready to give up on Korea, however. Chevy is the number-one foreign brand in the country, and the carmaker sold about half a million vehicles in the region in 2017, so there’s ample justification to stick around — if the business can be sorted out.
“We have a very solid track record,” said GM President Dan Ammann in a statement. “We’ve fixed businesses, like in South America, or we’ve exited when we don’t see a pathway to sustained success.” (GM placed South America and all businesses outside the US and China under its International umbrella last fall.)
Ammann also shot down any speculation that GM is fast-tracking a departure.
“We stand ready to engage,” he said. “Our preference is to stay and find a pathway to a viable, sustainable and profitable business.”
But even though GM has affirmed its commitment to finding a way to return GM Korea to health, the clock is ticking. Ammann stressed that the various stakeholders, from the government to labor unions and investors, would need to embrace the urgency of the situation.
“The ongoing discussions must demonstrate significant progress by the end of February, when GM will make important decisions on next steps,” Barry Engle, president of GM International, said in a statement.