The rumor that General Motors is planning to abandon Korea as a production base is nothing new. Last January, for instance, British outlet the Daily Telegraph reported that GM was considering moving manufacturing operations from Korea to Europe in an effort to fill unused production capacity. But now that GM is planning to close at least two of its plants in Europe, a recently-surfaced rumor would have us believe that GM will relocate manufacturing from Incheon, Korea to China.
According to reports, the reasoning behind the move is the fact that GM has not posted a huge sales gain last year in Korea, despite changing the name from GM Daewoo to GM Korea and launching the Chevrolet brand in 2011. A gain in sales volume may have been necessary to justify Korean operations. A source close to the company told the Korean Herald that replacing Daewoo with Chevy was the first step in closing the Bupeyong factory in Incheon.
At play is also the timing of the political transition in South Korea, as the automaker may have been planning to pull its manufacturing position during the later years of the Lee Myung-bak administration. Lee Myung-bak assumed presidency in February 2008, which lasts for five years and is not renewable.
For its part, General Motors management has consistently downplayed or completely dismissed the rumors. “Our operations are flexible and are running at a healthy capacity at the moment. There is nothing to say beyond that,” GM Korea said in a statement, but added that “we are not going to comment on speculation. GM Korea is an integral part of the GM organization as GM Korea’s plants are an integral part of GM’s global manufacturing footprint.”
Adding to the suspicion is the early resignation of Mike Arcamone, CEO of GM Korea. Arcamone resigned in January before completing his term in the country and the company has not offered a specific reason for his departure.
The GM Authority Take
It would seems that this has foreshadowing written all over it. GM’s initial plan, before deciding to close Ellesmere Port plant in the UK and the Bochum plant in Germany, was — reportedly — to bring Chevy production to Europe in order to fill underutilized capacity. From there, the Chevy vehicles would be exported to Korea.
But now that the plan seems to call for a decrease of production capacity in Europe (to bring GM Europe to profitability), it would appear that GM will just move production to China — and export to Korea, Europe, and elsewhere, from there. At that, we wonder if Arcamone’s resignation had anything to do with this award from the country’s President.