General Motors closes one of the South Korean factories and will also seek support from the trade unions for further cuts in costs to reduce its losses. This is bad news for thousands of workers directly or indirectly engaged with the production facility in Gunsan.
The decision announced by GM’s Korean subsidiary, is another step in the global operations cut program, which is being conducted by Director-General Mary Barra.
The company, which for decades had a dominant position in the international automotive industry, has lost its position in recent years. Now GM is in 4th place in the world after Volkswagen, Toyota Motor and the Renault-Nissan Motor Alliance.
After the closure of the plant in the coastal town of Gunsan, the company will reduce its excess production capacity. The decision, which will lead to write-offs of assets and monetary liabilities of 850 million USD, will affect 2,000 employees of the plant. In 2017, it accounts for only about 7% of the 520,000 vehicles produced in the Korean subsidiary of the company.
GM has three more plants in South Korea. The company announced it intends to keep its operations in Korea, and the closure of the plant is the “first step” in the large-scale restructuring of the operations. For its part, the Seoul government said it would order the state-owned Korea Development Bank, which holds a 17% stake in GM Korea to conduct a thorough analysis of its management over the past years.
According to media in South Korea, GM wants to get help from the authorities in the form of tax incentives or the Korean Development Bank’s involvement in the planned capital injection to support the company’s local division.
The carmaker is working together with government and the trade unions on restructuring its operations in the country, saying it can demand concessions on some labor issues and government incentives to help reduce operating costs. GM Korea’s business also includes several engine plants and an engineering and engineering center that has carried out a significant amount of work to create the Chevrolet Bolt electric car.