General Motors will cease producing the Chevy Cruze in South Korea starting in 2015 in an effort to cut costs, the automaker’s South Korean arm said on Tuesday. The General will transfer production of its compact car line, which includes a sedan, hatchback, and station wagon, to other locations including China and Europe as it overhauls global output capacity, according to a GM Korea spokesperson. The move semi-confirms rumors that GM was planning to cut production at its Korean facilities, although the automaker did say that it will use the manufacturing base in the country to focus on producing mini and small cars.
The announcement marks the first time any car maker has announced plans to move production out of South Korea. Cruze production at GM Korea’s Gunsan plant accounts for 16 percent of total plant capacity, or roughly 150,000 vehicles a year.
But the news isn’t all negative when it comes to GM’s operations in South Korea: the automaker plans to invest $917 million each year in its Korean operations starting in 2013 to develop new vehicles and powertrains. According to another GM Korea official, the company will utilize its Korean arm to perform an increased amount of engineering there.
General Motors owns 76.96 percent of its Korean operations. Minority owners include KDB (17.08 percent) and SAIC Motor (6.01 percent).
The North American-market Cruze is expected to continue production at GM’s Lordstown complex in Ohio.
The GM Authority Take
Moving Cruze (and other Chevrolet) production for China, to China, was expected… but moving production of Europe-destined Cruzen to Europe, while rumored to be moved to Poland, is rather unexpected — even though it makes complete sense, given the plant underutilization at loss-making GM Europe. Currently, all Chevrolets — with the exception of Corvette and Camaro — sold in Europe are built in Korea.
Coincidentally, an all-new Cruze is due in 2015 — which likely explains the reason for the timing. The new vehicle will ride on the successor to GM’s Delta architecture, called D2, which will underpin no less than 12 nameplates including the next-gen Cruze and next-gen Equinox, which is expected to shrink in size from the current model while becoming a global vehicle.
It seems that only time will tell whether GM’s alliance with PSA Peugeot-Citroen will have or has had any effect on GM’s decision to relocate Cruze production.